[House Hearing, 116 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,

                             PARTS I AND II

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

                                HEARINGS

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                        APRIL 9 AND MAY 22, 2019

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-17
                           
                           
                           
                           
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                       
 
 
 
 
                              ______
                           
 
                   U.S. GOVERNMENT PUBLISHING OFFICE 
  37-448                     WASHINGTON : 2020
 
 
                           
                           
                           
                           

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             PETER T. KING, New York
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                ANDY BARR, Kentucky
JOYCE BEATTY, Ohio                   SCOTT TIPTON, Colorado
DENNY HECK, Washington               ROGER WILLIAMS, Texas
JUAN VARGAS, California              FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey          TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
AL LAWSON, Florida                   BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan              WARREN DAVIDSON, Ohio
KATIE PORTER, California             TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah                    JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York   BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia            LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
                   
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 9, 2019................................................     1
Hearing held on:
    May 22, 2019.................................................    53
Appendix:
    April 9 and May 22, 2019.....................................    99

                               WITNESSES
                         Tuesday, April 9, 2019

Mnuchin, Hon. Steven T., Secretary, U.S. Department of the 
  Treasury.......................................................     4

                                APPENDIX

Prepared statements:
    Mnuchin, Hon. Steven T.......................................   100

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    ``Congressional Committee's Request for the President's Tax 
      Returns Under 26 U.S.C. Sec.  6103(f)'', dated June 13, 
      2019.......................................................   102
Beatty, Hon. Joyce:
    Letter to Inspector General Eric M. Thorson, U.S. Department 
      of the Treasury, dated February 14, 2018...................   135
McHenry, Hon. Patrick:
    Letter to Director Kenneth Blanco, Financial Crimes 
      Enforcement Network, U.S. Department of the Treasury, dated 
      May 6, 2019................................................   139
    Letter to Treasury Secretary Steven Mnuchin, dated September 
      12, 2018...................................................   140
Mnuchin, Hon. Steven T.:
    Written responses to questions for the record submitted by 
      Representative Budd........................................   143
    Written responses to questions for the record submitted by 
      Representative Cleaver.....................................   145
    Written responses to questions for the record submitted by 
      Representative Chuy Garcia.................................   155
    Written responses to questions for the record submitted by 
      Representative Anthony Gonzalez............................   155
    Written responses to questions for the record submitted by 
      Representative Green.......................................   158
    Written responses to questions for the record submitted by 
      Representative Kustoff.....................................   161
    Written responses to questions for the record submitted by 
      Representative Lucas.......................................   162
    Written responses to questions for the record submitted by 
      Representative Posey.......................................   162
    Written responses to questions for the record submitted by 
      Representative Stivers.....................................   166
    Written responses to questions for the record submitted by 
      Representative Wagner......................................   166
    Written responses to questions for the record submitted by 
      Chairwoman Waters..........................................   170


                        THE ANNUAL TESTIMONY OF

                     THE SECRETARY OF THE TREASURY

                         ON THE STATE OF THE

                     INTERNATIONAL FINANCIAL SYSTEM

                              ----------                              


                         Tuesday, April 9, 2019

             U.S. House of Representatives,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 2:04 p.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Maloney, 
Velazquez, Sherman, Meeks, Clay, Scott, Green, Cleaver, 
Perlmutter, Himes, Foster, Beatty, Heck, Vargas, Gottheimer, 
Lawson, San Nicolas, Tlaib, Porter, Axne, Casten, Pressley, 
McAdams, Ocasio-Cortez, Wexton, Lynch, Adams, Dean, Garcia of 
Illinois, Garcia of Texas, Phillips; McHenry, Wagner, King, 
Lucas, Posey, Luetkemeyer, Huizenga, Duffy, Stivers, Barr, 
Tipton, Williams, Hill, Zeldin, Loudermilk, Mooney, Davidson, 
Budd, Kustoff, Hollingsworth, Gonzalez of Ohio, Rose, Steil, 
Gooden, and Riggleman.
    Chairwoman Waters. The Financial Services Committee will 
come to order. Without objection, the Chair is authorized to 
declare a recess of the committee at any time.
    At today's hearing, we are receiving the annual testimony 
of the Secretary of the Treasury on the state of the 
international financial system.
    And I will now recognize myself for 4 minutes to give an 
opening statement.
    Today, this committee convenes for a hearing to receive the 
annual testimony of the Secretary of the Treasury on the state 
of the international financial system. I would like to start by 
talking about the International Development Association, or 
IDA, which is the arm of the World Bank that provides grants 
and highly concessional loans to the world's poorest countries.
    I am concerned that IDA, through its new private sector 
window (PSW) today is transferring $2.5 billion to the World 
Bank's private sector investment arm, the International Finance 
Corporation (IFC), and is subsidizing private firms selected 
without competition on the basis of unsolicited proposals.
    The PSW is likely to prioritize financial returns over 
positive development impacts which will be difficult to 
monitor. The PSW also stands in conflict with the World Bank's 
own principles that call for subsidies to be justified, 
transparent, competitively based, focused on impact, and 
guarded against rent-seeking opportunities.
    So my message to Treasury and to the World Bank is that 
unless these transfers stop, or at a minimum are competitively 
based and fully transparent down to the amounts and purpose of 
aid going to which firms and projects, the Administration's 
request for Congress to authorize the IFC's general capital 
increase will not be a committee priority.
    Now, I would like to turn to Treasury's implementation of 
U.S. sanctions. The Secretary also must provide this committee 
with complete answers today regarding the Treasury Department's 
actions to delist companies associated with Russian oligarch 
Oleg Deripaska. Deripaska is a criminal, and Vladimir Putin's 
confidant, who should not be let off the hook from sanctions 
that were put in place to punish bad actors.
    I am very concerned that the delisting agreement that 
Treasury implemented sends exactly the wrong message to 
Deripaska, other Russian oligarchs, and Putin himself, because 
Deripaska will still wield a great deal of influence over his 
previously sanctioned companies.
    Trump has shown a deference to and a fondness for Vladimir 
Putin, including at the Helsinki summit last summer when Trump 
inexplicably sided with Putin over his own Justice Department, 
when the FBI indicted 12 Russian intelligence officers for 
conspiracy to interfere in the 2016 U.S. presidential 
elections.
    It's very troubling that it appears that this dynamic may 
be affecting sanctions policy with the Trump Administration's 
Treasury Department, enabling Russian bad actors like Deripaska 
to evade sanctions.
    Moreover, Congress mandated several sanctions to be placed 
on Russia that Treasury has still not implemented, including 
sanctions required by the Chemical and Biological Weapons Act 
that the Administration had a statutory deadline to impose by 
last November.
    So, Secretary Mnuchin, you must explain these decisions in 
your public testimony today and address several other important 
issues. I expect you to be forthcoming with this committee.
    I also understand that despite our efforts to accommodate 
your schedule, you have now made another engagement this 
evening. This is unacceptable. If you are unwilling to stay 
today for the full duration of this hearing, the committee will 
compel your return for multiple additional hearings in the 
month of May.
    The Chair now recognizes the ranking member of the 
committee, the gentleman from North Carolina, Mr. McHenry, for 
5 minutes for an opening statement.
    Mr. McHenry. Well, welcome, Secretary Mnuchin. Welcome back 
to the committee. You come before this committee at a really 
precarious time for global markets. In fact, I wrote you in 
January right after the vote in the U.K. Parliament regarding 
Brexit.
    In that letter, I raised questions about the uncertainty of 
a prolonged Brexit and the effect it would have on financial 
institutions, the derivatives market, cross-border trading, and 
the financial services and insurance contracts.
    And after three failed attempts, the Prime Minister of 
Great Britain continues to work towards Friday's deadline on 
Brexit. In Europe, the long and uncertain path towards Brexit 
is coupled with a possible slowdown in Germany.
    I am particularly concerned about the overexposure of 
German banks and what this means for U.S. financial 
institutions. This is a serious thing for systemic risk. For 
example, last month, Forbes opined on the Deutsche Bank and 
Commerzbank merger indicating that both banks were in such deep 
trouble that even a merger couldn't help either one of them, 
and that is problematic.
    The global issues aren't just limited to the U.K. and 
Europe. In China, the era of double-digit growth is seemingly 
at an end, and thanks to the state-run allocation of capital, a 
disregard for the rule of law, and a regime that favors the 
theft of intellectual property over homegrown ideas, we see 
that coming home to roost.
    Moreover, should we be concerned--this is actually a pretty 
interesting question that I think is worthy of discussion here 
at Financial Services--that China has joined the Bloomberg 
Barclays Global-Aggregate Index, opening up their $13 trillion 
debt market to investors?
    The move is expected to bring in more than $180 billion in 
investor capital to China. What does this move mean for global 
markets? What effect does it have? Notwithstanding these risks, 
traditional threats to global stability remain, whether they 
emerge from international terrorism, weapons proliferation, or 
illicit finance flows.
    Treasury plays a critical role by administering sanctions 
and protecting the U.S. financial system, areas of 
bipartisanship on Capitol Hill, and we view the Treasury as 
important to this. That is why we give you this authority, and 
we think it should be used responsibly but forcefully with 
clear objectives of national interest.
    Finally, I want to make a special note of the Committee on 
Foreign Investment in the United State, or CFIUS, which is 
quickly becoming a model for other countries looking to screen 
investments for national security risks.
    Treasury's responsibility under this law has a significant 
impact on the global investment environment. Through bipartisan 
work here on Capitol Hill, we made significant changes to CFIUS 
in a way that targeted legitimate national security threats 
while preserving and even championing the United States' open 
investment climate.
    In fact, just last week, CFIUS unwound two deals involving 
Chinese investors. I look forward to working with the 
chairwoman to ensure that that piece of legislation is 
faithfully implemented and that regulations conform with 
congressional intent.
    And with that, I would like to yield the balance of my time 
to the gentleman from Ohio, Mr. Stivers.
    Mr. Stivers. I would like to thank the gentleman for 
yielding. Mr. Secretary, thanks for being here.
    I do want to take this opportunity to highlight the need to 
reauthorize the Export-Import Bank that expires in October. The 
Ex-Im Bank supports American exports and American jobs. 
Competition for international markets is fierce and United 
States companies already operate at a disadvantage.
    China's support for their export credit finance agency 
dwafs our Ex-Im. The Chinese Ex-Im equivalent was $36 billion 
in 2017 compared to only $200 million for the Ex-Im bank in the 
United States.
    I look forward to working with you to make sure we 
reauthorize this very important agency and institute reforms 
that will strengthen its ability to help American workers 
compete on the global playing field. I am also looking forward 
to your testimony with regard to global uncertainty, sanctions, 
international development, and the Bank Secrecy Act.
    Thank you for being here.
    I yield back the balance of my time to the ranking member.
    Mr. McHenry. I yield back.
    Chairwoman Waters. Thank you. The Chair now recognizes the 
subcommittee chairman, Mr. Cleaver, for 1 minute.
    Mr. Cleaver. Thank you, Madam Chairwoman. And thank you, 
Mr. Secretary, for appearing before this committee. And also, 
thank you for your service to our country.
    When you took this job, you, like Members of Congress, 
swore an oath to faithfully defend the Constitution against all 
enemies, foreign and domestic. In these unusual times, that 
oath is being tested.
    It is my opinion that many of our critically important 
institutions are actually being threatened. I think this 
hearing is an opportunity for you to tell us about how you are 
holding onto these institutions.
    Hopefully, you will provide candid answers to questions on 
your role and decisions impacting our citizens, and frankly the 
entire world, decisions that include a dangerous and 
wrongheaded trade and tariff policy that reduces America's 
income at a rate of $1.4 billion each month according to the 
Federal Reserve, the same policies that the U.S. Chamber of 
Commerce says threaten 2.6 million American jobs.
    We will also have, hopefully, a better understanding of how 
this Administration decides to remove sanctions against Russia 
and North Korea, these two countries that have been identified 
in our unclassified worldwide threat assessment as primary 
threats to our national security.
    I look forward to raising questions with you later. Thank 
you.
    Chairwoman Waters. Thank you very much. At this time, I 
want to welcome to the committee our witness, Mr. Steven T. 
Mnuchin, Secretary of the Treasury. He has served in his 
current position since 2017. Mr. Mnuchin has testified before 
the committee on previous occasions and I believe he does not 
need any further introduction.
    Without objection, your written statement will be made a 
part of the record, Secretary Mnuchin, and you are now 
recognized for 5 minutes to present your oral testimony.

 STATEMENT OF THE HONORABLE STEVEN T. MNUCHIN, SECRETARY, U.S. 
                   DEPARTMENT OF THE TREASURY

    Secretary Mnuchin. Thank you very much. It is a pleasure to 
be with you.
    Chairwoman Waters, Ranking Member McHenry, and members of 
the committee, it is good to be here with you today to discuss 
the state of the international financial system, the National 
Advisory Council on International Monetary and Financial 
Policies's report to Congress, and key priorities of the 
Treasury Department.
    I am proud to report that President Trump's program of tax 
cuts, regulatory relief, and improved trade deals is resulting 
in the strongest economic growth for the American economy since 
2005, and the best job market in generations.
    I would also just like to comment on opportunity zones, 
which are an important key component of the Tax Cuts and Jobs 
Act. They will help more Americans benefit from our strong 
economy. Opportunity zones offer capital gains relief for 
investments in businesses in distressed communities. We are 
seeing a great deal of enthusiasm for this policy all across 
the country because it will lead to revitalization and restore 
the promise of prosperity to more workers and families.
    The Administration is making trade with our international 
partners a top priority. I urge all Members of Congress to 
support the passage of the US-Mexico-Canada Agreement, USMCA. 
It will create the highest standards ever negotiated to protect 
intellectual property rights of entrepreneurs, provide strong 
support for the small and mid-sized businesses, encourage 
manufacturing, and opening markets for American agricultural 
products.
    We are also making progress negotiating with China to 
rebalance our economic relationship, end unfair trade 
practices, open their economy to American companies, and 
protect our critical technology.
    We remain focused on several economic issues related to 
national security. We are implementing the Foreign Investment 
Risk Review Modernization Act (FIRRMA). This legislation, which 
passed with overwhelming bipartisan support, modernizes the 
review process of the Committee on Foreign Investment in the 
United States, known as CFIUS, and enhances CFIUS's ability to 
analyze transactions for national security risks, preserving 
our commitment to an open investment environment.
    Treasury is combating the abuse of our financial system by 
rogue regimes, terrorist organizations, cyber criminals, and 
other illicit actors. The United States Government and our 
international partners are putting unprecedented pressure on 
the illegitimate Maduro regime in Venezuela. We will continue 
to target this regime and support interim President Juan Guaido 
as he seeks to restore security and prosperity in his country.
    Treasury is also using its authority to combat human rights 
abuses and corruption. We are pleased that many members of this 
committee have supported our sanctions and other actions. I 
assure you that the Administration will continue to 
aggressively target malign actors all around the world.
    Turning to policy developments impacting international 
financial institutions, we are advancing reforms to more 
efficiently alleviate poverty and foster stability and growth 
in emerging markets. We are working constructively at the G7, 
the G20, the World Bank, the IMF, and other partners to foster 
debt transparency that will reduce the risks of crisis in 
developing countries.
    As you are aware, the IMF aims to conclude the 15th General 
Review of Quotas this year. We believe the overall resources 
are currently adequate for it to accomplish its goals. We are 
beginning discussions with other shareholders on this issue.
    Finally, of particular note, we are requesting 
authorization for the funding of the World Bank's capital 
increase. In connection with this, we successfully negotiated a 
comprehensive reform package including lending measure limits 
and future need to limit future capital increases and focus 
resources on poorer countries.
    We are also requesting authorization for the planned share 
purchase in the North American Development Bank with the goal 
of working more closely with Mexico to improve economic 
conditions.
    I look forward to your questions, and to discussing ways to 
create more jobs and more opportunities for hard-working 
American families. Thank you very much.
    [The prepared statement of Secretary Mnuchin can be found 
on page 100 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Secretary Mnuchin, Chairman Neal requested the President's 
tax returns last week. Section 6103 of the Internal Revenue 
Code states that when the Committee on Ways and Means makes 
such a request, ``the Secretary shall furnish a return or 
return information specified in such request.''
    You are being asked to comply with the law today, and I can 
imagine you may feel your job as Secretary is on the line. 
Yesterday, President Trump forcibly ousted Secretary Nielsen, 
adding to a long list of cabinet level officials or staff that 
he forced out, including Chief of Staff John Kelly, Secretary 
of State Rex Tillerson, and Attorney General Jeff Sessions.
    Secretary Mnuchin, will you comply with the law by the 
deadline tomorrow and furnish the tax returns, even if it means 
you may be fired by this President for doing so?
    Secretary Mnuchin. First of all, thank you very much for 
that question. I had the opportunity to answer similar 
questions this morning when I testified earlier today. As I 
previously said, I want to acknowledge that we have received 
the request. As I said before, we will follow the law. We are 
reviewing it with our internal legal department and I would 
leave it at that.
    Chairwoman Waters. Thank you. But I guess what you are 
basically saying is, you will follow the law and you are not 
afraid that you will be fired if in fact you release the 
returns?
    Secretary Mnuchin. Well, I am not afraid of being fired at 
all.
    Chairwoman Waters. Very good.
    Secretary Mnuchin. Having said that, again, I want to be 
clear, I have said we will follow the law and we are reviewing 
that--
    Chairwoman Waters. Okay. And I am very pleased that you are 
not afraid of being fired.
    Secretary Mnuchin, since President Trump took office, 
numerous press reports have alleged that Trump associates and 
campaign officials attempted to negotiate the lifting of U.S. 
sanctions against Russia, and now I understand that when you 
lifted sanctions against Rusal, a major aluminum company 
largely owned by Russian oligarch Oleg Deripaska, you also 
directly benefited one of your former business associates and 
close friends, Leonid Blavatnik, with whom you owned RatPac-
Dune Entertainment, or RPDE.
    It also seems that Mr. Blavatnik has a close relationship 
with Mr. Deripaska. I have in my possession a series of letters 
the Treasury exchanged with Congresswoman Jackie Speier that 
pertain to this issue. Treasury's response to Ms. Speier denies 
media reports that you sold your ownership in RPDE to Mr. 
Blavatnik, stating that you sold your share to a third party 
unconnected to Mr. Blavatnik.
    However, the letter does not comment on Mr. Blavatnik's 
company purchasing an interest in a related company, RatPac 
Entertainment, at the exact same time. Who is the third party 
that you sold your shares to?
    Secretary Mnuchin. First of all, let me just say, as to the 
relationship with Len Blavatnik, he is not a close associate of 
mine. He is someone whom I have met--
    Chairwoman Waters. Did you sell it to him as a third party?
    Secretary Mnuchin. No, I did not sell it to him as a third 
party--
    Chairwoman Waters. RatPac Entertainment?
    Secretary Mnuchin. Directly or indirectly.
    Chairwoman Waters. RatPac Entertainment?
    Secretary Mnuchin. I have no connection with RatPac 
Entertainment whatsoever, nor can I comment on, nor am I aware 
of the specifics of the ownership of RatPac Entertainment. It 
is a completely separate entity.
    Chairwoman Waters. So RatPac-Dune was and is in no way 
related to RatPac Entertainment, is that correct?
    Secretary Mnuchin. RatPac Entertainment was a passive 
investor in RatPac-Dune.
    Chairwoman Waters. So there is a connection between RatPac-
Dune and RatPac Entertainment?
    Secretary Mnuchin. Again, RatPac was an investor in RatPac-
Dune. I was not an investor of or associated with RatPac.
    Chairwoman Waters. But when we asked whether or not the 
third party was involved with RatPac Entertainment at the same 
time, one had nothing to do with the other, is that right?
    Secretary Mnuchin. That is correct. The third party had 
nothing to do with RatPac whatsoever.
    Chairwoman Waters. Well, who is the third party that you 
sold your shares to?
    Secretary Mnuchin. That was a confidential transaction that 
was sold to a third party.
    Chairwoman Waters. Was it a Russian oligarch?
    Secretary Mnuchin. No, I can assure you it was not any 
Russian oligarch or any Russian person whatsoever.
    Chairwoman Waters. Why is it you cannot share that 
information with this committee?
    Secretary Mnuchin. I don't think it is relevant.
    Chairwoman Waters. I think it is relevant because of your 
involvement with Russian oligarchs even before you became 
Treasury Secretary, and you are in the position now where you 
are dealing with sanctions that were placed on these oligarchs 
and it appears that you are delisting or lifting sanctions, and 
it may be a conflict of interest. Don't you think you need to 
straighten that out?
    Secretary Mnuchin. I don't believe I have ever met a 
Russian oligarch, nor did I ever do business with a Russian 
oligarch, and I would just comment that Blavatnik, I believe, 
was from a different country. He wasn't a Russian oligarch.
    Chairwoman Waters. So you never met or talked with or had 
any conversations with Mr. Deripaska or with Mr. Viktor 
Vekselberg or anybody about sanctions, is that correct?
    Secretary Mnuchin. That is correct. I have never met either 
of them--
    Chairwoman Waters. No. No, not met, but had a conversation 
with, period.
    Secretary Mnuchin. I have never had any conversation with 
either one of them.
    Chairwoman Waters. And you have never been involved with 
any oligarchs in terms of your previous business, is that 
right?
    Secretary Mnuchin. That is correct.
    Chairwoman Waters. All right. And so I am going to have the 
record record that the third party that you sold your shares 
to, you refuse to reveal to this committee. Is that right?
    Secretary Mnuchin. That is correct.
    Chairwoman Waters. Okay. Let us continue.
    The gentleman from North Carolina, Ranking Member McHenry, 
is recognized for 5 minutes.
    Mr. McHenry. Secretary Mnuchin, I don't have any questions 
about your executive producer credentials, but I think you did 
well with ``American Sniper,'' ``Sully,'' ``The Lego Movie,'' 
and most recently, ``Wonder Woman.'' Congratulations to you on 
your box office success. Actually, I thought it was much 
funnier, but the crowd apparently didn't.
    So, thank you for your testimony. As I alluded to in my 
opening statement, I wrote you this past January, in 
particular, about Brexit. In that letter, I referenced the 
Financial Stability Oversight Board's (FSOC's) annual report 
and a number of outcomes related to Brexit that could trigger 
distress. So would you describe what work you and other 
regulators have been doing with U.S. financial institutions as 
well as regulators abroad to prepare appropriately for a 
disorderly Brexit?
    Secretary Mnuchin. Sure. Well, let me just comment. First 
of all, I think it is a surprise to many of us that we are 
sitting here today still waiting to see how this plays out. But 
over the last year and, specifically, over the last 2 months, I 
have been working very closely with FSOC and with the 
appropriate regulators to make sure that our financial 
institutions are prepared for a hard Brexit.
    Several weeks ago, I was in the U.K., and I met with both 
the prime minister and the chancellor of the Exchequer, Philip 
Hammond, and discussed it, as well as the head of the Bank of 
England. So we are very carefully monitoring these 
developments.
    I think U.S. financial institutions are prepared, but I 
think there could be some significant disruptions in the 
markets and in trade, as a result of a hard Brexit.
    Mr. McHenry. Are regulators prepared and is our government 
prepared?
    Secretary Mnuchin. I believe we are prepared, although I 
would just say I think there will be many aspects of a hard 
Brexit, and we have encouraged both parties to see if they can 
have a resolution that works.
    Mr. McHenry. How does this week's actions, yesterday's and 
today's actions with the U.K. government in their conversations 
with the E.U., how does that relate to your activities? Have 
you heightened activities this week as a result?
    Secretary Mnuchin. I haven't been privy to the 
conversations that had been going on yesterday and the day 
before. But as I said, I have been actively involved with this 
over the last 6 months. And I think, at this point, we need to 
be prepared for a hard Brexit as a very realistic outcome.
    Mr. McHenry. Okay. And so, with that mindset, you are 
prepared on Friday if there is a hard Brexit, as far as your 
footprint in Treasury? You have worked to see that we have done 
all that we can do in preparation?
    Secretary Mnuchin. That is correct. And we have coordinated 
with the Federal Reserve, the OCC, the FDIC, and the other 
appropriate regulators.
    Mr. McHenry. So tomorrow, this committee is holding a 
hearing with the seven largest financial institutions here in 
the United States. And from your perspective, how would you 
describe the U.S. financial system currently? The current 
state?
    Secretary Mnuchin. I think the U.S. financial system, 
broadly, is very well-capitalized, has de-risked significantly, 
and is in very good shape.
    Mr. McHenry. So the known knowns are well-provided for?
    Secretary Mnuchin. They are. But the unknown unknowns are 
what we always worry about.
    Mr. McHenry. And that is the nature of the financial 
institutions.
    Secretary Mnuchin. That is correct.
    Mr. McHenry. Some have described the banking environment as 
size equals survival. And as it relates to the Dodd-Frank Act, 
that has clearly been the case, where we have fewer small 
financial institutions because of the regulatory burden. Can 
you describe the cost to the system of that regulatory burden?
    Secretary Mnuchin. I think it is quite significant. And I 
think you know we worked with this committee and with the 
Senate last year on reforms to Dodd-Frank to make sure that 
community banks and regional banks can compete fairly. I think 
it is important that we have a robust regional bank and 
community bank system and that we don't end up with just a 
small number of banks in the country.
    Mr. McHenry. So greater competition--
    Secretary Mnuchin. Absolutely.
    Mr. McHenry. And less consolidation, basically as a result 
of regulation. So what role do U.S. financial institutions play 
in enforcement of sanctions?
    Secretary Mnuchin. U.S. financial institutions are critical 
in enforcing our sanctions.
    Mr. McHenry. So there is enormous benefit to us being the 
reserve currency and for us having financial institutions to do 
international trade?
    Secretary Mnuchin. Absolutely. The U.S., as the reserve 
currency, is very, very important. There are many benefits that 
we have from that, and that is one of the reasons why our 
sanctions are such powerful national security tools.
    Mr. McHenry. So if U.S. financial institutions do not play 
that role in sanctions, how would sanctions enforcement occur?
    Secretary Mnuchin. Well, it couldn't occur without both the 
U.S. financial institutions and other financial institutions 
that are connected to the U.S. system. That is critical.
    Mr. McHenry. Final question: You described an embarrassing 
situation, that is, the IRS technology footprint. We look 
forward to working with you to ensure that there is proper 
funding so that the IRS can update its technology footprint. 
And thank you for making that publicly known.
    And I yield back.
    Chairwoman Waters. Thank you. The gentlewoman from New 
York, Ms. Maloney, who is also the Chair of our Subcommittee on 
Investor Protection, Entrepreneurship, and Capital Markets, is 
recognized for 5 minutes.
    Mrs. Maloney. Thank you. Secretary Mnuchin, when you 
testified to this committee 2 years ago, I asked about 
beneficial ownership. You said that you looked forward to 
working with us on a solution to that issue.
    And then when you testified last year, you said, ``We have 
to figure out beneficial ownership in the next 6 months. I 
don't want to be coming back here next year and we don't have 
this solved, so we need to work with Congress on a bipartisan 
basis on this.''
    Well, Mr. Secretary, we have been working on a bipartisan 
basis on this issue, and I think we are very close to an 
agreement. The Treasury did provide us technical feedback on 
our bill, and we have incorporated all of your recommendations. 
And I want to thank you for that. You have seen the most recent 
draft of the bill, and I know you are still going through it, 
but I just want to ask you, do you think that we are headed in 
the right direction?
    Secretary Mnuchin. I do believe, generally, you are headed 
in the right direction, and I appreciate your work on this. I 
hope this is something that, on a bipartisan basis, we can get 
accomplished, both here and in the Senate. As I have said in 
the past, there are many things--I am proud of our 
accomplishments to date. But this is not one of them. And I do 
think we need to solve this, and I hope not to be back again 
next time without this solved.
    Mrs. Maloney. I hope that you are correct. Switching 
topics, you said in testimony this morning that your team had 
communicated with the White House Counsel's Office about 
Congress' request for the President's tax returns. But there 
isn't supposed to be any communication with the White House 
about this. The process was designed to avoid interference with 
the White House.
    Now, I know that you said this morning that you personally 
weren't involved in those discussions with the White House, but 
obviously your team told you about those communications. So 
what did your team tell you about these communications with the 
White House?
    Secretary Mnuchin. Well, first, let me just say, as I 
commented on this morning, and I will repeat, I have had no 
direct conversations with the President or anybody else in the 
White House about this. As I volunteered this morning, I did 
make clear our legal department has consulted with the White 
House, as they would and as I believe would be normal.
    That is not taking direction from the White House. I don't 
view that as interference. I think, as you know, it was widely 
publicized that we were going to receive the request and they 
consulted with them before it. It was not specific to the 
President's--anything related to the President's tax returns 
other than the expectation of getting this request.
    Mrs. Maloney. Well, did your team ask for the White House's 
permission to release the President's tax returns? Did the 
White House ask your team not to release the tax returns?
    Secretary Mnuchin. We would not ever ask for the White 
House's permission on this, nor did they give us the 
permission. As I have said, we have consulted, which I believe 
was appropriate of our legal department.
    Mrs. Maloney. Well, I think the fact that there was any 
communication with the White House about this is deeply 
troubling and certainly violates the spirit of the law, if not 
the letter of the law, and I think we need to get to the bottom 
of this. I yield back.
    Chairwoman Waters. The Chair advises Members that votes 
have been called on the Floor. The committee will recess for 
votes and resume immediately following. The committee stands in 
recess.
    [Whereupon, at 2:36 p.m., the committee recessed, to 
reconvene at 3:22 p.m., the same day.]
    Chairwoman Waters. The gentleman from Michigan, Mr. 
Huizenga, is recognized for 5 minutes.
    Mr. Huizenga. I appreciate the Chair's recognition. And 
it's good to see you again, Mr. Secretary.
    I want to touch base really quickly on a couple of 
international issues, one being Venezuela, and the other one I 
want to touch on is the Export-Import Bank, and we will see if 
we can get to USMCA, as well.
    But the United States, as you well know, as well as major 
European countries has recognized Juan Guaido as the interim 
president of Venezuela, but the IMF has yet to follow and do 
the same, and I am curious about your thoughts on how could 
Congress support additional resources for the IMF, let alone 
rescue Venezuela potentially if the fund disagrees with the 
largest shareholders on who the legitimate leader of Venezuela 
currently is?
    Secretary Mnuchin. Well, I don't think that the IMF 
necessarily disagrees. And as a matter of fact, I was with 
Christine Lagarde yesterday and we discussed this issue. The 
real issue is that we are focused on what would it take to 
unlock IMF resources to the interim government, and that is 
something we are constructively working with the IMF on.
    And I would say more importantly, we are very focused at 
the appropriate time of the transition of using both IMF 
resources and World Bank resources to rebuild the country, that 
the people of Venezuela are in desperate need of an economic 
recovery.
    Mr. Huizenga. And I might add the people of Venezuela 
deserve better. They--
    Secretary Mnuchin. Agreed.
    Mr. Huizenga. --deserve better than the current regime, and 
I certainly am hoping that Mr. Guaido is able to be recognized 
permanently. But any additional help you can give to make that 
happen would be deeply appreciated.
    Export-Import Bank, the Bank dates back to 1945 and we have 
had a couple of iterations of reauthorizations, discussions, 
reforms of some degree. In fact, in the last go-around one of 
the provisions that was put in there was a requirement for the 
President to pursue negotiations with foreign countries to 
``substantially reduce with the possible goal of eliminating'' 
those countries' export subsidies. And I know that was 
specifically talked about with Airbus and what could be 
happening there.
    Could you please give us an update on Treasury's role in 
conducting these negotiations? And what specific progress, if 
any, are you making on this issue?
    Secretary Mnuchin. Yes, thank you. Well, first, let me just 
comment that President Trump is very interested in the Export-
Import Bank and making sure that we have a quorum and that it 
can lend properly.
    As it relates to export subsidies, that is something the 
Treasury is very involved in, and specifically in conversations 
that Ambassador Lighthizer and myself are having with China, 
that is a topic that is high on the list.
    Mr. Huizenga. So could you give us a little more specifics 
on the progress on that? Not all of us are big fans of the 
Export-Import Bank. When you look at the original intent of it, 
it was to get those smaller industries that were not able to be 
banked into a foreign transaction to be able to have the 
resources to be able to do that.
    We have seen it go in some very different directions, and 
specifically I am looking for what is the status of those 
conversations?
    Secretary Mnuchin. The conversations with foreign countries 
on subsidies or the conversations on the use of the Export-
Import Bank?
    Mr. Huizenga. Specifically dealing with the foreign 
countries having similar structures. The directive was that 
Treasury negotiate with these countries to try to reduce, if 
not remove, the need for those.
    Secretary Mnuchin. Yes, so at the G7 and the G20 we have 
been having very significant conversations. David Malpass, 
prior to leaving to become Head of the World Bank, oversaw 
those, and I think we are making progress also at the OECD.
    Mr. Huizenga. Okay, you have mentioned, very quickly, in 
your opening about the USMCA, coming from Michigan, which some 
statistics would point to the largest trading partnership being 
the U.S. and Canada. The sixth largest trading partnership is 
the State of Michigan and Canada. Give us an update on what is 
happening there and your take on how we are going to be dealing 
with the USMCA.
    Secretary Mnuchin. Well, I think the trade between the 
U.S., Canada, and Mexico is very important to our economy. I 
think, as I mentioned in my opening statement, that this is an 
agreement that brings forward trade very importantly and I hope 
it is brought up within Congress quickly so that it will be 
passed.
    Chairwoman Waters. The gentlewoman from New York, Ms. 
Velazquez, is recognized for 5 minutes.
    Ms. Velazquez. Thank you, Chairwoman Waters. And thank you, 
Mr. Secretary. I was here earlier listening to your exchange 
with Chairwoman Waters and heard you say that you will comply 
with the law and furnish President Trump's tax return.
    But what I did not hear you say to the chairwoman was 
whether you were going to comply with Chairman Neal's deadline 
of tomorrow. So my question to you is, yes or no, will you 
comply with Chairman Neal's deadline of tomorrow?
    Secretary Mnuchin. I want to clarify my previous comments 
so there is no misunderstanding. I said that I would comply 
with the law. I did not--
    Ms. Velazquez. And the law said--and the written request 
from the chairman of the Committee on Ways and Means of the 
House of Representatives, the chairman of the Committee on 
Finance of the Senate, or the Chairman of the Joint Committee 
on Taxation, the Secretary shall furnish. So that is the law.
    Secretary Mnuchin. Again, I just want to be very clear so 
there is no misunderstanding. I have said that I will comply 
with the law. I have not made a comment in one way or another 
about whether we would supply the tax returns. I want to be 
very clear on that. We have said we will comply with the law.
    Ms. Velazquez. What law then are you referring to? This is 
the law, U.S. Code Sec. 6103. So can you tell me what other law 
talks about tax returns?
    Secretary Mnuchin. That is the law, and as I have said we 
are consulting with our lawyers.
    Ms. Velazquez. Well, you said you will comply with the law.
    Secretary Mnuchin. That is correct.
    Ms. Velazquez. Well, we will see about tomorrow. Secretary 
Mnuchin, in early March, the U.S. officially hit the national 
debt ceiling, capping the debt at just over $22 trillion. 
According to the CBO report produced in February, the Treasury 
Department will exhaust its use of extraordinary measures 
sometime in late September or early October.
    Do you agree with the CBO's projection that the Treasury 
Department will exhaust its use of extraordinary measures 
sometime in the fall?
    Secretary Mnuchin. I am not going to give an exact date. 
There are a lot of assumptions. I think the more important 
issue is that I have written to Congress and I would urge 
Congress on a bipartisan basis to pass the debt ceiling.
    This is something that is very important to our national 
debt and our national credit, and I would hope that this is not 
something that would be sitting here in late September--
    Ms. Velazquez. Okay. I hear you. Thank you. What would be 
the consequences both domestically as well as internationally 
of the U.S. defaulting on even some of its debt?
    Secretary Mnuchin. I can't possibly imagine that anybody in 
Congress would ever want us to default on our debt. It would be 
quite disastrous.
    Ms. Velazquez. So do you think the debt ceiling should be 
held hostage by any desire President Trump might have to fund 
his vanity wall?
    Secretary Mnuchin. The President has no interest in holding 
this hostage to any issue. The President has encouraged me and 
I have reached out to both the Democrats and Republicans in 
discussions. The President would like to have this passed as 
soon as we can.
    Ms. Velazquez. Okay. Thank you. In the Treasury 
Department's budget request for Fiscal Year 2020, you and 
President Trump chose to eliminate funding for the CDFI Fund's 
discretionary grant and direct loan programs. Can you explain 
this decision and tell us how you think the communities served 
by these institutions will be impacted?
    Secretary Mnuchin. Thank you. I had the opportunity to talk 
about this issue this morning at the Appropriations 
Subcommittee, so let me repeat this. First of all, I want to 
acknowledge that I do think this program serves many 
communities in a significant way, that this was just a 
difficult decision looking at funding across multiple programs, 
how we have prioritized it.
    And if this committee and other--if we have appropriations 
for that and that is Congress' desire, we shall properly 
administer the programs as they have been done in the past.
    Ms. Velazquez. You bet that that money will be appropriated 
for the CDFI. Thank you. I yield back.
    Chairwoman Waters. The gentleman from Missouri, Mr. 
Luetkemeyer, is recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman.
    Welcome this afternoon, Secretary Mnuchin. I know a while 
ago Ms. Maloney talked about beneficial ownership. I just 
wanted to reiterate that I am working with her on the bill. I 
am looking forward to working with you to make sure that we get 
what we need on that.
    I am not really happy about codifying a rule. I wish the 
Treasury would--if we could take our bill and hand it to you 
and you would make those changes, it would serve me better than 
us trying to codify it.
    But today we haven't been able to get that done, and so 
maybe this is the best way to handle it, and I don't know if 
you have a comment on it? I would appreciate a comment.
    Secretary Mnuchin. Well, I appreciate the bipartisan views 
on this. And again, there are specifics we need to work out and 
we look forward to sitting down with you and others on the 
committee to try to get this done soon. I think it is an 
important--
    Mr. Luetkemeyer. If we could reach a bipartisan agreement, 
would you be willing to make those changes through the rule 
process or do we have to go legislatively?
    Secretary Mnuchin. I think that is something we need to sit 
down and discuss with the committee.
    Mr. Luetkemeyer. Okay. Thank you. As Secretary of the 
Treasury, you also serve as Chair of FSOC. FSOC is tasked with 
identifying risks and responding to emerging threats to 
financial stability.
    In the past, FSOC has discussed the issue of CECL and many 
of the concerns around the standard. In my opinion, CECL 
affects numerous aspects of the economy and could have drastic 
procyclical issues like mark-to-market.
    In my discussions with the FASB, they indicated they did 
not do any prior testing, any new surveying, did not do any 
studying, and as a result we are in the same situation with a 
rule I think could have a dramatic impact as what mark-to-
market did whenever they didn't do the due diligence on that 
one, either, and had to pull it after the disaster of 2008.
    So I am very concerned about the effect it could have 
especially on the GSEs and on the credit unions, who if you 
look at them having to build up reserves, the only way for them 
to find the income to build up those reserves and keep them 
there is through raising the fees on loans.
    We had in this committee back in December the Home 
Builder's Association, which said for every $1,000 increase on 
a home loan, 100,000 people no longer have access to credit or 
to be able to buy or build a home. That is dramatic. That is 
going to have a tremendous effect on the economy if it would 
have that level of cost.
    They are both doing studies right now to find that out and 
we are hopeful that FASB will put a pause on this until we can 
study this, because they didn't, and we need to have these 
industries studied to make sure we get that done. Would you 
support something like that?
    Secretary Mnuchin. This is an issue we are closely 
studying. We look forward to speaking to you and following up 
on this and it is something we are discussing very closely at 
FSOC. And since you have mentioned GSEs, I do hope that is an 
area that we can work on, on a bipartisan basis for GSE 
reforms.
    Mr. Luetkemeyer. Well, my concern is that the GSEs are 
going to have to come up with billions of dollars to put in the 
reserves. When you have a $5 trillion portfolio, with just a 
back-of-the-envelope analysis of a 2 percent reserve, you are 
at $100 billion. And they are nowhere near that.
    So I don't how they are going to raise the money, quite 
frankly, unless they raise fees, which is going to have a 
dramatic effect on the economy--and the same thing with credit 
unions. So my concern is I hope that the regulators, and a lot 
of folks who are involved in economic policy, take into 
consideration what is going on with CECL.
    We will work to try and find a way to get FASB to pause on 
this so we can see it to make sure we know what the effects of 
this are going to be before we implement this rule and don't 
have the same disastrous results that we did with mark-to-
market. So I appreciate your concern and working on that with 
us.
    One of the things that I saw, about last week or week 
before last, in the Wall Street Journal, there was a chart on 
the front page that talked about the value of European banks 
versus the value of American banks. And it was kind of 
interesting because European banks were 70 percent of their 
book value. And American banks were 1.09, or roughly 10 
percent, above book value, which tells me that our banks are in 
good shape. I think that is great. We have a good, strong 
economy.
    But it also tells you that European banks are in trouble. 
When they are valued at 70 percent of what their book value is, 
it tells you the bank is in trouble, their economy is in 
trouble, or both, and that is not good.
    So I think you mentioned a while ago, and I think the 
ranking member talked about Brexit. With that in mind, with 
these--with the weakness of the--in my mind and just splashed 
on the front page of the Journal there, how do you see this 
playing out? Do you see this as a concern? Do you see this 
Brexit going to be able to work this thing out and the banks 
are going to recover? Is that rating a result of Brexit, or is 
that just a rating of some other weaknesses in the economy and 
the banking system?
    Secretary Mnuchin. Well, as you pointed out, there is no 
question that U.S. banks are much better capitalized than 
European banks. There is no question that, as you have pointed 
out, the U.S. economy is much stronger than what is going on in 
Europe. And as it relates to making predictions on Brexit, that 
is a complicated thing to predict.
    Mr. Luetkemeyer. Okay. Thank you, Mr. Secretary.
    Chairwoman Waters. The gentleman from Missouri, Mr. Clay, 
who is also the Chair of our Subcommittee on Housing, Community 
Development, and Insurance, is recognized for 5 minutes.
    Mr. Clay. Thank you, Madam Chairwoman. And thank you, Mr. 
Secretary, for being here. I have some concerns about the 
compliance history of Deutsche Bank and the potential national 
security and criminal risk posed by its operations in the 
United States.
    Recently, the New York Department of Financial Services and 
the U.K. Financial Conduct Authority have brought actions 
against Deutsche Bank for its role in facilitating suspicious 
activity in the United States. Can you comment on any and all 
enforcement activities involving Deutsche Bank and provide this 
committee some background for the record?
    Secretary Mnuchin. I don't think it would be appropriate 
for me to comment on the regulator's ongoing activity as it 
relates to Deutsche Bank. The primary responsibility of this is 
with the primary regulators. Obviously, from Treasury's 
standpoint, that is the OCC and FinCEN. And again, I can assure 
you the regulators are very focused on Deutsche Bank, as they 
are on other banks, but I can't comment on ongoing enforcement 
matters.
    Mr. Clay. And does it give you pause or a concern about the 
activities of a bank operating in this country with some 
serious questions behind it? Does that give you concern?
    Secretary Mnuchin. I want to be careful, as Secretary, of 
what I say. But I have a lot of conferences with our regulators 
and them being on top of these issues. And I would say, as a 
general matter, not specific to Deutsche Bank, the issues that 
you talk about we take very seriously, and I discuss with the 
financial regulators regularly.
    Mr. Clay. Thank you for that response. When you testified 
before our committee last July, you stated that, ``At this 
time, the United States finds the IMF's resources are adequate, 
following the 2016 implementation of the 2010 quota and 
governance reform package.''
    Most recently, in December, when Treasury Under Secretary 
David Malpass testified before our committee, he explicitly 
stated that the Administration will not support an IMF quota 
increase, essentially bringing to a halt a decade of slow 
progress in reforming the Fund's governance structure to make 
it more representative, legitimate, and therefore more 
effective.
    Now, this will seem shortsighted to some, as it allows 
Japan and Europe to maintain its overweight voting power. And 
of course, none of this will be lost on China or other under-
represented emerging markets.
    Are you concerned that the Administration's rejection of 
any possible reform of voting shares at the Fund could alienate 
China and other emerging markets, which in turn might cause 
them to drift away from the multilateral institutions and 
increasingly towards regionalism?
    Secretary Mnuchin. Well, let me just clarify. I am the lead 
as it relates to the IMF issues. We are--actually, I am looking 
forward to IMF meetings this week. People are coming in from 
all over the world. Just to clarify a few things. We have said, 
one, we are comfortable with the resources they have today, but 
I think, as you know, the NAB will roll off.
    Two, we have said we don't support an increase in quotas, 
but we are in ongoing discussions with the IMF and the other 
shareholders about what we do to support the balance sheet. And 
I think the United States leadership at the IMF as the largest 
shareholder is very important to us.
    Mr. Clay. Well, what about the governance structure and--
    Secretary Mnuchin. The governance is also very important. 
And as part of any ongoing issue, governance and reforms are 
high on the priority list, just as they have been with the 
World Bank.
    Mr. Clay. I see. And a couple of years ago, the Chinese 
yuan had joined the U.S. dollar, the euro, the yen, and the 
British pound in the IMF's Special Drawing Rights basket, which 
determines currencies that countries can receive as part of IMF 
loans.
    By joining this elite grouping, China certainly doesn't 
appear to be a developing nation. If an American from St. Louis 
wanted to invest in China, could they have full confidence in 
the Chinese banking system?
    Secretary Mnuchin. The question was, should an American 
have full confidence in the Chinese banking system?
    Mr. Clay. Yes.
    Secretary Mnuchin. It is a general comment. I am sure there 
are banks there that are well-capitalized and banks there that 
have significant problems. Their system is highly leveraged.
    Mr. Clay. Thank you. My time is up.
    Chairwoman Waters. The gentleman from Wisconsin, Mr. Duffy, 
is recognized for 5 minutes.
    Mr. Duffy. Thank you, Madam Chairwoman.
    Welcome, Secretary Mnuchin. I have concerns about the 
status of the ongoing negotiations at the International 
Association of Insurance Supervisors (IAIS). They are 
developing an international capital standard (ICS).
    I would note that Randy Quarles gave a speech in January 
and stated that the ICS ``may not be optimal for the United 
States insurance markets,'' obviously expressing some concern 
about this negotiation. I guess my question to you is, looking 
at this tried-and-true U.S. system of insurance regulation, in 
your role in the FSB, are you going to lean in and protect our 
system, advocate, fight, negotiate for our system, and our 
capital standards?
    Secretary Mnuchin. Of course.
    Mr. Duffy. Are you doing that?
    Secretary Mnuchin. Yes.
    Mr. Duffy. Are you respected? I imagine you are pretty well 
respected.
    Secretary Mnuchin. Yes.
    Mr. Duffy. So if you and Mr. Quarles lean into this, we 
should get a better result than what we are hearing from the 
speech from Mr. Quarles, right?
    Secretary Mnuchin. I would hope so.
    Mr. Duffy. So would I. Okay, great, thank you. Let's talk 
Fedwire. Obviously, it moves over $600 billion a day in 
payments, and last week Fedwire went down and was completely 
nonoperational for more than 3 hours. Were you briefed by the 
Federal Reserve about--
    Secretary Mnuchin. I was.
    Mr. Duffy. And can you tell us what happened? I mean, 3 
hours is concerning.
    Secretary Mnuchin. First of all, I would just say I was 
completely abreast of it real-time. The Chair and I were 
speaking real-time on this issue. The Fed had backup plans that 
I was comfortable with, I think it would be inappropriate in a 
public forum like this for me to comment on the specifics, but 
I am happy to follow up--
    Mr. Duffy. Did the backup not work?
    Secretary Mnuchin. Excuse me?
    Mr. Duffy. Did the backup not work, because it was down 
about 3 hours.
    Secretary Mnuchin. Again, I want to be careful. I am more 
than happy to come and talk to you in a different setting. I 
will say, I have complete confidence in the Fedwire system. I 
was fully aware of the specifics of what was going on. We were 
completely on top of it.
    Mr. Duffy. Okay. I would appreciate a further conversation 
in a different setting. Are you a lawyer?
    Secretary Mnuchin. I am not, but I deal with a lot of 
lawyers.
    Mr. Duffy. Sorry about that. So I don't know if you have an 
opinion as to--maybe you know this. Is a Presidential candidate 
or a President required to release their tax returns?
    Secretary Mnuchin. I do not believe they are.
    Mr. Duffy. And it has been common practice oftentimes that 
they will release their tax returns, but they are not required, 
is that your understanding?
    Secretary Mnuchin. I believe that is the case.
    Mr. Duffy. I actually agree with that practice. I have said 
publicly that I think that President Trump should release his 
tax returns, it could be a good thing, but the President has 
chosen not to release his tax returns. I think you are going to 
get a lot more questions today about taxes.
    And I would just note that to walk down a political road 
where we are going to use the Chairman of Ways and Means and 
the power given to the Chair for political purposes to gain the 
tax returns of our political opponents, we know that when one 
action is taken, it oftentimes doesn't stop.
    I don't know if anyone in this room wants to have their 
taxes released. I don't know if Hillary and Bill want theirs 
released, and Obama wants his released. We could play this game 
out. And I guess this is for no investigative purpose. We heard 
for 2 years that Bob Mueller has to be protected, Bob Mueller 
is the gold standard. Don't cut his money, you make sure that 
you protect him and let him do his work.
    And he did his work. We got a synopsis. And it is not over. 
We continue to have debate about, well, there might be 
something in the report. Maybe we can get the actual report out 
regardless of what is confidential, what is from 
investigations. And now we have gone on to tax returns, and I 
guess I want you to follow the law. It is important.
    But I would just note that in this room, we should be 
awfully concerned that what is good for the goose, is good for 
the gander. What happens here will probably come around. I 
invite you, as well. And so the President is not required to 
release his taxes. He hasn't released them. I think he should. 
He hasn't, and I think we should let it go at that.
    Secretary Mnuchin. Well, as I have said, we do intend to do 
follow the law. I would just say, I think that if Kevin Brady, 
when he had been Chair of the committee, had requested high-
profile Democrat tax returns, there would have been significant 
concerns.
    Mr. Duffy. There would have been concerns.
    Secretary Mnuchin. We will follow the law.
    Mr. Duffy. I am shocked to hear that, Mr. Secretary. Of 
course, there would have been concerns.
    Chairwoman Waters. Mr. Duffy, your time has expired. The 
gentleman from New York, Mr. Meeks, who is also the Chair of 
our Subcommittee on Consumer Protection and Financial 
Institutions, is recognized for 5 minutes.
    Mr. Meeks. Mr. Duffy, you went there. Barack Obama did 
disclose his tax returns. In fact, every President of United 
States since Nixon opened their tax return, and in fact, when 
someone gives their word, shouldn't one be, their word is their 
bond and they should live by what their word is? Is that not 
correct, Mr. Secretary? If you say something to the American 
people, you should tell them the truth, is that not correct?
    Secretary Mnuchin. I do tell the truth.
    Mr. Meeks. Okay, but since Mr. Duffy brought it up, the 
President of the United States told the American people that he 
would release his tax returns. And he has said it at least 16 
times, that he would release his tax returns. He made a promise 
to the American people. Now, shouldn't the President of the 
United States be a man or a woman of their word?
    Secretary Mnuchin. Well, let me just comment that--
    Mr. Meeks. Yes or no, Mr. Mnuchin?
    Secretary Mnuchin. I would like to answer--
    Mr. Meeks. Just answer yes or no. It is a yes-or-no 
question.
    Secretary Mnuchin. Again, what I have read in the press is, 
he said he would release his returns when he wasn't under 
audit, but I am not privy to the specifics of that.
    Mr. Meeks. He has said several times, he said before he was 
elected President and after he was elected President, that he 
would release his tax returns, and then we hear from his Chief 
of Staff that he is never going to, under any circumstances. So 
that means that he has lied to the American people.
    I hope, Mr. Secretary, you are not a liar, and other 
individuals in the Administration are not liars, and that when 
you testify, you testify to the truth and not deceiving 
individuals. I hope as this President--
    Mr. Duffy. Madam Chairwoman, I am going to raise a point of 
order.
    Mr. Meeks. You opened the door, sir.
    Mr. Duffy. If the gentleman is calling the President a 
liar--
    Mr. Meeks. You opened the door.
    Mr. Duffy. An order?
    Mr. Meeks. I didn't call anybody--I am saying that you can 
go to the videotape and see what the President said and what he 
hasn't done. And so, yes--
    Mr. Duffy. If the gentleman--
    Mr. Meeks. If that is that I am calling--
    Chairwoman Waters. The time belongs to the gentleman from 
New York.
    Mr. Meeks. --the President of the United States a liar--
    Chairwoman Waters. Please do not interrupt him.
    Mr. Duffy. I have a point of order, though.
    Chairwoman Waters. There is no point of order. What is your 
point of order?
    Mr. Duffy. It is my point of order. Is the President a 
covered personality?
    Chairwoman Waters. Members are reminded to avoid 
personality in their remarks. What is your point of order?
    Mr. Duffy. That the President is a covered personality and 
I believe the gentleman was calling the President a liar.
    Chairwoman Waters. The Chair does not recognize that as a 
point of order. Will the gentleman proceed with--
    Mr. Meeks. Yes. I just want a few more times like to point 
of order--
    Mr. Duffy. I would move to take the gentleman's words down.
    Mr. Meeks. So, what I am saying, Mr. Secretary, is that the 
American people listen to what someone, when they make a 
statement, they make a commitment to the American people of 
whether they live up to it or not. And I am also stating that I 
am hoping that individuals of the Administration do the same, 
because there have been reports already that the President 
yesterday was telling individuals to disobey the law in regards 
to the security--the border line, and telling officers, ``Don't 
listen to the judges.''
    Now, I came here with a whole other series of questions 
that I wanted to ask. But Mr. Duffy went there because I wanted 
to know some other things that are important to the American 
people. And now I am--he has raised my concerns because 
generally what happens at the top goes all the way down. And 
with all of the individuals who were fired yesterday, some 
because they are trying to tell the President to follow the 
law, and then the President would not follow the law, then it 
gives me concerns.
    And I think that is why the chairwoman asked you, ``Are you 
concerned about your job?'' Because it seems as though 
individuals within the Administration who follow the law and 
may tell the truth and not try to deceive individuals in some 
kind of way, the Administration of the President seems to want 
to fire them. And that was the nature of her initial questions 
that she had with you.
    And I have almost lost all of my time, so I will just ask 
one question. I wanted to ask about--talk about leveraged 
lending and things of that nature, which is important. But I 
don't have that kind of time.
    So let me ask you this. Slapping tariffs on our allies has 
made for tough negotiations. Do you believe those tariffs have 
been overly disruptive? And how do they serve our purpose when 
it comes to negotiating with Mexico and Canada? Because it 
seems to me that they don't.
    Secretary Mnuchin. Well, I am very pleased with the 
agreement we have with Mexico and Canada. And I will tell you 
as it relates to China, the tariffs have been effective in 
getting China to the negotiating table.
    And I know you ran out of time, but let me just comment on 
leveraged lending, since you brought that up.
    Chair, would you like me to comment on--I won't.
    Chairwoman Waters. The gentleman from Ohio, Mr. Stivers, is 
recognized for 5 minutes.
    Mr. Stivers. Thank you, Madam Chairwoman.
    I am over here, Mr. Secretary. Thanks for being here today. 
So Ambassador Lighthizer testified in front of the Ways and 
Means Committee recently and said that it is really important 
to reauthorize the Export-Import Bank because it supports 
American jobs and American exports. Do you agree with 
Ambassador Lighthizer's assessment?
    Secretary Mnuchin. I do.
    Mr. Stivers. Great. And we look forward to working with you 
on a bipartisan basis to reauthorize the Export-Import Bank and 
make important reforms to make sure that it has all the 
safeguards that need to be in place for the taxpayers and to 
make sure that it is running effectively. But I really 
appreciate your thoughts and opinions on that.
    I said I wanted to talk to you a little bit about 
suspicious activity reports. You are in charge of the Financial 
Crimes Enforcement Network, FinCEN, that collects suspicious 
activity reports, SARs. And almost a million of those were 
filed last year by financial institutions.
    Many times, that happens without a feedback loop to the 
financial institutions to help them be better at preparing and 
knowing what was good information, and what was bad 
information.
    And it seems to me that there might be a better way to 
conduct SARs, even if we don't change the reporting threshold, 
just getting the information and making it more useful in a 
central database or some type of way where it is query-able by 
the folks who need it. Are you working on anything to make 
those more effective?
    Secretary Mnuchin. Yes, we are. First, let me just comment, 
the SARs are very important for all of our law enforcement and 
our activities around sanctions. So when I was a banker, I was 
concerned these things just went into a black hole. We do use 
them, but we are actively looking at the policy around SARs and 
we are working with FinCEN and TFI on looking at whether we 
should make certain changes. So thank you for bringing that up.
    Mr. Stivers. And if you could--and I understand that you 
can't report back on everything. But there may be a way to 
create a feedback loop to make the production more effective.
    Some of these folks are, again and again, doing the same 
things and maybe making the same mistakes on these suspicious 
activity reports, or making them less effective for law 
enforcement than they could or should be. So some type of 
feedback would be very helpful for a lot of folks who want to 
help, as you are trying to help catch the bad guys.
    Secretary Mnuchin. Thank you.
    Mr. Stivers. Thank you. Finally, I wanted to touch on 
something that I know some other people have talked about. 
Tomorrow there is going to be a hearing with seven of the large 
financial banks in America. And we talked a little bit about 
what would happen with sanctions if we didn't have large 
American banks.
    If the U.S. didn't have global banking institutions, and 
instead we had to rely on European entities, Chinese entities, 
and other foreign entities to help try to make our sanctions 
effective, would they be able to be implemented? And would they 
be as effective at shutting down rogue regimes?
    Secretary Mnuchin. No, they wouldn't. The U.S. financial 
system and the strength of it and the importance of the dollar 
and the large financial institutions are all critical to our 
sanctions enforcement.
    Mr. Stivers. Thank you.
    I yield back the balance of my time.
    Chairwoman Waters. The gentleman from Georgia, Mr. Scott, 
is recognized for 5 minutes.
    Mr. Scott. Thank you, Madam Chairwoman.
    Treasury Secretary Mnuchin, are you under oath to tell us 
the truth today?
    Secretary Mnuchin. I don't know technically if I am under 
oath or not, but I am here to tell you the truth. Yes.
    Mr. Scott. You are here to tell us the truth? Have you ever 
had any business dealings with Russians?
    Secretary Mnuchin. Have I had any business dealings with 
Russians?
    Mr. Scott. Yes, sir.
    Secretary Mnuchin. Not that I am aware of. But I just want 
to be clear, my great-grandparents emigrated here from Russia. 
So I may be a minuscule part Russian myself.
    Mr. Scott. Let me ask you this: Have you ever had any 
business dealings with Russian oligarchs?
    Secretary Mnuchin. No. As I commented earlier, I don't even 
believe I know any Russian oligarchs.
    Mr. Scott. Do you have any knowledge of anyone in the Trump 
Administration who has done business with Russians?
    Secretary Mnuchin. The Trump Administration is very large. 
I cannot comment on the entire Trump Administration--
    Mr. Scott. Do you know, if we get specific, then, of any 
business dealings that President Donald Trump has had with 
Russians as a businessman?
    Secretary Mnuchin. I have no access to the President's 
finances--
    Mr. Scott. No. I am not asking--
    Secretary Mnuchin. --other than what I read in the press.
    Mr. Scott. I am not asking access. You see, Mr. Mnuchin, 
you are the Treasury Secretary. You are our chief steward of 
all economic matters, as far as we are concerned, in the world, 
trade matters, financial matters. It is within your purview and 
covers the waterfront, just as our very first Treasury 
Secretary Alexander Hamilton did. Treaties, you name it.
    My whole point is this. Now, the reason these questions are 
coming up to you is, there is such a great hunger among the 
American people to try to find out what is it about Russia and 
the relationship with this Administration that causes this 
unease? Nowhere was that more paramount than in sitting on the 
world stage, President Trump took the word, the advice of Putin 
over his own Treasury Secretary, his own intelligence.
    So it sets many in America--and I would say the large 
majority--and that is why we are trying to get to these 
questions.
    But before I go, I want to get back to the trade issue--
something that you are dealing with. I represent the great 
State of Georgia and we are number one in peanuts, pecans, and 
poultry, and number two in cotton, and right now, all of these 
industries are suffering.
    And I want to just get your opinion here. The latest data 
says that nearly 100 percent of cotton produced in the United 
States is exported. U.S. cotton and cotton yarns are subject to 
an additional 25 percent tariff in China due to the trade 
dispute.
    Georgia makes one-third of all the pecans produced in the 
nation. Half of those go to China, 25 percent. Where is this 
coming to? And you just made a statement that China is 
resolved. How so? When my people in Georgia, my farmers and 
producers are just hanging on by their fingernails because of 
this trade situation? What can you tell me to tell my farmers 
in Georgia? Cotton and--
    Secretary Mnuchin. I want to make just two quick 
statements. First of all, I don't believe that the President 
listened to Putin over me, okay, or am I aware of his 
intelligence.
    On the farmers, I can assure you that I am working very 
hard on the China deal, and agriculture is a very important 
part of that, so I appreciate that.
    Chairwoman Waters. The gentleman from Texas, Mr. Williams, 
is recognized for 5 minutes.
    Mr. Williams. Thank you, Madam Chairwoman. Mr. Secretary, 
thank you for being here today. There is currently a debate 
going on in our country about the economic systems of 
capitalism versus socialism. As you know, I am a small-business 
owner. I am a car dealer who is a strong believer in markets, 
the concept of risk and reward, and individual freedom.
    The U.S. economy is growing at the fastest pace in over a 
decade while most of the developed world is experiencing an 
economic slowdown. And yet some people, some on the other side 
of the aisle are unwilling to accept the reality that our 
success for the past 2 years is a result of reducing the 
government's footprint in the free market.
    So, Mr. Secretary, are you a capitalist or a socialist?
    Secretary Mnuchin. I am a capitalist.
    Mr. Williams. That is great. And what effect would it have 
on GDP and the U.S. economy if we began to turn away from free 
market principles and take a more socialist approach?
    Secretary Mnuchin. I think it would be disastrous for the 
economy, and every single country that has pursued those 
economic goals has deteriorated significantly.
    Mr. Williams. Venezuela, Cuba, just to name a few.
    Secretary Mnuchin. And many more.
    Mr. Williams. Yes. The economy is booming because the tax 
cuts that were enacted last year are simply working. Unleashing 
the power of the private sector has led to increased capital 
investments, more job opportunities, and higher wages for 
workers. These are all very positive outcomes in the short 
term, and these capital investments will continue to pay 
dividends into the future.
    With that being said, we should not get complacent. What do 
you see as the biggest obstacle holding back the economy from 
even higher growth?
    Secretary Mnuchin. I think the good news is the economy is 
in very good shape. I think that clearly the world economy has 
slowed down. That is having some impact. I think getting our 
trade agreements renegotiated is probably the single most 
important issue for the economy, and that is why it is such a 
big priority of this Administration at the moment.
    Mr. Williams. Last week, the Texas Bankers visited my 
office and talked about the Bank Secrecy Act. We discussed the 
current thresholds for currency transactions, suspicious 
activity reports being so low that it creates a heavy 
compliance burden for small banks.
    When the CTR threshold of $10,000 was initially implemented 
in 1970, that was enough to buy two brand new automobiles. This 
is no longer the case because of inflation. So how would you 
recommend adjusting the current CTR and SAR regime to make 
compliance easier for smaller institutions?
    Secretary Mnuchin. Well, we are looking at this carefully, 
and I am sympathetic to the issue for community banks and small 
regional banks. Having said that, with the advance of 
technology and people can break transactions up into many, 
many, many smaller transactions, we are not yet convinced that 
raising the limit is the appropriate issue, but we are 
continuing to study it.
    Mr. Williams. Okay. While our country is moving in the 
right direction economically, I and a lot of people, and I am 
sure including yourself, are worried that we are not paying 
enough attention to the national debt which recently surpassed 
$22 trillion, as we know. So as I said, I am concerned that our 
national debt will ultimately hinder economic growth in the 
country.
    The net interest debt in 2018 was $371 billion. That 
affects a lot of things. Fort Hood is in my district, and it 
affects the military. They are concerned about it. So that is a 
huge number. So how concerned should we be about our soaring 
national debt?
    Secretary Mnuchin. I am glad you brought it up. I think the 
debt is something that has doubled in the previous 
Administration. I think it is something that we have to be 
careful and watch government spending. That is why the 
President is trying to look at decreasing government spending.
    The most important issue is growth. I am comfortable that 
we can support the national debt as a percentage of GDP as it 
is now, but we need to be on a pathway to make sure that the 
deficits don't continue to balloon and the government spending 
is not out of control.
    Mr. Williams. We are of the age that we remember 20 percent 
interest in our lifetime, and 6 or 7 percent was a good rate, 
but right now with the debt, 6 or 7 percent could be harmful, 
so I think that we are doing the right thing in being worried 
about it.
    And then on a side note I would like to--you and I have had 
conversations in the past on interest rates, and we have agreed 
on a lot of where the interest rates ought to go, and Chairman 
Powell was here the other day and said that interest rates 
would remain flat. So I want to thank him for that, and thank 
you for hearing me out when I talk about it.
    I yield my time back, Madam Chairwoman.
    Chairwoman Waters. Thank you very much. The gentleman from 
Missouri, Mr. Cleaver, who is also the Chair of our 
Subcommittee on National Security, International Development, 
and Monetary Policy, is recognized for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Mr. Secretary, the President, I believe, has expressed 
publicly his support for reauthorization of the Export-Import 
Bank, and I am--because he has and people on both sides of the 
aisle are also interested. Has Treasury submitted the 
reauthorization request?
    Secretary Mnuchin. I am glad to hear that there is 
bipartisan support because this is important to the President, 
and my understanding is that we are working on that. We would 
like to see this--
    Mr. Cleaver. Don't you--yes, sir. We only have until 
September. And so it would be good if we had a reauthorization 
request submitted now. And that is one step before we are going 
to be able to get something done that can be done relatively 
easily.
    Secretary Mnuchin. My understanding is this is going 
through the interagency process at the moment. We are not the 
lead, but we are actively supporting this, and I appreciate 
your focus on this. Let me be clear, we want to reauthorize the 
Export-Import Bank.
    Mr. Cleaver. So it will be done shortly?
    Secretary Mnuchin. I am going to go back and find out the 
exact status from the people who are working on it, yes--
    Mr. Cleaver. Madam Chairwoman, is it appropriate for me to 
ask if I could receive, or if the committee could receive--
    Secretary Mnuchin. We will follow up with your staff.
    Mr. Cleaver. Okay, thank you. Let me go back and visit some 
places where you have been earlier. My first concern is the 
American public--as it is I am sure yours--but the American 
public is losing on the tariffs, and it is not just coming from 
me or a Democrat. It is coming from all over. The U.S. Chamber 
of Commerce has already said that we going to lose $1.6 billion 
in export trade that is threatened.
    And in my district, we are being decimated. I can 
understand why Senator Grassley came out and said we need to 
focus on creating opportunities instead of erecting barriers. I 
would like to see a resolution with Canada and Mexico, et 
cetera, is killing--that is my next door neighbor, Nebraska.
    My farmers are being bludgeoned. I drove by some soybean 
fields 2 weeks ago to look at flood damage, and people are 
leaving the soybeans in the field, from $10 down to $8 now and 
dropping. I mean, people are hurting.
    If you had a chance to look at the State of Missouri, $432 
million we export to Canada, $72 million to Mexico, $80 million 
to China, and $239 million to Europe. You know, I spoke to a 
farmer on Friday, and he said, ``Our patience is running out.'' 
When I go back home on Friday, and I go out into the rural 
parts of my district, which is significant, what do I say?
    I mean, they voted for the President. Is it too much for 
them to expect not to continue to be hurt?
    Secretary Mnuchin. No, they will be heard. And I have been 
accused that all I want to do is sell soybeans, but I can tell 
you I want structural reforms. But the vice premier, when he 
was here last time, committed to a very big order of soybeans, 
and I can assure you that agriculture is very important to the 
President and that is on the top of the list of issues to be 
resolved. I understand your concerns.
    Mr. Cleaver. Yes. My farmers don't know anything about 
that. We are talking about U.S. tariffs costing American 
consumers about $6.9 billion last year, and it may go up this 
year. And so I appreciate your concern for my appreciation, 
but, you know, I have to go home Friday. I have to talk to 
folks, and I would like to say, ``I spoke to the Secretary of 
the Treasury and he said next Thursday at 3:00, the pain will 
begin to be diminished.'' Or should I say Friday, what day?
    Secretary Mnuchin. Well, I can tell you, the Chinese have 
committed to a very, very large order. While we are 
negotiating, they have committed significant orders in the 
soybean--
    Mr. Cleaver. Already?
    Secretary Mnuchin. Yes, already. And they are in the 
markets executing those orders.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Chairwoman Waters. The gentleman from Ohio, Mr. Davidson, 
is recognized for 5 minutes.
    Mr. Davidson. Thank you, Madam Chairwoman. Secretary 
Mnuchin, thank you so much for your testimony and really the 
great work you and your Department are doing on behalf of the 
American people. Thank you.
    I think you would agree that America is broadly seen as the 
world's land of opportunity. People from all over the world, 
capital from all over the world comes here. And it is still 
attracted to the United States of America. In fact, our GDP 
growth, our wage growth, and our favorable markets are the envy 
of the world.
    We are an outlier in many respects to the rate of 
performance over the past 2 years. And one of the areas that I 
get concerned about is, in the midst of all that, why are some 
things not quite working?
    America is still the most innovative country in the world, 
but when I see American innovators taking their innovation and 
raising the capital for that innovation outside the United 
States, something seems to be broken. What is wrong with our 
markets that this would happen?
    And so as I look at blockchain, right now, for example, I 
see this reality where the innovation is happening in the 
United States and elsewhere, but it is rapidly happening 
elsewhere because even American companies are raising the 
capital outside of the United States, because they don't have 
the regulatory certainty they need for capital formation. And 
without the capital formation, we see so often that the 
development just doesn't take place.
    So that is why today a bipartisan group from this 
committee, and outside the committee introduced the Token 
Taxonomy Act that would provide regulatory certainty for the 
crypto market to define what is a security and what is not a 
security.
    But are you following the developments in blockchain? And 
just the dynamic impact that could have--not just for capital 
formation but for security, for the frameworks that we have for 
data security? Premier Xi Jinping maybe with hyperbole said 
that he believes that the blockchain will be 10 times more 
significant than the internet. So are you tracking blockchain 
significantly in the Department of the Treasury?
    Secretary Mnuchin. I am. There are not many things I would 
say I will take the other side of that, but I don't think 
blockchain will be 10 times more significant than the internet.
    We are working with all the regulators on blockchain, and 
more importantly on crypto assets. We want to make sure that 
these can't be used for illicit purposes. And I am not familiar 
with your bill but I am happy to follow-up with your staff and 
understand your ideas.
    Mr. Davidson. Thank you, Mr. Secretary. And your staff has 
been very helpful, as have people across the industry, people 
in the SEC, and there is good support for a non-partisan topic 
as to where should this be regulated. But more broadly, when we 
look at this gap, you see when there is a gap between our 
regulatory frameworks and the demands, supply and demand get an 
imbalance, there is a black market. The United States--or the 
market simply moves. There is no black market.
    And if you look in the past 12 months, finance moved to 50 
percent market share for crypto assets. Part of the regulatory 
framework, as you highlighted earlier, that our banks have is 
because so much moves through the U.S. financial system, so 
much moves through the protocols that the United States has 
helped establish and that would include trade and including 
financial trade.
    So I really think it would be advantageous for the United 
States to stay at the forefront of this. We are rapidly losing 
ground. We need to quit studying the issue and get regulatory 
certainty for our market in this space.
    I would say that towards that end, one of the encouraging 
things to me, as you highlighted in the USMCA, is trade. And in 
particular, I wonder if you could highlight some of the 
financial services wins because we hear so much more about 
manufacturing or agriculture. We see the expansion of financial 
services coverage in USMCA and including the framework that we 
are working on with China.
    Secretary Mnuchin. Thank you for pointing that out. We 
think the financial services improvements in USMCA are quite 
significant and quite frankly are a model to use in other trade 
agreements, and financial services in our discussions with 
China are very high on the list and we have made a lot of 
progress.
    Mr. Davidson. Thank you for that. And when you look at the 
framework and the protocols, FinCEN, whether you are talking 
OFAC with our sanctions, one of the underpinnings of that is 
the Bank Secrecy Act.
    My colleague, Ms. Maloney, highlighted the work that she 
has done on beneficial ownership. I would just caution that as 
we look as this framework, you mentioned earlier that you 
conducted a private transaction that you would like to remain 
private.
    There are legitimate business purposes why that should 
still be the case and should be subject only to discovery, not 
total criminal penalties for people who don't file forms that 
they don't even know exist. I yield back.
    Mr. Green [presiding]. The gentleman yields back.
    Mr. Sherman is recognized for 5 minutes.
    Mr. Sherman. Thank you. I am actually going to agree with 
you on a couple of things. We should re-authorize the Ex-Im 
Bank, as the gentleman from Ohio pointed out, but it is 
meaningless unless you fill the seats on the board.
    Can you tell us now that the President will fill the seats 
on the Ex-Im board and push the Senate to confirm so that we 
can get a functioning Ex-Im Bank? By way of background, if you 
authorize it, but you don't put board members on it, they can't 
do anything.
    Secretary Mnuchin. I am going to agree with you, as well, 
that not only do we have to re-authorize it, but we need the 
board quorum, and I can assure you the President is very 
interested in having the board filled.
    Mr. Sherman. But he has not appointed anyone? I hope that 
you will get him more interested in actually appointing rather 
than thinking about appointing.
    Second, as to tariffs, no economist wants tariffs, but 
tariffs are often the only way to push other countries to drop 
their tariffs and other barriers to entry.
    The Chinese have calculated that we are in a stronger 
position to impose pain on them in order to get them to change, 
but that their political system is better able than ours to 
endure pain, and therefore they will beat us in these 
negotiations, make only token changes, and that we will 
continue to have the largest trade deficit in the history of 
bilateral trade in the history of the world.
    My hope is--and I know that tariffs can be painful on both 
sides--that you will do what is necessary to get us a trade 
relationship with China that is not the most pernicious, 
cancerous, malignant, and lopsided trade relationship in 
history.
    As to marijuana, I don't know if Ed Perlmutter has spoken 
yet or not, I know they have to have some pride in the fact 
that those hundred dollar bills bear your signature, but 
carrying around big sacks of hundred dollar bills through our 
neighborhoods in California is not good public safety.
    Will the Administration come out in favor of allowing those 
marijuana institutions that are legal under State law to be 
able to have access to the banking system?
    Secretary Mnuchin. Well, let me comment on that. I think 
this is a significant issue, particularly in my many roles, 
including the IRS, where we have had to build cash rooms to 
take in the cash. I am not going to make a comment on what the 
policy should be.
    There is a problem that there is a conflict between the 
Federal law and State law, and until that is resolved, we 
cannot deal with it, without legislation or some other--
    Mr. Sherman. Will you endorse--I mean, it is within the 
jurisdiction of the committee and relevant to your functions--
Mr. Perlmutter's legislation which we passed on a bipartisan 
basis through this committee very recently?
    Secretary Mnuchin. I need to review it. I am not familiar 
with--
    Mr. Sherman. Can you get back to us within 2 weeks on this?
    Secretary Mnuchin. I would be happy to review it and my 
staff will follow up.
    Mr. Sherman. And then on the Ex-Im Bank, the pressure has 
to be not so much to appoint, but to get McConnell to confirm. 
I believe you finally sent up enough people to make a quorum.
    Korea, on an uninterrupted basis for many years, has 
continued to create more fissile material. If you want a better 
deal, you are going to have to have stronger sanctions. I Chair 
and Mr. Yoho is the ranking member, we had reversed roles in 
prior years. We have sent you two letters urging you to 
sanction those major Chinese banks that violated the U.S. 
sanctions.
    So far we have only sanctioned minor Chinese companies. But 
in particular, on May 21st, there was the announcement by your 
Department of sanctioning two relatively small shipping firms 
from China. Then the President tweeted the next day that he is 
withdrawing. Then it was announced that we wasn't withdrawing 
what you had done but was stopping you from doing something 
else.
    Is there something more important than what you did on May 
21st that you are considering that the President has told you 
not to do?
    Secretary Mnuchin. First of all, I would say, the sanctions 
are very important on North Korea. It is the only reason why 
they are negotiating--
    Mr. Sherman. Well, pretending to negotiate is what they do 
when we have inadequate sanctions. Making real concessions is 
what they do when we have good sanctions. Go ahead.
    Secretary Mnuchin. I don't think we have inadequate 
sanctions. I think we have the strongest sanctions that ever 
existed. I know there was some confusion about the tweets. As I 
have clarified, the President never told me to take off those 
sanctions, and we didn't.
    I can't comment on future sanctions, what we will do one 
way or another, but sanctions enforcement--
    Mr. Sherman. Are you looking at major Chinese banks, 
without naming names?
    Mr. Green. Mr. Sherman, your time has expired.
    Secretary Mnuchin. Again, I think it would be inappropriate 
to make any specific comment on people whom we are going to 
sanction in the future, whether it is there or anywhere else, 
but--
    Mr. Green. The gentleman's time has expired. The Chair now 
recognizes the gentleman from North Carolina, Mr. Budd.
    Mr. Budd. I thank the Chair for yielding.
    Mr. Secretary, thank you for being here. I am going to 
follow up on my colleague from Wisconsin, Mr. Duffy, what he 
mentioned on the topic of international insurance regulations. 
So, if the IAIS, or the International Association of Insurance 
Supervisors, refuses to do what my colleague from Wisconsin 
asked and provide the U.S. system formal recognition of this 
upcoming Abu Dhabi meeting, will you be willing--you, Mr. 
Secretary, would you be willing to force the IAIS to delay the 
adoption of the international capital standards to a later date 
where they will recognize the U.S. system and our aggregated 
capital approaches being developed by both the State insurance 
commissioners, all 50 States, and the Federal Reserve?
    And here is why I am asking this question, background. It 
is critical that the U.S. insurance companies are provided some 
regulatory certainty and that they don't have to spend the next 
5 years, which, by the way, is the time of the ICS monitoring 
and testing period--they don't have to spend the next 5 years 
wanting to know if the regulatory system will be sufficient for 
the IAIS.
    So, will you agree to either make the IAIS publicly and 
formally recognize the U.S. system at that Abu Dhabi meeting, 
or delay the adoption to a later date?
    Secretary Mnuchin. I want to be careful making a public 
commitment on this but I am happy to speak to your office and 
we will follow up. I can assure you that we are focused on, and 
in favor of, the U.S. system, which is critical to our 
insurance companies.
    Mr. Budd. That is very helpful. It sounded like you were 
willing to and I don't want to put you in a corner on this. I 
understand the sensitivity here. But it sounded like, when you 
were talking with my colleague, that you would like to make 
that sort of commitment. And how certain are you that we can 
give some certainty to our State-based insurance companies? How 
certain are you that you can give them some future certainty?
    Secretary Mnuchin. Well, we always want to have regulatory 
certainty. That is critical. And this is an issue we are 
focused on so I look forward to following up with your office 
on this as we make progress quickly.
    Mr. Budd. Thank you for that. So, another concern I have 
with these international negotiations involves the Federal 
Insurance Office (FIO). Under the Trump Administration, we have 
seen the office stay really within its bounds and it has not 
acted like an insurance regulator, which is good.
    But I have serious concerns about the Office being involved 
in overseas negotiations and even more concerned about what the 
Office could look like under a future Administration. For 
example, under the previous Administration, the Office went 
down the road of performing activities like issuing arbitrary 
and inaccurate reports, commenting negatively on the domestic 
insurance industry, initiating duplicative and unnecessary data 
calls, and acting like a quasi-regulator via the use of its 
very powerful subpoena authority.
    So, Mr. Secretary, how does the current Administration view 
the role for the Office? And would you agree with me that it is 
important to put regulatory bounds on the FIO going forward to 
prevent what happened during the previous Administration or 
even worse?
    Secretary Mnuchin. Well, I can comment on what we are 
doing. I am not an expert on what was done in the previous 
Administration--
    Mr. Budd. That is fair. Go ahead.
    Secretary Mnuchin. I look forward to getting updated on 
that. It is not a regulator, it is not meant to be a regulator, 
and we would never support it being a primary regulator.
    Mr. Budd. And in the Administration that you work in, can 
you put some constraints on it that would protect against 
abuses in future Administrations?
    Secretary Mnuchin. We will take suggestions from you on 
this in your office and work with you on it.
    Mr. Budd. I look forward to the dialogue there. So, in the 
time I have left, I want to switch over and I want to discuss 
Hezbollah, who has a very sophisticated network of criminal 
activities to fund its terror operations in Lebanon and 
throughout the world, and that pretty much uses a lot of 
funding from Iran. The U.S. Treasury Department plays a vital 
role in helping to identify and stop the flow of illicit funds 
to the terror groups.
    So, Mr. Secretary, what steps is the Treasury currently 
taking to stop the flow of resources to Hezbollah? And in 
particular, what are we doing to stop Iranian resources from 
going to Hezbollah?
    Secretary Mnuchin. I think you know we have the toughest 
sanctions on Iran and we are very focused on issues at 
Hezbollah. We are also focused with working with people in the 
region. One of the reasons why I need to leave this evening is 
because I have a bilat, an important bilat that is focused on 
combating terrorist financing. This is one of both my most 
important priorities and the Department's most important 
priorities.
    Mr. Budd. So, last year, Congress passed the Hezbollah 
International Financing Prevention Amendments Act of 2018 to 
increase our ability to target Hezbollah's global financing and 
reach. What steps has the Treasury taken to implement 
specifically this new legislation?
    Secretary Mnuchin. Well, first of all, we very much 
appreciate the additional funding we have had for TFI to build 
up these resources. And, again, since we are running out of 
time, we will follow up with you on the specific steps.
    Mr. Budd. I look forward to that, thank you.
    Mr. Green. The gentleman's time has expired. I now 
recognize myself for 5 minutes.
    Mr. Secretary, you recently had an encounter with ethics, 
and this had to do with an entity that you sold to your then-
fiancee, now wife. And by the way, this is in no way intended 
to demean her in any way, nor is it intended to demean you.
    But you sold Stormchaser productions, and you sold it to 
her. And ethics, after having reviewed it, concluded that given 
that you gave an indication, let's call it a promise, to recuse 
yourself if there are any future dealings with the Government 
and Stormchaser, there would be no penalties imposed. Is this 
true?
    Secretary Mnuchin. Well, I appreciate you raising this, 
because I want to be very--
    Mr. Green. Excuse me, I need to know if this is true 
because I really don't want to dwell on it. I am going on to 
something else. Is this true?
    Secretary Mnuchin. That I have committed to recuse?
    Mr. Green. Yes, sir.
    Secretary Mnuchin. Yes, I have signed a new ethics 
agreement that has clarified. But just to be clear, had there 
been conflicts before then, I would have recused myself. So I 
have been in touch with ethics officials for the last 2 years--
Treasury ethics officials.
    Mr. Green. Thank you. As I said, I don't intend to dwell on 
that issue. But I do plan to go to another issue now that 
involves an entity known as RatPac-Dune. Are you familiar with 
RatPac-Dune?
    Secretary Mnuchin. I am very familiar with it.
    Mr. Green. And is it true that you have sold your interests 
in RatPac-Dune?
    Secretary Mnuchin. Yes, I sold it a long time ago.
    Mr. Green. And is it true that you have indicated that you 
need not expose the third party that you sold it to?
    Secretary Mnuchin. I'm sorry, could you repeat the 
question?
    Mr. Green. Is it true that you have indicated that you need 
not, and will not, expose the third party that you sold it to?
    Secretary Mnuchin. It was a confidential transaction.
    Mr. Green. A confidential transaction. Which means that we 
will have no idea--we, meaning the Oversight Subcommittee--as 
to what the terms or the conditions were? Not that I am overly 
interested in your personal business, but we don't know what 
the provisions are and we don't know what the entity is that 
purchased it. Is that a fair statement?
    Secretary Mnuchin. The transaction was fully approved by 
the ethics people at Treasury. So I don't anticipate there are 
any issues.
    Mr. Green. But it is true that we are charged with the 
responsibility of oversight, correct? You agree, sure you do.
    Secretary Mnuchin. I am not an expert on your oversight 
responsibilities, so I will--
    Mr. Green. Let me just assure that we are. We are charged 
with oversight. So the question becomes, how do we perform 
oversight of that which we cannot see? It is very difficult at 
best, probably impossible to accomplish.
    I mention the two of you because we live in a world, Mr. 
Secretary, where it is not enough for things to be right; they 
must also look right. This may look right to some, but the 
truth be told, the American public is concerned.
    In the case that you had with your wife, you signed an 
agreement to recuse, and if there is a conflict we will be 
aware of the conflict and understand that you must recuse. With 
RatPac, we will not have the ability to monitor the 
relationship because we have no idea as to what it is.
    Therefore, we cannot ascertain based on empirical evidence 
whether you should recuse. My point is this: It would seem to 
me that in the interest of the public having a belief that our 
system functions fairly and properly with transparency, that 
you would reveal to whom you sold the interest.
    You don't have to tell us how much. There are numbers 
floating around, $25 million, but it would seem that you would 
reveal this. You have said you won't, so I won't ask you to do 
it. But it just seems to me that that would be an appropriate 
thing for a person who has the lofty position of being the 
Treasury Secretary of the United States of America--it seems 
that that would be appropriate. I won't ask you to respond.
    Secretary Mnuchin. Well, I do want to have the opportunity 
to respond. I just want to make one thing and clarify, and this 
is all in the public domain, the entity of RatPac-Dune had a 
transaction with Warner Brothers. Warner Brothers bought it out 
and that entity is fully liquidated.
    So not only do I not have any interest in that entity at 
this point, but nobody has any interest in that. That entity 
has been fully--so there couldn't possibly be any ongoing 
conflict whatsoever.
    Mr. Green. And I will take your word for it.
    Secretary Mnuchin. Thank you.
    Mr. Green. Unfortunately, I have to. I yield back my time, 
and I recognize the gentleman from Ohio, Mr. Gonzalez.
    Mr. Gonzalez of Ohio. Thank you, Mr. Chairman. And thank 
you, Mr. Secretary, for being here. I think there are a lot of 
reasons for us to be very excited about the state of the United 
States economy, certainly when you compare it to what is going 
on in Europe and through really the entire world.
    We can look at GDP, unemployment, wage growth, there are 
tons of reasons to be excited. And I agree, I think a lot of it 
primarily has to do with the deregulation and the tax cuts. I 
think it is fairly obvious.
    When I think about the next stage of growth and how we can 
keep this moving, I go directly to trade, specifically U.S.-
China. And I want to thank you and the Administration for 
finally stepping up and pushing back against China.
    I think now kind of the curtain has been pulled back and I 
think the entire country has a good sense of just how 
disruptive they have been. But I want to ask sort of a tactical 
question to push back a bit.
    My only real concern is we have been going in alone on that 
one. We are pursuing at the moment what seems like primarily a 
bilateral agreement. And I guess I would like to hear your 
perspective on why we have chosen bilateral versus partnering 
with some of our other allies, and if there is a plan to do 
that, because it strikes me that that would be a more forceful 
and potentially durable front.
    Secretary Mnuchin. Well, we do talk about these issues of 
China trade at the G7. It is something important. Having said 
that, we have been unsuccessful for a long time doing this on a 
multilateral basis.
    I think we are making a lot of progress. Ambassador 
Lighthizer is doing a terrific job with everybody at USTR. I 
have a call with him tonight and with the vice premier. And as 
we have said, we are making progress.
    If we are able to conclude this, these will be the most 
significant structural changes that have ever occurred. If we 
are able to conclude this, there will be an enforcement that is 
very important to this. There will be an enforcement department 
built under the vice premier.
    So we still have significant issues, but this will be one 
of the biggest accomplishments for U.S. trade, U.S. companies, 
and U.S. workers if we are able to open up their markets on a 
fair and level playing field and get structural changes.
    Mr. Gonzalez of Ohio. I completely agree, and like I said, 
I applaud the effort, and hopefully you don't mistake my 
comments for suggesting otherwise. You touched on the 
enforcement piece, and again, I saw last week China decided or 
said that they would shut down entanyl factories.
    I am from northeast Ohio, and Fentanyl opioids have been a 
huge challenge for our community. That is an incredible 
promise. The next question is on the enforcement. So specific 
to that on the fentanyl, what levels of enforcement do we have 
in place or how can we ensure that they are actually doing 
this?
    Secretary Mnuchin. Well, I can tell you the only reason why 
they did the fentanyl is because it was a personal request from 
President Trump to President Xi. President Xi made a point of 
saying how difficult this would be for them, but they were 
going to do this.
    They have put through the laws. And I am very confident 
they are going to follow through on this, independent of any of 
our current trade negotiations. And it is a very important 
issue. It is killing, as you know, tens of thousands of people.
    Mr. Gonzalez of Ohio. Just to clarify, so if we can't get 
the broader trade agreement, your suspicion is that the 
fentanyl ban will still be in place and we will be able to 
enforce it?
    Secretary Mnuchin. I have every expectation that that was 
not a conditional agreement.
    Mr. Gonzalez of Ohio. Great. And now kind of shifting to 
the Belt and Road Initiative a little bit, I just saw that 
China recently expanded into Italy with this. I think it is 
hard to figure out exactly what they are doing, candidly. I 
think the details kind of stay out of the public eye.
    But last Congress, we passed--I was not here, I am a 
freshman--but we passed the Better Utilization of Investments 
Leading to Development, the BUILD Act. It was signed into law 
to help counteract China's emergence in new markets.
    What in addition can we do to push back on China's growing 
presence in the international development sphere?
    Secretary Mnuchin. Well, I think the single best thing is 
we now have David Malpass, who was my Under Secretary, as head 
of the World Bank. And I think both at the IMF and at the World 
Bank, debt and transparency are very important issues.
    And I think the World Bank combined with our BUILD Act and 
other things can be a serious competitor to their Belt and 
Road.
    Mr. Gonzalez of Ohio. Okay. Thank you, and with that I 
yield back the balance of my time.
    Mrs. Beatty [presiding]. I yield myself 5 minutes.
    Thank you, Secretary Mnuchin, for being here. As I was 
reviewing your statement, in paragraph four of your statement, 
you note that opportunity zones are a key component of the Tax 
Cut and Jobs Act.
    You also say that opportunity zones will offer capital 
gains tax relief for investments in businesses in distressed 
communities. So I would like to know, when is that going to 
happen? How many dollars will be put into distressed 
communities? And how will you protect and assure us that we 
won't have gentrification in these communities?
    Secretary Mnuchin. So, when it is going to happen, it has 
already started. People have already started creating 
opportunity zone funds. We have put out some regulations. We 
are putting out more regulations. We hope to get those out 
within the next few weeks. They are critical to create 
certainty.
    Mrs. Beatty. Where are some of those that are already in 
existence? Where are the dollars? What communities? What 
States?
    Secretary Mnuchin. No. What our--I was--
    Mrs. Beatty. Do you have any in Columbus, Ohio?
    Secretary Mnuchin. I was saying the funds--the funds have 
started, so the capital formation has started. Many of the 
investments are waiting for the regulations, which I said we 
hope to have out in the next few weeks.
    In regards to how much, from commitments that I have heard 
people make, I could extrapolate, I think this is going to be 
over $100 billion, and the issue of gentrification is something 
we are going to have to monitor very carefully and it will be 
part of the reporting process.
    Mrs. Beatty. So you will be able to put in writing to me 
how we would make sure that we don't take these minority or 
urban communities and then all of the dollars and change them 
to where those individuals no longer have a place to live?
    Secretary Mnuchin. Absolutely, and we look forward to 
working with you and your office on these issues. Our objective 
is to create more jobs and more opportunities in those 
communities, not to change them.
    Mrs. Beatty. Okay. Let me switch to another area that is of 
interest to me, and also in your testimony earlier you used 
language to eliminate poverty and to talk about growth. As you 
will recall, when you were here last year, I asked you about 
the Office of Minority and Women Inclusion (OMWI)--and you 
didn't do so well, if I was grading you with a test score.
    You didn't know who your OMWI Director was. You didn't have 
a lot of information to offer me about OMWI. So now can you 
tell me who your OMWI Director is?
    Secretary Mnuchin. I can, and I want to thank you, because 
you did point this out to me. It's Lorraine Cole, and I meet 
with her on a monthly basis. I go through the reports. I 
appreciate the importance of this and thank you for bringing 
this to my attention last year.
    Mrs. Beatty. Well, let me also say--and I would like to 
enter into the record that we requested the IG to take a look 
into your Department's compliance with Section 342 of the Dodd-
Frank Act. It didn't come up so well.
    When I read the report, the Inspector General found that 
the OMWI at your Department will not likely be able to fulfill 
its responsibility at the same level as the other OMWIs in the 
other regulatory offices because of insufficient staffing.
    I asked the same question to the new Director of the CFPB 
last week and it is a yes-or-no question, will you put enough 
money in there to maintain Dr. Cole and to give her the 
appropriate staff as Section 342 states? It is a yes or a no, 
because right now we know it is saying you only have two 
people. We know that is not enough.
    So are you going to put it up to a standard that I am going 
to let you determine, but a standard that won't be embarrassing 
to you or cause an issue when you come before my Diversity and 
Inclusion Subcommittee or back here?
    Secretary Mnuchin. I will commit to you to make sure that 
she thinks that she has enough staff.
    Mrs. Beatty. Okay. So the last question that I have is, are 
you aware of what the Inspector General's report stated? And do 
you have any idea of the diversity--if we are going to talk 
about growth and eliminating poverty and we are going to go 
into distressed communities, do you have any idea of what your 
Department looks like with women and minorities? And if not, 
you can send it to me in writing.
    I only have a few seconds, so I am going to reclaim my 
time, because I would like to take my last few seconds to 
recognize the Honorable Jesse Jackson being in our hearing 
room, and quite appropriately today when we are talking about 
national issues. So thank you, Reverend Jackson, my friend, for 
being here.
    My time is up.
    I now recognize the gentleman from Indiana, Mr. 
Hollingsworth, for 5 minutes.
    Mr. Hollingsworth. Good afternoon, Mr. Secretary. It is 
great to see you again. I appreciate the time that you have 
invested with us thus far.
    Really, I know one of the things that we have worked on in 
last Congress and we continue to work on in this Congress on 
both sides of the aisle, but especially on this side of the 
aisle, is developing an ecosystem in terms of financial 
regulation, financial oversight, where every bank of all 
different sizes can participate and hopefully grow 
successfully, because ultimately them being able to grow 
successfully helps their communities grow successfully.
    And I certainly believe in an ecosystem where everyone 
competes on a level playing field and everyone has the 
opportunity to compete for good business. But I hope that you 
might be able to speak, especially in advance of tomorrow, 
about how it serves American interests, and not only American 
corporate interests but sometimes American Government 
interests, in having super large banks headquartered here in 
the United States, having a financial system around the world 
that depends on the U.S. financial system, as well, and how 
that empowers Treasury and how it empowers the American 
consumer and how it empowers American companies to have very 
large institutions that can serve the needs of very large 
American companies and serve the needs of American interests? 
And I wondered if you might be able to talk a little bit about 
that.
    Secretary Mnuchin. Well, I think it is important. I don't 
know about the words, ``super large.'' I would say large, well-
capitalized U.S. financial institutions are critical to the 
U.S. economy that have sufficient capital to be able to supply 
businesses both large and small and do global business. It is 
very important to the U.S. economy.
    Mr. Hollingsworth. Right, and as you talked about earlier 
with regard to trade, Indiana has a very high percentage of its 
State's GDP is dependent on trade, and ever more important U.S. 
companies are competing, selling, importing, exporting abroad 
and it is really important that we have institutions that can 
do that kind of cross-border work.
    And frankly, in their absence, other institutions would 
step in and do that work and perhaps they might be not 
headquartered in the United States. And so, it continues to be 
really important to me to ensure that we have an ecosystem 
where our large institutions can compete, as well.
    And I wondered if you might also talk a little bit about 
the importance of even foreign-owned banks that operate and 
invest right here in the United States and how they have a role 
to play in that financial services ecosystem, as well.
    Secretary Mnuchin. Yes, we encourage a system where foreign 
banks can invest in the United States. We want to make sure 
that they are properly regulated, and they are properly 
capitalized.
    Mr. Hollingsworth. Right.
    Secretary Mnuchin. But like any other type of investment, 
we encourage foreign companies or foreign individuals to invest 
in the United States.
    Mr. Hollingsworth. All right, and as you say properly 
regulated and properly capitalized, I know that one of the 
concerning issues that we have had a few times that has come up 
here is just making sure that there is some parity between the 
two, right?
    We don't want our foreign institutions to be advantaged in 
some way or disadvantaged in some way. We want them to be 
thoughtfully regulated, thoughtfully capitalized such that they 
can compete on that level playing field with U.S. firms so that 
hopefully the American consumer and American companies that are 
seeking to use them will face a competitive environment where 
they can get the best possible deal, right?
    Secretary Mnuchin. That is correct, a level playing field.
    Mr. Hollingsworth. Great. Well, I am glad to hear that. So 
coming back to--I just want to touch on one other topic. It is 
important, as a part of Treasury's work, the sanctions, right? 
The financial restrictions the Treasury does is an important 
aspect of that.
    And much of the strength of that comes from being a reserve 
currency, and the U.S. financial system being such a large part 
of the global financial system. And I wondered if you might 
talk about what threats there might be to that system and the 
architecture of that system coming from some of our large 
counterpart countries?
    Secretary Mnuchin. Well, it is a tremendous benefit for us 
to be the reserve currency of the world, and it is a tremendous 
responsibility. And that is why when we look at sanctions, we 
have to take lots of different issues and into consideration, 
but there is no question that sanctions are effective because 
we are the reserve currency of the world. And for the U.S. 
financial system, it is of utmost importance for us to maintain 
that status.
    Mr. Hollingsworth. Right, and those things, those policy 
threats that might imperil us being the reserve currency, 
imperil our financial system, restrict the ability of our 
financial system to reach and compete globally, those might 
adversely impact in the long run the efficacy of these 
sanctions and the United States being a leader and being able 
to conduct those operations around the world, right?
    Secretary Mnuchin. It would, and our ability to raise 
capital all over the world.
    Mr. Hollingsworth. Right. Certainly, there are many 
challenges, but that is an important one that I think is 
frequently lost, that the efficacy of these sanctions programs 
depends on us continuing to be a capital market, continuing to 
be a financial services industry that competes around the world 
and has an ever larger presence around the world, so--
    Secretary Mnuchin. They are intricately linked, and I am 
glad you have pointed that out.
    Mr. Hollingsworth. Thank you for the time today. I yield 
back.
    Mrs. Beatty. The gentleman from Washington, Mr. Heck, is 
recognized for 5 minutes.
    Mr. Heck. Thank you, Madam Chairwoman. I would like to 
quickly follow up on some of the line of questioning of my 
friends, Mr. Stivers and Mr. Huizenga, regarding the Export-
Import Bank.
    First, to correct the record, the Bank was not, as 
indicated, established in 1945. It was established in 1934. It 
is celebrating its 85th year, but I quibble. The larger point, 
however, I would like to correct is the representation that it 
exists only to assist small businesses.
    In fact, a simple reading of the history of the bank over 
85 years is that it assists with export credit in three areas 
where the market is imperfect. The market is, indeed, imperfect 
in helping small businesses stand up sales to foreign 
countries. It is also imperfect in its sales to countries that 
are developing because banks don't have the international 
ability necessarily to collect within certain developing 
countries.
    And, thirdly, banks are disinclined to engage in long-term 
financing for long-lived large-dollar items. So think massive 
earth-moving equipment by Caterpillar sold to some nation that 
is building highways. And it is in this regard that I think it 
is really important to clarify that even though Caterpillar, as 
an example, might be a very large business, Caterpillar's 
supply chain is made up of thousands and thousands of small 
businesses who are hurt by the fact that the bank does not have 
a quorum and, therefore, cannot approve deals above $10 
million.
    So simply put, would you acknowledge that small businesses 
are being hurt by the absence of a quorum on the Export-Import 
Bank?
    Secretary Mnuchin. I would, and the $10 million threshold 
is an awfully low threshold. So, I think we would agree that 
there are lots of small businesses, medium-sized businesses, 
and as you have pointed out, big businesses that do employ 
people with small business. And the purpose was not to displace 
private capital but, as you have pointed out, to assist where 
there is not private lending to facilitate trade.
    Mr. Heck. Mr. Secretary, do you have any idea how much 
China's various export credit authorities have issued in loan 
guarantees or loans in the last 2 years?
    Secretary Mnuchin. It is enormous and multiples, multiples 
of anything we would do no matter what we ended up doing with 
the Export-Import Bank.
    Mr. Heck. Would it surprise you to learn that they have 
issued more credit in the last 2 years than our Export-Import 
Bank has in its entire 85-year history?
    Secretary Mnuchin. That would not surprise me.
    Mr. Heck. So would you acknowledge that in this era where 
China is emerging as clearly a highly competitive, long-term, 
strategic competitor that utilizes whole-of-government means to 
achieve their purposes, that we would be well-served by having 
a fully functioning Export-Import Bank as one of the arrows in 
our quiver in which to compete with them?
    Secretary Mnuchin. I can tell you that the President and I 
and others in the Administration think this is very important, 
and I would hope whatever issues there are, we can figure this 
out on a bipartisan business and whatever reforms. It is 
important from an economic standpoint to get the Ex-Im Bank 
back open, and that means loans above $10 million.
    Mr. Heck. Do you have any idea why we call it the Export-
Import Bank when it doesn't do any import business whatsoever?
    Secretary Mnuchin. I'm sorry? What was that?
    Mr. Heck. Do you have any idea why we call it the Export-
Import Bank when it doesn't do any import business whatsoever?
    Secretary Mnuchin. I don't know the history of that.
    Mr. Heck. So I want to shift to the proposal by the 
Administration to reform the Government-Sponsored Enterprises. 
The President has obviously directed you and Secretary Carson 
to come forth with a plan to reform Fannie Mae and Freddie Mac 
and also lay down some benchmarks by which that proposal would 
be measured.
    I would like to respectfully suggest the addition of two 
more benchmarks. The first is predicated on the clear evidence 
that we have a shortage of homes in this country. As I 
indicated in an earlier subcommittee meeting, in the 1970s, we 
built 12,000 units for every million people in America, and now 
we are building 4,000 for every million.
    Clearly, we have a shortage. That has been documented to be 
at least 1.5 million. And part of the solution to that, because 
we assess that construction financing sometimes gets pinched, 
not necessarily but sometimes consumer access to credit, the 
construction financing gets pinched, would you support at least 
the current level of support by the GSEs of construction 
financing?
    And secondly, as we or if we stand up a new GSE, would you 
commit to ensuring that smaller banks and credit unions have a 
means of laying off their mortgages so that they can compete 
effectively with larger banks who can create their own 
securitization market? Would you support those two benchmarks?
    Secretary Mnuchin. Well, I can assure you on the second 
benchmark, I completely support that and want to make sure 
there is a fair and level playing field. On the first 
benchmark, I am not expert enough on this, but we will reach 
out to your office. And as we put together a proposal, we will 
absolutely take into account your ideas.
    Mr. Heck. Thank you, Mr. Secretary. I yield back.
    Mrs. Beatty. The gentleman's time has expired.
    The gentleman from Wisconsin, Mr. Steil, is recognized for 
5 minutes.
    Mr. Steil. Thank you. Thank you, Secretary Mnuchin, for 
being here. First question, kind of the role of large banks in 
our economy, the U.S. has a large and dynamic economy producing 
many globally successful companies. Businesses are world 
leaders in manufacturing, services, technology, and consumer 
goods. They create opportunities for workers, families, and 
downstream suppliers.
    I experienced firsthand the impact that this can have on 
manufacturing in southeast Wisconsin on successful American 
business generating jobs, sustaining communities, and investing 
in innovation.
    As you know, the U.S. is home to several large financial 
institutions that, among other things, provide the critical 
services to American companies engaged in global commerce that 
fulfill an important role in our financial system.
    As I look at it--as the world's top 10 largest banks, four 
are Chinese, several others are European. And by my count, only 
a couple are U.S.-based. Does this matter? And what would 
happen to our economy if large, globally competitive banks are 
placed at a competitive disadvantage to our foreign banks?
    Secretary Mnuchin. I think it would be a very significant 
problem for the U.S. economy.
    Mr. Steil. In particular, as it relates to exports in the 
United States?
    Secretary Mnuchin. As it relates to everything, being 
competitive, having strong, well-capitalized, leading banks is 
very important to the structure of our overall economy and to 
us being competitive throughout the world.
    Mr. Steil. Thank you. I am going to shift tactics to 
illicit finance and human trafficking, which is something that 
is important to me. According to the latest estimates, more 
than 40 million people around the world are subjected to human 
trafficking. Many are trapped in forced labor, or are sexually 
exploited. Research estimates that 25 percent of these people 
are children, and 75 percent are women and girls. It is a 
terrible crime. And regardless of party geography, we have to 
be committed to stopping this.
    But unfortunately, it is also big business, and that means 
we need to target the financial crimes associated with this, 
and the ill-gotten profits from human trafficking, which is why 
I introduced a bill earlier today that would require our 
government to hold countries accountable that turn a blind eye 
to illicit financial activity with regards to human 
trafficking. What can the Treasury Department do to prevent 
human trafficking and their associates from abusing the U.S. 
financial system to facilitate their crimes?
    Secretary Mnuchin. Well, we have the proper intelligence in 
working with the State Department. We have many sanctions 
authorities that we can utilize and we go after for these 
issues. And I am not familiar with your bill, but we look 
forward to learning about it.
    Mr. Steil. I appreciate you taking the time today. I yield 
back.
    Mrs. Beatty. The gentleman yields back. The gentleman from 
Guam, Mr. San Nicolas, is recognized for 5 minutes.
    Mr. San Nicolas. Thank you, Madam Chairwoman. And thank 
you, Mr. Secretary, for being with us this afternoon. I wanted 
to have a conversation about the earned income tax credit and 
how it creates a unique liability for the Treasury. The earned 
income tax credit, for an EITC taxpayer, the difference between 
their income tax refund and their income tax withholdings is a 
Treasury liability. Is that correct?
    Secretary Mnuchin. I believe that is the case, but now we 
are into an accounting issue--
    Mr. San Nicolas. Right, right. Basically, they earn X 
amount, X amount is withheld, if the refund exceeds what is 
withheld, that is actually a Treasury liability that the 
Treasury has to pay out. Is that correct?
    Secretary Mnuchin. I want to make sure I am following your 
technical issue. There are withholding taxes. There is the 
EITC. Okay. I think what you are saying is, definitionally--I 
don't--I am not sure. I can check. I don't believe we record 
that as a liability on our books and records, but I will check 
that and get back to you.
    Mr. San Nicolas. Well, what I mean by liability is that the 
Treasury is responsible for paying out the earned income tax 
credit, if there is no withholding sufficient to pay it--to 
fund it.
    Secretary Mnuchin. The Treasury is responsible for paying 
out the EITC. That is correct.
    Mr. San Nicolas. Does the Treasury fund this liability by 
diverting funds from education, health, or public safety?
    Secretary Mnuchin. The Treasury funds everything, okay, on 
a general basis. There are no specific allocations from one 
program to any other program.
    Mr. San Nicolas. And so, again, just to reiterate, the 
Treasury is responsible for funding the earned income tax 
credit?
    Secretary Mnuchin. The Treasury is responsible for 
disbursing the earned income tax credit. The U.S. Government is 
responsible for funding it.
    Mr. San Nicolas. Well, I am glad we have this on the 
record, Mr. Secretary, because I am a delegate from Guam. And 
since 2008, Guam has been absorbing 100 percent of the earned 
income tax credit payouts that have been filed from our 
taxpayers in the Territory. And this sum has actually ballooned 
to account for over 50 percent of the annual set-aside that we 
have for tax refunds altogether.
    And so, what I am really hoping, especially with tax season 
in full gear, is that we can have the Treasury work with the 
Guam Department of Revenue and Taxation to figure out what 
earned income tax credit amounts the Treasury should be paying 
for the taxpayers on Guam who are claiming this credit.
    And I want to just put on the record, also, Mr. Secretary, 
that this is not something new. The Treasury has, for years, 
already been paying out the additional child tax credit on 
Guam. And so, in order for us to be consistent with the 
Treasury funding the ACTC, I humbly ask that Treasury also do 
its part to fund the EITC on Guam.
    And this is very critical, Mr. Secretary, for a variety of 
reasons. One of them is the fact that, with poverty rates so 
high on Guam, the diversion of general fund coffers in the 
Territory of Guam, to fund the EITC payouts, impacts education 
and it impacts health and it impacts public safety. And those 
diversions also result in deficits to the territory, because we 
are having to pull other tax resources that would have 
otherwise been used to meet our appropriations projections.
    And so I think that the time has come for us to have the 
conversation of not only having the Treasury fund the EITC on 
Guam going forward, but I would deeply appreciate if the 
Treasury can also work with the Government of Guam to reconcile 
all of the earned income tax credits that have been paid out 
since 2008 so we can recover those funds, because it has 
resulted in deficits, it has resulted in debt, and it has 
resulted in deferred maintenance.
    We don't even have textbooks in our public schools that are 
within the reasonable 7-year age of the textbooks. There are so 
many fund diversions going on in the territory, and this ETIC 
liability of $56 million a year accounts for a significant 
chunk of that. So I appreciate your forthrightness in answering 
my questions with respect to who is responsible for paying 
that. And I look forward to the Treasury working with the 
Territory of Guam in making the territory whole.
    Secretary Mnuchin. And let me just comment, I am aware that 
Guam has some highly technical tax issues. I actually met with 
the Governor the last time he was here, with the Office of Tax 
Policy. We would be happy for you to come in, also, on this. So 
please follow up with my office on these specific issues. I 
know there is this and a bunch of other technical issues we 
have been trying to help on.
    Mr. San Nicolas. I just want to zero in on this. Thank you, 
Mr. Secretary. I yield back.
    Mrs. Beatty. The gentleman from Kentucky, Mr. Barr, is 
recognized for 5 minutes.
    Mr. Barr. Thank you, Madam Chairwoman.
    Mr. Secretary, in the last Congress, I was pleased to Chair 
the subcommittee that oversaw the development of the Foreign 
Investment Risk Review Modernization Act, or FIRRMA. I 
appreciate your support of that effort. I later served on the 
conference committee that negotiated the FIRRMA provisions that 
the President signed into law.
    This committee's leadership has been united in its 
prioritization of FIRRMA rulemaking. And I would ask for 
unanimous consent to enter into the record a letter that I co-
signed with Chairwoman Waters, former Chairman Hensarling, and 
the former subcommittee ranking member, Gwen Moore, detailing 
congressional intent behind some of FIRRMA's provisions.
    Mrs. Beatty. Without objection, it is so ordered.
    Mr. Barr. Thank you. And Mr. Secretary, I have a few 
questions for you on the status of the current rulemaking 
processes. FIRRMA requires CFIUS to narrow its scope for 
certain transactions to particular countries. While CFIUS has 
some discretion on which countries it targets, clearly, 
Congress wanted to see China taken seriously. How will you go 
about ensuring that China and other bad actors are the focus of 
the rulemaking and not U.S. allies such as Canada, Japan, 
Israel, and our partners in Europe?
    Secretary Mnuchin. Well, first of all, we are very much 
supportive of the legislation, thank you. This is a priority of 
ours, executing it. I can assure you we are not just focused on 
China, we are focused on other countries as well, and we look 
forward to working with you. I think the regulations will be 
clear as we roll this out, the pilot in the full-time, that we 
want to encourage investment, we don't want to discourage 
investment, but this is about protecting national security 
interests.
    Mr. Barr. Great, and thank you for balancing those 
interests, including maintaining an open investment climate. I 
was pleased to see that the President's budget contained 
significantly more resources for CFIUS operations. CFIUS is a 
national security function, and Congress should fund it 
appropriately.
    Does the President's expanded request to Congress mean that 
you currently don't see a need to impose filing fees?
    Secretary Mnuchin. No. We anticipate there will be filing 
fees, as well.
    Mr. Barr. But nothing more than what is contemplated in 
FIRMA?
    Secretary Mnuchin. Nothing that is--I believe it is in our 
budget, it takes into account the new filing fees, but we will 
follow up with your office on it.
    Mr. Barr. Thank you.
    Secretary Mnuchin. I think you will find that the filing 
fees will be reasonable.
    Mr. Barr. Thank you. And Mr. Secretary, I was encouraged to 
see the Administration announce its designation of the Islamic 
Revolutionary Guard Corps (IRGC) as a foreign terrorist 
organization.
    The IRGC and the Quds Force have been responsible for the 
deaths of numerous Americans abroad and were even behind the 
planning of an attempted bombing attack right here in our 
nation's capital. In what ways will this designation restrict 
IRGC financial activity that previous Executive Orders and the 
Countering America's Adversaries Through Sanctions Act did not? 
And what role will Treasury have in these restrictions?
    Secretary Mnuchin. Well, Treasury has been very involved 
with the State Department on this on an interagency basis. It 
is something that we think is very important. From a financial 
standpoint, we have already had financial sanctions in place. 
This puts in other restrictions to restrict people both in 
entering the country and doing business and other things. So 
this is even stronger sanctions that would be in place.
    Mr. Barr. Well, I applaud the Administration's designation, 
and I know Treasury is going to have an important role to play 
in implementation. Finally, you had mentioned your interest in 
commenting on the leverage loan issue. Obviously, leverage 
lending is increasing, 75 percent, I think is estimated through 
non-bank firms.
    But as I understand it, nearly 70 percent of U.S. companies 
are not investment grade, and aren't leverage loans simply 
loans to well-known, non-investment grade companies like Dell, 
American Airlines, Burger King, CableVision, Sprint, and Hilton 
Hotels, that permit these companies to grow, thrive, and hire 
American workers? And if these loans were shut off, wouldn't it 
be very bad for the companies and their employees along with 
the broader U.S. economy?
    Secretary Mnuchin. That is true, leverage lending is a very 
important part of the economy. We are working at FSOC and 
studying the leveraged lending issue. Just because people have 
raised this to make sure there are no problems, but it is 
something we are on top of.
    Mr. Barr. And I know you recognize that if the economy does 
have a downturn, prices will drop, and certain types of high-
yield debt will be difficult to refinance, but in a November 
2018 speech referring to elevated business bankruptcies and 
outsized losses, Fed Chairman Powell said, ``Such loses are 
unlikely to pose a threat to the safety and soundness of 
institutions at the core of the system, and are likely to fall 
on investment vehicles like CLOs with stable funding that 
present little threat of damaging fire sales.''
    Given that CLOs provide long-term capital, and are not 
subject to the short-term redemptions or outflows we have seen 
in retail and institutional credit products, do you believe, 
unlike some of the current rhetoric in Washington today, that 
CLOs can represent a vital source of liquidity to the below 
investment-grade companies?
    Secretary Mnuchin. I do, indeed, and that is one of the 
reasons we are comfortable. A lot of the capital has moved out 
of the regulated banking sector into CLOs which are permanent 
capital vehicles.
    Mr. Barr. Right, and they have performed very well over 
their 30-year history, including during the financial crisis.
    Mrs. Beatty. The gentleman's time has expired.
    Mr. Barr. I yield back.
    Mrs. Beatty. The gentleman from Illinois, Mr. Casten, is 
recognized for 5 minutes.
    Secretary Mnuchin. Madam Chairwoman, excuse me for one 
second, I don't mean to be disrespectful, but we had an 
agreement that I was going to leave here at 5 o'clock. I have a 
very significant bilat. It would be embarrassing to be late.
    Now, I will tell you, in the last 6 years, there has never 
been a Secretary of the Treasury who sat for more than 3 hours 
and 15 minutes, so as a courtesy, I am happy to stay until 
5:15, but it would be very embarrassing to a foreign government 
if this committee expected me to not show up for that meeting.
    Mrs. Beatty. Mr. Secretary, I thank you for that, but if we 
still have Members here with questions, and we have Members on 
both sides who too have prepared for these questions, would you 
be willing to come back to the committee in May?
    Secretary Mnuchin. I am always be willing to come back to 
the committee. I look forward to working with Chairwoman Waters 
on an appropriate time to make--
    Mrs. Beatty. So you would commit to coming back in May?
    Secretary Mnuchin. Absolutely, I want to make sure the 
committee always has time to get answers to all of their 
questions.
    Mrs. Beatty. Okay, thank you.
    Secretary Mnuchin. If I am going to come back, though, I 
would propose that we could break, so I am not late for this 
meeting.
    Mrs. Beatty. And if we continue and stop at your deadline, 
and we need more than one additional hearing, would you commit 
to coming back at least twice?
    Secretary Mnuchin. I would do what previous Secretaries 
have done. I can't see why it is not sufficient to come back. 
But again, as opposed to trying to negotiate this in this 
format, I have every aspect--I would like to have a good 
working relationship with the committee, and I look forward to 
answering all of your questions.
    Mrs. Beatty. Thank you. The gentleman from Illinois, Mr. 
Casten, is recognized for 5 minutes.
    Mr. McHenry. Madam Chairwoman--
    Mr. Casten. Thank you--
    Mr. McHenry. Madam Chairwoman, inquiry of the Chair. At 
this point, there are equal numbers of questions asked by 
Republicans and Democrats, so if we are going to adjourn in 5 
minutes, we need to divide this remaining time between 
Republicans and Democrats, just to be fair, under our committee 
rules.
    Mrs. Beatty. I have no problem with that. We have been 
doing that the entire time, going from Democrats--
    Mr. McHenry. It is 5:10, and so 5 more minutes is taken, 
and then the Secretary has to leave in 5 minutes--
    Mrs. Beatty. So then, a question will go to the Secretary 
to stay for one Democrat and one Republican. The gentleman from 
Illinois, Mr. Casten, is recognized for 5 minutes.
    Mr. Casten. Thank you, Madam Chairwoman, and thank you, Mr. 
Mnuchin. I will try to be quick to respect your time. Would you 
support a United States return to the gold standard?
    Secretary Mnuchin. I would not.
    Mr. Casten. Good. Do you agree with the President's recent 
call for a renewal of quantitative easing?
    Secretary Mnuchin. I'm sorry, I didn't hear your question.
    Mr. Casten. Do you agree with the President's recent 
suggestions that we should renew quantitative easing?
    Secretary Mnuchin. In my role as Treasury Secretary, it 
would be inappropriate for me to make specific comments on what 
the Federal Reserve should or shouldn't do.
    Mr. Casten. Okay. From significantly expanded deficit 
spending, to significantly expanded borrowing, we are pursuing 
a very expansionary policy since the 2015 tax cuts, in spite of 
rising GDP and falling unemployment. As a general matter, do 
you support the pro- rather than countercyclical fiscal policy 
we have been pursing relative to the larger economy?
    Secretary Mnuchin. I don't think you can put all fiscal 
policy the same. I support the tax cuts, and I stand by--I 
think this will create growth that will pay for it. But we also 
had significant government spending on top of that, and we have 
to be careful, because we can't spend the money twice.
    Mr. Casten. Okay. The reason for my question is that, I 
think this morning, the IMF cut the global growth outlook to 
the lowest level since the crisis. Domestically, we are seeing 
an inversion from the 3 month of the 10-year Treasury bonds, we 
are looking at an inverted yield curve. How concerned should we 
be that we are approaching the next downturn?
    Secretary Mnuchin. First of all, there is no question that 
growth outside of the United States, whether it be in Europe or 
China, has slowed significantly. As it relates to the inverted 
yield curve, I am not particularly concerned about the inverted 
yield curve at all, and from everything we see, we see for the 
next 2 years, still very strong, robust U.S. growth.
    Mr. Casten. Well, I certainly hope you are right. I think I 
have yet to see a downturn that people predicted at the right 
moment. If we could, we would all be wealthy by now. If it 
comes, here is my concern. In the last downturn, we had the 
tremendous good fortune to have exceptionally competent policy-
driven technocrats at the helm, from Mr. Bernanke, to Mr. 
Paulson, to Mr. Geithner. These men were uniquely suited to the 
moment, and I think we can second-guess them, but they did 
pretty well under the circumstances.
    President Trump has, to put it mildly, not proven himself 
capable of attracting or retaining people of that caliber. And 
I want to be clear, I do not put you in that category. You are 
an extremely smart guy, and your resume qualifies you for this.
    But I do have real concerns, given some of his recent 
suggested nominees to various Federal Reserve posts, who might 
have answered some of these questions differently than you 
have, that when the next downturn comes, we are not going to 
have people with the skills necessary to handle it, and 
certainly without the trust of the markets that prior 
generation had.
    Now, I am not going to ask you whether you agree with that, 
it would be an awkward question for you, I suspect, given your 
background. You may hear some of those concerns at night. My 
question for you as the Congress, given that potential and 
given your experience and wisdom, how would you advise we hedge 
against that future risk?
    Secretary Mnuchin. Well, I don't agree with you at all. I 
have a lot of confidence in the economic team that we have, 
whether it is with the regulators or whether it is in the 
Commerce Department, in the Trade Department, Larry Kudlow in 
the White House. I think we have as robust an economic team as 
we have had in previous eras, and I am glad you liked these 
previous people. I worked for Secretary Paulson for a long 
period of time, and I understand that.
    Mr. Casten. Well, I guess my concern is, as much--I mean, 
the President keeps sycophants and family members around him. 
There is a lot of turnover in the rest. And I am as concerned 
about the trust that financial markets will have for those 
individuals putting policy first as their basic skills. And 
that is the concern that I feel we have to hedge against.
    Secretary Mnuchin. Is there a question I am supposed to 
answer on that?
    Mr. Casten. I think with respect to your tight time, I will 
yield back the balance of my time.
    Chairwoman Waters. The gentleman from Georgia, Mr. 
Loudermilk, is recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Madam Chairwoman. Mr. Secretary, 
thank you, I will be very conscious of your time. Even though I 
am a Member of Congress, I am also an American citizen, and I 
think it is very important that we put the best light of our 
nation with the rest of the world, especially with foreign 
leaders.
    So I have a whole suite of questions, but I am just going 
to narrow it down to one. Four years ago, the National 
Association of Registered Agents and Brokers (NARB) Act was 
signed into law, and it is going to be stood up at the Treasury 
Department.
    But what is holding it back is that we haven't nominated a 
board of directors yet to be confirmed by the Senate. They 
haven't been appointed. I am leading a bipartisan, bicameral 
letter to the President. Several have signed onto it, 
expressing the urgency to go ahead and move forward. I know 
that you have submitted some names. My question is, can you 
please pass along to the President the urgency of getting this 
moved forward?
    Secretary Mnuchin. I will.
    Mr. Loudermilk. Thank you, Mr. Secretary. I yield back the 
balance of my time.
    Chairwoman Waters. Mr. Secretary, if I may, you had 
indicated that you would like to have a press conference in 
this room following--
    Secretary Mnuchin. I am going to cancel that. I don't have 
time for that, so I am going--
    Chairwoman Waters. Well, that is what I was going to ask 
you, if you would, instead of having the press conference, 
continue with those Members who have been waiting here for so 
long. And I think what I thought I originally heard was 5:30, 
rather than 5:15. So is it possible you can give us another 15 
minutes to get to these Members--
    Secretary Mnuchin. No, I have a foreign leader waiting in 
my office at 5:30, okay? I agreed to stay longer--it will be 
embarrassing if I keep this person waiting for a long period of 
time. I wasn't going to have a press conference; I was going to 
have a short press gaggle. I am not going to do that now.
    And I have assured you that I am happy to come back here 
and answer more of your questions. I respect the committee and 
we want to have a good working relationship with you. So I hope 
you will understand that I am already going to be late for my 
5:30--
    Chairwoman Waters. I do understand. We are late all the 
time, unfortunately. We are all pressed for time, and I do get 
it. However, I think I indicated early on that we would request 
or require that you come back at least 2 more times in the 
month of May. Is that something you are agreeing to?
    Secretary Mnuchin. No, Madam Chairwoman, I find this to 
be--you know, every single time Jack Lew and other Secretaries 
came here, there has never been anybody who has been here more 
than 3 hours and 15 minutes. I have sat here for over 3 hours 
and 15 minutes, I have told you I will come back. I just don't 
believe we are sitting here negotiating when I will come back. 
We will follow up with your office. How long would you like me 
to come back for next time? I have told you I will accommodate 
you.
    Chairwoman Waters. I appreciate that, and I appreciate your 
reminding us of the length of time other Secretaries have been 
here. This is a new way and it is a new day and it is a new 
Chair, and I have the gavel at this point. If you wish to 
leave, you may.
    Secretary Mnuchin. Can you clarify that for me?
    Chairwoman Waters. If you wish to leave, you may.
    Secretary Mnuchin. Okay. So, we are dismissed. Is that 
correct?
    Chairwoman Waters. If you wish to leave, you may leave.
    Secretary Mnuchin. I don't understand what you are saying.
    Chairwoman Waters. You are wasting your time. Remember, you 
have a foreign dignitary in your office.
    Secretary Mnuchin. I would just say that the previous 
Administration--when the Republicans--they did not treat the 
Secretary of the Treasury this way. So if this is the way you 
want to treat me, then I will re-think whether I voluntarily 
come back here to testify, which I have offered to do.
    Chairwoman Waters. Mr. Secretary, I want you to know that 
no other Secretary has ever told us the day before that they 
were going to limit their time in the way that you are doing. 
So if you want to use them as examples, you have acted 
differently than they have acted. And as I have said, if you 
wish to leave, you may.
    Secretary Mnuchin. If you wish to keep me here so that I 
don't have my important meeting and continue to grill me, then 
we can do that. I will cancel my meeting and I will not be back 
here. I will be very clear, if that is the way you would like 
to have this relationship.
    Chairwoman Waters. Thank you.
    The gentleman, the Secretary has agreed to stay to hear all 
of the rest of the Members. Please cancel your meeting and 
respect our time.
    Secretary Mnuchin. Okay. So ,just let's be clear to the 
press. I am canceling--
    Chairwoman Waters. Who is next on the list?
    Secretary Mnuchin. I am canceling my foreign meeting. You 
are instructing me to stay here and I should cancel my foreign 
meeting.
    Chairwoman Waters. No. You just made me an offer.
    Secretary Mnuchin. No, I didn't make you an offer.
    Chairwoman Waters. You made me an offer that I accepted.
    Secretary Mnuchin. I did not make you an offer. Let's be 
clear. You are instructing me--you are ordering me to stay 
here.
    Chairwoman Waters. No, I am not ordering you. I am 
responding. I said you may leave any time you want. And you 
said, okay. If that is what you want to do, I will cancel my 
appointment, and I will stay here, so I am responding to your 
request.
    If that is what you want to do--
    Secretary Mnuchin. That is not what I want to do. I told 
you--
    Chairwoman Waters. What would you like to do?
    Secretary Mnuchin. What I have told you is I thought it was 
respectful that you would let me leave at 5:15--
    Chairwoman Waters. You are free to leave any time you want.
    Secretary Mnuchin. Which is the current period of time.
    Chairwoman Waters. You may go anytime you want.
    Secretary Mnuchin. Okay. Well, then, please dismiss 
everybody. I believe you are supposed to take the gavel and 
bang it. That is the appropriate--
    Chairwoman Waters. Please do not instruct me as to how I am 
to conduct this committee. The time belongs to the Chair. Who 
is next?
    The gentlewoman from Pennsylvania, Ms. Dean, is recognized 
for 5 minutes.
    Ms. Dean. Thank you, Madam Chairwoman, and thank you, Mr. 
Secretary. I am not sure the Secretary has the attention right 
now. Mr. Secretary?
    Secretary Mnuchin. Okay. So I have just been advised that I 
am under no obligation to stay; I am here voluntarily. I will 
leave at 5:30, which is going to make me already 20 minutes 
late, so I am happy to listen for another 10 minutes, and then 
I will--
    Chairwoman Waters. Thank you. Ms. Dean, would you proceed?
    Secretary Mnuchin. And I have withdrawn my offer to 
voluntarily come back. We can follow up if that is appropriate 
or not.
    Chairwoman Waters. You may choose to do whatever you want.
    Ms. Dean, it is your time now, please proceed.
    Ms. Dean. Thank you for restoring the clock, also. Mr. 
Secretary, how do you do? Good. And I am disappointed to hear 
you threaten not to come back. That isn't really what we hope 
of our cabinet officials in this Administration or any other 
Administration, so thank you for staying on.
    Who is the foreign dignitary that you are meeting with?
    Secretary Mnuchin. I am meeting with a very senior person 
from Bahrain who is here to talk about national security issues 
and sanctions.
    Ms. Dean. Thank you.
    Maybe you heard this, but last week NATO General Secretary 
was before a joint session of Congress and he gave a beautiful, 
stirring speech. His concerns regarding Russia were the 
following.
    In 2014, Russia illegally annexed Crimea, the first time in 
Europe that one country has taken part of another by force 
since World War II. He said that we see this as ``a pattern of 
Russian behavior including a massive military build up from the 
Arctic to the Mediterranean, from the Black Sea to the Baltic. 
The use of the military grade nerve agent in the United 
Kingdom, support for Assad's murderous regime in Syria, 
consistent cyber attacks on NATO allies and partners targeting 
everything from power grids, sophisticated disinformation 
campaigns, and attempts to interfere in democracy itself.''
    Did you have a chance to hear his speech?
    Secretary Mnuchin. I didn't, but at your recommendation, I 
will get a copy of it and read it.
    Ms. Dean. It is beautiful, and he prefaced it and ended it 
with, ``It is good to have friends.'' And he was really 
recalling the history of NATO and the partnership of 70 years 
among nations there and he ended it with, ``It is good to have 
friends.'' In the middle he implied, or at least I inferred, 
that it is also good to know who your friends are not in this 
world.
    And with that history of what has been going on with 
Russian aggression, I am puzzled how it was that you decided to 
de-list three sanctioned Russian companies with, I guess, 
majority ownership by Deripaska. What was your decision for de-
listing them from sanctions?
    Secretary Mnuchin. Sure. Well, thank you for raising that, 
because it is a very important issue. First of all, the 
important issue is we decided to sanction the companies, and I 
think in particular you are talking about Rusal and the related 
entities. They were all a group of entities. And we did that 
under the various different authorities that we had.
    Ms. Dean. Why did you de-list them? I just--I don't want to 
go the whole history. Why did you de-list them?
    Secretary Mnuchin. We de-listed them because the company 
approached us, not the oligarch, the company approached us. A 
large group of people, including our current people, negotiated 
an agreement--
    Ms. Dean. Was the company majority controlled by the 
oligarch?
    Secretary Mnuchin. And it is no longer majority controlled 
by him.
    Ms. Dean. He now has what percentage ownership?
    Secretary Mnuchin. He and related entities have a 45 
percent ownership and a 35 percent vote.
    Ms. Dean. And he shed some ownership to whom?
    Secretary Mnuchin. Various different entities.
    Ms. Dean. Who?
    Secretary Mnuchin. Again, I am happy to--
    Ms. Dean. Any family members? Any related members?
    Secretary Mnuchin. Again, if you are referring to--there 
were shares transferred to his children pursuant to a divorce 
decree that he was legally bound to do.
    Ms. Dean. So he retains 45 percent ownership, his children 
got other shares, so likely among the family they have more 
than a majority of ownership?
    Secretary Mnuchin. No. They don't have more than a majority 
in the family.
    Ms. Dean. But we don't know that for sure. Are you able to 
provide us that full detailing?
    Secretary Mnuchin. I believe on a confidential basis we 
would be more than happy to give you all those details.
    Ms. Dean. Okay. Speaking of conflicts of interest, when did 
you take the position of Secretary?
    Secretary Mnuchin. I believe it was February 13th.
    Ms. Dean. Of 2017?
    Secretary Mnuchin. That is correct.
    Ms. Dean. And you sold a company that you owned to your 
then-fiancee, now wife, is that correct?
    Secretary Mnuchin. That is correct. And that was fully 
approved by the Ethics Department of the Treasury.
    Ms. Dean. And that took place when?
    Secretary Mnuchin. I don't have the exact date, but I can--
    Ms. Dean. After you assumed the secretaryship?
    Secretary Mnuchin. Yes. But that was in my ethics 
agreement, I was given a certain amount of time to sell assets. 
That was appropriate, which I did.
    Ms. Dean. But you thought it appropriate to sell to your 
fiancee, now wife? That would clear you of any conflict of 
interest?
    Secretary Mnuchin. Again, just to be clear, okay, that 
transaction was fully vetted and fully approved and consistent 
with the ethics department.
    Ms. Dean. What questions did you ask of ethics counsel 
surrounding that transaction?
    Secretary Mnuchin. I asked extensive questions both 
internally to our designated ethics adviser as well as outside 
counsel I had. I wanted to make sure I was fully in compliance.
    Ms. Dean. Because you were concerned about a conflict of 
interest or the appearance of a conflict of interest?
    Secretary Mnuchin. No. Not because I was concerned with--I 
was never concerned about a conflict of interest. Quite 
frankly, I don't think I should have had to sell it, but I 
agreed to comply with what was the decision of the OGE.
    Ms. Dean. Why did they tell you that you needed to sell it?
    Secretary Mnuchin. I don't know, again--
    Ms. Dean. You took on that transaction, divested yourself 
of the ownership, although your wife owns it, and you don't 
know why they recommended that that was what you needed to do?
    Secretary Mnuchin. Again, I want to just be clear. I 
divested virtually every single asset that I owned. And again, 
as part of the agreement I entered into, I agreed to sell the 
asset. I was fully compliant when I sold it to my fiancee.
    Ms. Dean. I just see a strange parallel here.
    Chairwoman Waters. The gentleman from Tennessee, Mr. Rose, 
is recognized for the rest of the time between now and 5:30 
when the Secretary will be leaving.
    Mr. Rose. Thank you, Secretary Mnuchin, for being with us 
today and for being so generous with your time. I would like to 
yield 30 seconds of my time to Mr. King.
    Mr. King. Thank you. Thank you for that. Mr. Secretary, in 
respect to your time, I will just take 5 seconds to say I will 
submit every question to you if okay with you regarding CFIUS 
and China. And with that, I yield back to the gentleman.
    Mr. Rose. Thank you, Mr. King. The FSOC annual report has 
previously stated that the Council reaffirms its view that 
housing finance reform legislation is needed to create a more 
sustainable system.
    The White House recently issued a memo, as you know, on 
housing finance reform on March 29th outlining a number of 
initiatives. Mr. Secretary, I understand you cannot go into the 
weeds too much and tell me more about Treasury's views at a 
high level of what housing reform should look like. But could 
you give me some guidance as to what you believe and Treasury 
believes housing reforms should look like?
    Secretary Mnuchin. Absolutely. And this is an area I have 
been involved with for over 30 years. It is something I have 
talked about and I believe that it should be twofold. So, one, 
as it relates to the GSEs, we should have a system where 
taxpayers are not at risk.
    We want a robust system where people can access mortgage 
capital, 30-year mortgages, but not put taxpayers at risk. And 
the reason why we are focused on housing reform and not just 
GSE reform is we want to make sure that we don't take the risk 
out of Fannie Mae and Freddie Mac and put it all at FHA and 
transfer it to taxpayers in another bucket.
    So this is something I really hope we can work on a 
bipartisan basis. I have said my first choice is to do 
legislation with Congress, and I hope we can do something 
quickly this year.
    Mr. Rose. Thank you. I appreciate your interest in making 
housing finance reform a priority. While the last 
Administration did express some interest in the issue, they did 
not provide the leadership necessary to get reform over the 
finish line. And your leadership makes me optimistic that this 
will get done.
    In the interest of time, Madam Chairwoman, I ask unanimous 
consent to submit to the record a list of previous appearances 
by Treasury Secretaries along with the time that they gave--
    Chairwoman Waters. Without objection, it is so ordered. 
Thank you very much.
    Mr. Rose. I yield back.
    Chairwoman Waters. Mr. Secretary, thank you for staying 
until 5:30. Without objection, all Members will have 5 
legislative days within which to submit additional written 
questions to the Chair, which will be forwarded to the 
Secretary for his response.
    And I ask the Secretary to please respond as promptly as 
you are able. And I expect the Secretary to honor our 
invitation to return, so that the rest of these Members will 
have an opportunity to pursue their questions.
    So without objection, all members will have 5 legislative 
days within which to submit extraneous material to the Chair 
for inclusion in this record.
    Secretary Mnuchin. Thank you, and I look forward to being 
back in May. We will work on a date.
    Chairwoman Waters. Thank you very much.
    Secretary Mnuchin. Thank you very much. I appreciate it.
    Chairwoman Waters. The hearing is adjourned.
    [Whereupon, at 5:31 p.m., the hearing was adjourned.]



                      THE ANNUAL TESTIMONY OF THE

                       SECRETARY OF THE TREASURY

                          ON THE STATE OF THE

                        INTERNATIONAL FINANCIAL


                            SYSTEM--PART II

                              ----------                              


                        Wednesday, May 22, 2019

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 8:34 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Maloney, Green, 
Cleaver, Perlmutter, Himes, Foster, Beatty, Vargas, Gottheimer, 
Gonzalez of Texas, San Nicolas, Tlaib, Porter, Axne, Pressley, 
McAdams, Wexton, Lynch, Adams, Dean, Garcia of Illinois, Garcia 
of Texas, Phillips; McHenry, Wagner, Lucas, Tipton, Hill, 
Emmer, Zeldin, Loudermilk, Budd, Kustoff, Rose, Gooden, and 
Riggleman.
    Chairwoman Waters. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    This is part two of the committee's hearing on the annual 
testimony of the Secretary of the Treasury on the state of the 
international financial system, part one of which convened on 
April 9, 2019. As agreed with the ranking member, without 
objection, this hearing is deemed a continuation of that 
hearing, and we will go to Members who did not have the 
opportunity to question the witness on April 9th.
    We have the Secretary until 10:45 this morning, which 
accounts for our early start today.
    The gentleman from New Jersey, Mr. Gottheimer, is 
recognized for 5 minutes.
    Mr. Gottheimer. Thank you, Mr. Secretary, for being here 
this morning.
    The recent tax hike bill had a devastating impact on my 
district, the Fifth District of New Jersey, gutting the State 
and local tax deduction, better known as SALT, sharply limiting 
New Jersey's property tax deductions, and imposing a massive 
tax hike on New Jersey's families and businesses.
    Last year, I worked with New Jersey officials on 
legislation to provide real tax relief for my constituents via 
tax credits for charitable contributions to our towns.
    After New Jersey passed the law, the IRS, without any 
legislative basis, against legal precedent and decades of 
previous IRS approvals, issued provisional rules that would 
severely limit New Jersey's ability to offer tax relief through 
the charitable deduction, undermining New Jersey's new law 
allowing our towns to use it. And it also hurt, as you probably 
know, 33 other States like Alabama, Georgia, and South Carolina 
that have been using the charitable provision for decades now.
    It is not a red State or blue State issue, Mr. Secretary. 
But I really believe that Congress didn't give you or the IRS 
permission to interpret the new tax law as they see fit. These 
rules are still provisional. I am just asking if you have a 
status update for us on the limits on the charitable tax 
deduction for these purposes?
    Secretary Mnuchin. Well, first of all, let me just say, I 
do appreciate it, as the SALT deduction is having an impact on 
some of the economies, and we are monitoring that carefully. We 
did allow for a deduction that did cover a very significant 
amount of the people.
    As it relates to the charitable deduction, this 
Administration very much supports charitable deductions, as 
does the Department. I think the issue that you are referring 
to is that there are no limits on charitable deductions where 
there is not a quid pro quo attached. The question I think you 
are referring to is where certain States tried to get around 
the Federal law by passing certain laws, and I understand that 
is still under further review by the IRS and our legal 
department.
    Mr. Gottheimer. What about the 33 States that have been 
using this for decades now? Should they have to stop 
immediately?
    Secretary Mnuchin. Well, again, we have spent a lot of time 
on this guidance. We are trying to make sure that the 
legitimate use of tax credits is still allowed. I believe the 
guidance is still under review, and we are happy to follow up 
with your office.
    Mr. Gottheimer. Do you have a sense of timing on when those 
rules will go final?
    Secretary Mnuchin. I think it is going to be out shortly. 
It is a priority of ours. Again, we want to make sure that 
legitimate use of charitable contributions is supported.
    Mr. Gottheimer. I know you were very involved personally, 
which is a little unusual, in the approval process of these 
guidelines. Why did you feel a need to get personally involved 
in these particular ones? I know most you don't, right?
    Secretary Mnuchin. No, actually, that is not the case. We 
meet almost daily with a team at Treasury, Office of Tax 
Policy, General Counsel, all of our areas, and we review, 
actually, every single regulation. I think it is my obligation, 
given the complexity of these issues, to make sure that I am 
briefed on them.
    Mr. Gottheimer. Okay.
    Secretary Mnuchin. So this issue is no different than 
others.
    Mr. Gottheimer. Thank you.
    On SALT for a second, you advocated for SALT cuts by saying 
they ``predominantly benefited high-income earners to help pay 
for major tax cuts for American families'' and estimated that, 
``approximately 5 percent of taxpayers will itemize and have 
State and local income tax deductions above the SALT cap.''
    In my State, in New Jersey, 42.75 percent, not 5 percent, 
of taxpayers in the Fifth District, or approximately 359,000 
people in the 4 counties I represent, actually claimed a SALT 
deduction. That is far from 5 percent. In fact, the average in 
Bergen County, one of my counties, is $24,783.
    After hearing the impact and reviewing this tax season, do 
you have a different view at all on these claims of what you 
originally said, sir?
    Secretary Mnuchin. Well, we are monitoring it carefully. I 
would comment that there are a lot of people with SALT 
deductions who do have AMT relief. I do think it does hit the 
high end of taxpayers significantly. But we are monitoring the 
impact on these economies and watching it carefully.
    Mr. Gottheimer. Thank you, sir.
    In the remaining time, if I can quickly ask you an Iran 
question, last November, the full set of sanctions waived under 
the 2015 nuclear deal with Iran came back into effect. What 
impact do you see these newly imposed sanctions having, and 
where do you see issues with compliance?
    Secretary Mnuchin. I see these new sanctions being very 
impactful. They are having the impact that we want, which is 
absolutely limiting the amount of money that is going to Iran 
that is used for terrorist activities, that is used for 
military purposes. And we are very pleased with the progress 
and the enforcement of these sanctions. So it is something we 
are monitoring very carefully.
    Mr. Gottheimer. Thank you very much for your time, sir.
    Thank you. I yield back.
    Chairwoman Waters. The gentleman from Tennessee, Mr. 
Kustoff, is recognized for 5 minutes.
    Mr. Kustoff. Thank you, Madam Chairwoman, for convening 
this morning's hearing.
    And, Mr. Secretary, thank you for coming back this morning.
    Back in November, ahead of the G20 summit, you released a 
statement regarding the U.S.-Mexico-Canada trade agreement, and 
I appreciate you doing that.
    Two questions. As you know, Congress is faced with passing 
or not passing the U.S.-Mexico-Canada trade agreement. First 
question: Can you address what happens to the economy if in 
fact we do pass the USMCA? Second question: Can you address the 
effects on the economy if we don't pass the USMCA?
    Secretary Mnuchin. Sure.
    Well, I am hopeful that Congress takes this up soon. I know 
Ambassador Lighthizer has had productive discussions with the 
Speaker on this. Because I think it has a very important 
economic impact, I think it has been estimated, anywhere 
between 30 and 100 basis points in terms of GDP, which is a 
very big number.
    These are two of our largest trading partners. This has a 
lot of support from the Governors, has a lot of bipartisan 
support from businesses. So the impact is quite significant. 
And I am pleased that we have reached an agreement with Canada 
and Mexico on steel and aluminum tariffs, which, again, is 
another reason to move forward with the agreement quickly.
    Mr. Kustoff. And what would be the effect on the economy if 
we don't pass the U.S.-Mexico-Canada Agreement?
    Secretary Mnuchin. It could be quite significant in the 
other direction, depending what happens, whether we stick with 
the existing NAFTA deal or whether we terminate the NAFTA deal. 
So, you know, very positive economic to move forward on it. So 
I am encouraged, and hopefully the House will take it up soon.
    Mr. Kustoff. Thank you.
    As it relates to the Current Expected Credit Losses (CECL), 
I have talked to a number of--I am concerned with community 
banks especially. In my area, which is west Tennessee, we have 
some really good, strong community banks who are concerned 
about the effects that the CECL implementation would have on 
them and their ability to lend money.
    Have you or anybody in Treasury or any regulators conducted 
a study to assess the potential impacts to banks, and 
especially to community banks, if CECL is in fact implemented 
or those standards are implemented in the next year or so?
    Secretary Mnuchin. I share some of your concerns. We have 
had discussions at the FSOC over this. We have had the 
discussions with the Fed and other regulators about delaying 
the impact on it, on stress-testing and other things.
    So I think the regulators understand this issue. They are 
trying to look at it carefully. It is an accounting provision. 
So it is something we are focused on. And we hope that the 
transition will alleviate some of the concerns that you have 
addressed, but this is an issue we continue to study.
    Mr. Kustoff. Okay. I appreciate that.
    My district, which is part of Memphis and then west 
Tennessee, has a large agricultural component. In fact, it is 
the largest agricultural district in the State of Tennessee. I 
hear from a lot of my farmers about tariffs and the impacts of 
tariffs. And I am characterizing, but, generally, the farmers 
are supportive of the President. They are willing to endure 
short-term pain for longer-term gain. That is generally. That 
is not everybody, but generally.
    If you were a Member of Congress representing an 
agricultural district, what would you tell farmers about 
tariffs and the potential impacts and, hopefully, the potential 
positive effects that they may have?
    Secretary Mnuchin. Well, I can assure you the President is 
very focused on the agriculture community and the farmers 
specifically. We talk about it almost weekly. Sonny Perdue 
participates in our trade meetings and represents the farmers 
in those meetings.
    I think the good news is, as it relates to lifting some of 
these tariffs with Mexico, that will help the farmers 
substantially in terms of trade with Mexico and reciprocal 
issues. And it relates to China. If we can get a good deal, it 
will also be very good for the farmers.
    I think, unfortunately, we were on track for that, and we 
have gone backwards. The President and Secretary Perdue are 
looking at various different programs to make sure, as we take 
in tariffs, we can use some of that money to support the 
farmers. So I can assure you the President is very focused on 
this.
    Mr. Kustoff. Thank you, Mr. Secretary.
    And I yield back my remaining time.
    Chairwoman Waters. Thank you.
    The gentleman from Utah, Mr. McAdams, is recognized for 5 
minutes.
    Mr. McAdams. Thank you, Madam Chairwoman.
    And, Mr. Secretary, thank you for coming back to the 
committee this morning.
    As you may know, Utah leads the nation with the highest 
number of children per family on average. And I, myself, have 
four kids. So the cost of household goods and children's items 
specifically is a big concern in my district, a big concern for 
my constituents as they map out their household budgets every 
month.
    So I wanted to read to you a list of items this 
Administration is proposing to tax in its trade dispute with 
China. And I know you refer to these as tariffs, but in 
reality, Utahans and Utah business leaders and Americans are 
the ones paying these costs. So I will call them what they are, 
a tax.
    I am going to read a few of these items from the USTR's 
Federal Register notice on proposed list for tariffs, all of 
which will potentially be taxed up to 25 percent: baby diapers, 
infant formula, children's footwear, infant nursery monitor 
systems, strollers, highchairs and bouncers, baby carriages, 
and child safety seats.
    And these are just some of the items that are related to 
babies and infants. It is by no means an exhaustive list, 
because the list also includes all forms of clothing and items 
that are also used by adults.
    In fact, you have 76 pages of items that you want to tax at 
a rate of 25 percent. That is these items right here in the 
Federal Register. Seventy-six pages of items that would receive 
a 25-percent tax.
    So, Mr. Secretary, I understand that you and this 
Administration want to address China's unfair trade practices, 
and I support that, but I don't think the strategy and 
rationale behind this process has been properly explained, and 
I don't think you have properly consulted Congress throughout 
the process.
    So I guess my question is, what do I tell mothers and 
fathers in my district when the price of their baby formula and 
diapers goes up? What if they can't afford those price 
increases? Should they just go without buying diapers or not 
buy a car seat for their kid? What do I tell them?
    I will let you respond.
    Secretary Mnuchin. Well, first, let me comment, I would be 
more than happy to come up and meet with you and a bunch of 
your colleagues and explain in a smaller setting our thoughts 
on this.
    You have a very valid point on these issues, so let me make 
a couple of points.
    First of all, these are proposed tariffs. They are not in 
place.
    Second, there will be an exception process as part of this 
301. We have already had many productive meetings with Commerce 
and USTR and others.
    And, third, I can tell you I am monitoring the situation 
very carefully. I was on the phone with the CFO of Walmart, 
which is obviously one of the biggest sellers of the that you 
have described specifically, and I understand from Walmart what 
things they can source from other areas and what items they 
can't.
    I would say we haven't made any decisions yet, but we will 
be especially sensitive to the consumer items and within the 
consumer items, I assure you, items that particularly affect 
people on fixed salaries and have four kids and others.
    So there has been no decision made on any of these items, 
and I assure you we will monitor it very carefully before we 
raise all these items--
    Mr. McAdams. Well, I would just say, I think people are 
alarmed. People are seeing their costs go up already in 
anticipation of these tariffs.
    Has the Administration set up the exclusion process you 
referred to for round three on the China tariffs?
    Secretary Mnuchin. We are working on setting up the 
exclusion process.
    Now, I haven't seen the prices go up. I have been 
monitoring this very carefully, and I would--
    Mr. McAdams. Is there a plan for an exclusions process for 
round four?
    Secretary Mnuchin. Yes, there is.
    And I would also just comment, given the depreciation of 
the Chinese currency, a big component of this is being paid for 
by China, because as the currency depreciates, our companies 
are being able to buy things at lower prices.
    But we are very carefully monitoring the consumer prices, 
and that is something that I can assure you the President will 
be very focused on before we make any decisions.
    Mr. McAdams. Well, I just want to make sure--I want my 
constituents to not be taxed, to not feel this pain in their 
monthly budgets as they are trying to balance budgets, put food 
on the table, and provide for their kids and their children's 
safety.
    When can we expect any future announcement on the exclusion 
process?
    Secretary Mnuchin. Well, I think you know the process of 
round four. There won't be any decision probably for another 30 
or 45 days. And we will have an exclusion process built and 
ready if the President decides to go forward with that.
    Mr. McAdams. Thank you.
    I know that Representative Ron Kind has introduced 
legislation here in the House that would require such a process 
as well, and I am a cosponsor of that legislation. And for the 
sake of the peace and assurances of the American people, I hope 
we will get this process moving as soon as possible.
    Thank you, and I yield back.
    Chairwoman Waters. The gentleman from Virginia, Mr. 
Riggleman, is recognized for 5 minutes.
    Mr. Riggleman. Thank you, Madam Chairwoman.
    And thank you, Mr. Secretary--I am over here on the end. 
And thank you, Mr. Secretary, for coming back to the committee 
this morning.
    I know the title of this hearing is, ``The State of the 
International Financial System,'' but before we get into that, 
I wanted to quickly discuss a tax issue.
    The IRS recently announced that corporate alternative 
minimum tax refunds received under the Tax Cuts and Jobs Act 
will no longer be subject to sequestration, but AMT refunds 
received by taxpayers in lieu of claiming bonus depreciation 
under Section 168 will remain subject to sequestration.
    Taxpayers earn no interest on AMT prepayments and are 
counted dollar for dollar against future liabilities. These 
prepayments operate as interest-free loans to the government 
that remain until the taxpayer incurs a liability, to which the 
AMT credit is applied. In many cases, these prepayments extend 
for decades.
    The only way to receive an AMT credit is to pay the tax. So 
these are not loopholes exploited by American businesses but 
serve as a way to reduce our tax liabilities should they owe 
money to our favorite uncle, Uncle Sam.
    I don't support a policy that treats these taxpayers 
differently, particularly in the case where the AMT credits 
represent prepayments or overpayments of tax and should not be 
subject to sequester.
    And, sir, can I get your commitment today that you will 
look into the actions that the IRS can and should take on 
behalf of these companies on the AMT credit specifically to 
remedy this situation?
    Secretary Mnuchin. Yes. I can tell you I am familiar with 
it. It is a technical issue. We are working with OMB on trying 
to resolve it, so--
    Mr. Riggleman. Thank you.
    Secretary Mnuchin. --thank you for raising it.
    Mr. Riggleman. Thank you. And I knew that was probably a 
pretty quick answer, so thank you for that.
    And following up on tax issues, on March 5th of this year, 
the Department of the Treasury released a policy statement on 
the tax regulatory process. This policy statement established 
the IRS's commitment to notice-and-comment rulemaking, the 
limited use of temporary regulations, and the proper role of 
guidance documents.
    One key assertion of this policy statement says, 
``Subregulatory guidance is not intended to affect taxpayer 
rights or obligations independent from underlying statutes or 
regulations. Unlike statutes and regulations, subregulatory 
guidance does not have the force and effect of law.'' I 
wholeheartedly agree with this statement. And what I love about 
our bureaucracy is we actually have guidelines about 
guidelines. I think that is incredible.
    But would you be willing to officially adopt this position 
as the Chair of FSOC?
    Secretary Mnuchin. I will review that with FSOC and take it 
up with them. It sounds like a good idea.
    Mr. Riggleman. Thank you very much.
    I think the entire Administration needs to have the same 
view of guidance. I would argue that if this document is good 
enough for the IRS, it should be equally appropriate for the 
FSOC or any Federal regulatory body in the United States. And, 
again, that is just based on my business background with 
regulations, about regulations, about guidance.
    I see my time is running a little bit short, but one final 
topic I want discuss is cybersecurity.
    In June of 2017, Treasury issued a report entitled, 
``Nonbank Financials, Fintech, and Innovation.'' In this 
report, Treasury states, ``Regulatory fragmentation, overlap, 
and duplication, however, can lead to ineffective regulatory 
oversight and inefficiencies that are costly to the taxpayers, 
consumers, and businesses.''
    By the way, Mr. Secretary, I think you can see a theme in 
my questioning today.
    The report also says that, ``Cybersecurity is addressed 
among a broad group of Federal and State regulators through the 
Financial and Banking Information Infrastructure Committee 
(FBIIC).''
    When the prudential regulators were here last week, this 
was something I talked about. I also know that the Financial 
and Banking Information Infrastructure Committee (FBIIC), is 
chaired by Treasury and comprised of over 15 members from 
additional regulators.
    Can you quickly discuss how Treasury is working with the 
numerous regulatory bodies to harmonize cybersecurity 
regulations to protect consumers without creating too 
cumbersome a framework?
    Secretary Mnuchin. Yes. Thank you. It is a major priority 
of mine. We have added additional resources to the Department. 
We have met with public and private partnerships on this.
    And we really have two tasks. One is harmonization across 
the regulators. We have recently had a productive meeting with 
the bank CEOs and the regulators on that. And the second is 
making sure we have better coordination between our intel, our 
technical people, and the private sector to make sure that we 
are fully prepared.
    Mr. Riggleman. Thank you very much.
    I think just in closing I would ask, as we go forward, I 
would just hope that we don't have any guidance come out about 
subregulatory guidance, which is about the guidance, not 
actually regulations.
    Thank you, and I yield back.
    Chairwoman Waters. Thank you.
    The gentlewoman from Virginia, Ms. Wexton, is recognized 
for 5 minutes.
    Ms. Wexton. Thank you, Madam Chairwoman.
    And thank you, Mr. Secretary, for joining us here today.
    I would like to talk a little bit about your refusal to 
comply with a lawful subpoena from the Ways and Means 
Committee.
    As you know, Section 6103(f)(1) says that the Secretary 
shall furnish the Ways and Means Committee with any return or 
return information specified in requests. You are aware of 
that, right?
    Secretary Mnuchin. Yes.
    Ms. Wexton. Okay.
    And you are also aware that nowhere in that section is the 
chairman of Ways and Means required to include a reason, a 
legislative reason, for the request. You are aware of that as 
well?
    Secretary Mnuchin. I have read the language.
    Ms. Wexton. Okay.
    But in your letter dated May 17th to Chairman Neal, you 
rely on advice from the DOJ in determining that the request 
lacks a legitimate legislative purpose. Is that correct?
    Secretary Mnuchin. That is correct.
    Ms. Wexton. Okay.
    Now, you understand that we are the Legislative Branch so 
we make decisions about legislating, right?
    Secretary Mnuchin. I understand that there are three 
branches of government and they perform different functions.
    Ms. Wexton. And you are the Executive Branch, right?
    Secretary Mnuchin. That is correct.
    Ms. Wexton. Which executes the laws. You don't make the 
laws.
    Secretary Mnuchin. Correct.
    Ms. Wexton. Right. We make the laws.
    Now, we learned last night of a second opinion which was 
written by the IRS Chief Counsel's Office. Are you aware of 
that memo?
    Secretary Mnuchin. I became aware of that memo when it 
was--we got an inquiry from The Washington Post, and it was 
just recently published. I am not sure who the author of that 
was, but I have seen it in The Washington Post
    Ms. Wexton. Okay. So when did The Washington Post inquire 
of you about your knowledge--
    Secretary Mnuchin. I believe the day before yesterday, they 
called us up, and we confirmed that I and the Commissioner were 
not aware of that letter and had not seen it.
    Ms. Wexton. But you have since that time reviewed that 
memo.
    Secretary Mnuchin. Actually, I haven't reviewed it. I 
looked at it literally on the way up here. Someone handed me 
the printed copy of it. So I would not describe that as I have 
reviewed it.
    Ms. Wexton. Did somebody make you aware that the memo 
states that the law does not require that the Ways and Means 
Committee Finance Chair or JCT Chief of Staff include a reason 
or purpose for the request?
    Secretary Mnuchin. Again, I haven't--again, let me just 
say, the legal advice that we have relied upon--and, again, I 
understand there are three branches of government, and when it 
comes to constitutional issues, there could be different 
interpretations. And that is why there is a third branch of 
government, to interpret--
    Ms. Wexton. But--I'm sorry, reclaiming my time, you are at 
least aware that the conclusion of that memo directly 
contradicts the conclusion that you are relying upon?
    Secretary Mnuchin. No, I actually don't believe that is the 
case. That memo, I understand, is addressing a different issue 
and is not addressing the issue that we and the Department of 
Justice looked at.
    But, again, let me just say, this is not a letter that came 
to our attention earlier--
    Ms. Wexton. Madam Chairwoman, reclaiming my time, who at 
the IRS would have made the decision not to run this memo up 
the chain?
    Secretary Mnuchin. I have no idea.
    Ms. Wexton. Do you plan to find out?
    Secretary Mnuchin. We are trying to find out who wrote the 
memo, where it came from, when it was, and why it wasn't 
distributed, yes.
    Ms. Wexton. Have you had any conversations with the 
President at any time prior to your confirmation or to today 
about your desire or willingness to provide the President's tax 
returns to Congress?
    Secretary Mnuchin. I have had no conversations ever with 
the President or anyone in the White House about delivering the 
President's tax returns to Congress.
    Ms. Wexton. I want to switch gears and talk for a minute 
about Jamal Khashoggi, the Washington Post columnist and 
Virginia resident who was brutally killed at the Saudi Arabian 
consulate in Istanbul. The Saudi government has already 
acknowledged its role in the killing of Mr. Khashoggi. The CIA 
has reportedly established with high confidence that it was an 
assassination that was ordered by Crown Prince Mohammad bin 
Salman.
    Do you accept the intelligence community's assessment of 
what happened?
    Secretary Mnuchin. Let me just first comment that it is 
obviously a horrible situation that he was killed.
    I can't comment--I obviously have access--
    Ms. Wexton. Do you accept the intelligence community's 
assessment?
    Secretary Mnuchin. Again, what I would just like to say is, 
I have access to all of the classified information. It would be 
inappropriate for me to make comments on the CIA intelligence 
that--
    Ms. Wexton. Reclaiming my time, Madam Chairwoman.
    Secretary Mnuchin. --has not been released.
    Ms. Wexton. Okay. Let me back up a little bit. So you met 
with Crown Prince Mohammad bin Salman less than 3 weeks after 
the disappearance of Mr. Khashoggi, right?
    Secretary Mnuchin. I did. I was scheduled to speak there, 
which I canceled, but I did meet with him and talk to him about 
terrorist financing. And I obviously have private 
conversations--
    Ms. Wexton. And there is a picture that was tweeted out by 
the Kingdom on October 22nd. Is that you in that picture with--
    Secretary Mnuchin. That is. And we also had private 
conversations about the Khashoggi investigation at that time.
    Ms. Wexton. Okay. So you were fine with appearing publicly 
with Mohammad bin Salman?
    Secretary Mnuchin. I canceled my public speech. I was in a 
meeting privately, and there were photographers. And I thought 
it was the appropriate thing to deliver a message to him from 
the President--
    Chairwoman Waters. Time has expired.
    Ms. Wexton. Thank you, Madam Chairwoman. I yield back.
    Chairwoman Waters. The gentlewoman from Missouri, Mrs. 
Wagner, is recognized for 5 minutes.
    Mrs. Wagner. I thank the chairwoman.
    And, Secretary Mnuchin, thank you for the courtesy of 
coming back today. I am especially pleased, as the vice ranking 
member of Financial Services and also the vice ranking member 
of Foreign Affairs, that we are focusing on the state of the 
international financial system here today.
    Mr. Secretary, I was pleased to see that the U.S. seized a 
North Korean cargo ship earlier this month carrying coal. North 
Korea has also conducted missile tests this month for the first 
time in almost a year-and-a-half with missiles that appeared to 
resemble Russian technology.
    As talks with the North Koreans stall and North Korea 
demonstrates its increasing aggression, what specific measures 
can we expect to come from Treasury, sir?
    Secretary Mnuchin. Well, the President is determined that 
we continue our efforts to enforce both the U.N. sanctions and 
the U.S. sanctions against North Korea. And they have had a 
very important effect on bringing the Chairman to the 
negotiating table, and we will continue to enforce those 
sanctions.
    Mrs. Wagner. Especially in the banking arena?
    Secretary Mnuchin. Across multiple arenas, yes. They have 
all been very effective.
    Mrs. Wagner. Mr. Secretary, the Obama Administration 
mistakenly believed that Burma was on the path to reform, and 
it lifted sanctions and embraced IFI investment.
    Given that Burma has continued to commit atrocities against 
ethnic groups across the country, do you think IFIs should 
continue engaging with Burma? And if so, how can they help 
prompt a more rights-respecting environment?
    Secretary Mnuchin. I am concerned about the situation 
there. We will continue to have discussions with the IFIs and 
others and monitor this situation so that there is the 
appropriate outcome.
    Mrs. Wagner. And, again, I just hope that we will impose 
additional sanctions that were lifted by the Obama 
Administration, given the path that has been taken vis-a-vis 
the atrocities that are happening against so many different 
ethnic groups.
    Burmese civil society organizations have expressed concerns 
with the IFC's lending proposals in luxury development 
projects, infrastructure, and agribusiness given the country's 
corrupt business environment and lack of property rights.
    How has the IFC used its position to promote transparency 
and inclusive economic development in Burma?
    Secretary Mnuchin. Well, let me just say, I share your 
concerns. I know our international department has been having 
conversations. And I expect to see David Malpass very soon, and 
I will raise this specifically to his attention. There is no 
reason, in my mind, that the IFC and others should be doing 
this without the appropriate conditions attached.
    Mrs. Wagner. And I would be very pleased to send some 
information along, some questions, if you will be having those 
discussions.
    Secretary Mnuchin. Please do.
    Mrs. Wagner. Thank you.
    After issuing its first U.S.-dollar-denominated bond issue 
this month, the China-backed Asian Infrastructure Investment 
Bank (AIIB) raised $2.5 billion and attracted orders of more 
than $4.4 billion. The AIIB has said that the funds will be 
used to invest in infrastructure projects across Asia, where 
the AIIB is a major financier of Belt and Road projects.
    What are the World Bank, IMF, and the Asian Development 
Bank doing to support the Belt and Road Initiative?
    Secretary Mnuchin. Well, I can speak for the IMF and the 
World Bank, and they are both very focused on debt transparency 
and making sure that China follows rules of debt transparency 
that are consistent with the Paris Club and others and making 
sure that, if debt is taken on by these countries, that it is 
sustainable and that they can afford it.
    And if there is proper financing for infrastructure, that 
is one thing, but if there is money that is designed to loan-
to-own, that is inappropriate.
    Mrs. Wagner. And how is the U.S. ensuring that countries 
aren't becoming overly indebted to China or entering predatory 
contracts?
    Secretary Mnuchin. Well, those are conversations we have at 
the G20 consistently, and I think there is a lot of support 
from all of our allies on this issue.
    Mrs. Wagner. Thank you.
    I am about to run out of time, but I would like to forward 
some information about Burma to you for your further 
discussions. Thank you.
    I yield back, Madam Chairwoman.
    Chairwoman Waters. Thank you.
    The gentleman from Connecticut, Mr. Himes, is recognized 
for 5 minutes.
    Mr. Himes. Thank you, Madam Chairwoman.
    And thank you, Mr. Secretary, for being here.
    I want to revisit Treasury's decision to delist Rusal, En+, 
and associated entities owned and controlled at the time by 
Russian oligarch Oleg Deripaska.
    Just to remind you of the fact pattern here, Congress is 
informed on December 19th, literally the day we are breaking 
for the holiday break, that it is Treasury's intention to 
delist these entities. Nonetheless, Congress acts on January 
17th with a strong veto-proof majority in the House to 
disapprove of the delisting. The Senate acts, as well, but not 
with veto-proof majorities. And despite this disapproval on the 
part of the United States Congress, on January 27th the 
Treasury, in fact, delists Rusal and En+ as a result of the 
deal that was struck.
    Since then, Mr. Deripaska's net worth, inasmuch as I can 
calculate it, has risen by $2 billion, largely as a result of 
the doubling of the share price of En+ and his remaining stake. 
That is what we can see visibly. Lord Barker of Battle, who 
engineered this deal, the executive chairman of En+, received a 
$5 million bonus for his success in engineering this deal. Lord 
Barker of Battle, of course, denied access to classified 
information by the British Parliament because of his ties to 
Russia.
    And what I worry about most is what the leader of Russia, 
Vladimir Putin, sees. Deripaska says, ``I don't separate myself 
from the Russian state. I have no other interest.'' So Vladimir 
Putin sees the Treasury act in contravention of the will of 
Congress to deliver this remarkable gift to Mr. Deripaska, a 
guy who associates himself with Russian interests, at a time 
that we are really coming to understand the full effect of the 
Russian interference in our election, we know what they are 
doing in Syria, and we know what they are doing around the 
world.
    So, Mr. Secretary, my question is--and I got into the weeds 
with you on this, I know, in the classified session, and I had 
the opportunity to talk to OFAC. I understand the process and 
the mechanics. But I wonder if you can tell me, what American 
interest was served, what strategic interest was served by the 
decision to delist En+ and to massively increase Mr. 
Deripaska's net worth?
    Secretary Mnuchin. Well, let me give you a brief answer 
now, and I would be happy to follow up with you.
    First of all, let me just say, many people in Treasury, 
including myself and a large group of career staff, spent a 
long time on this transaction, negotiating this transaction. 
First of all, it was our decision to put him on the sanctions 
list despite what we knew this would do to the aluminum 
markets.
    We were pleased with the negotiations. We think that this 
shows that sanctions work, that not only has this 
Administration done more sanctions on Russia than anybody 
previously but--
    Mr. Himes. Mr. Secretary, I don't mean to be rude, but when 
you say--I have heard you say that before, that sanctions work. 
And I have heard you say on multiple occasions that the point 
of sanctions is to change behavior.
    So please elaborate on what you just said. How, in this 
case, did sanctions work? How did Mr. Deripaska change his 
behavior, Russia change its behavior? How did they work, in 
this case?
    Secretary Mnuchin. Well, what we have done is we have 
effectively separated him from the company. We have put in a 
compliance system with U.S. and European people on the board, 
which is unprecedented.
    And as it relates to strategic issues, I would just also 
comment, there were many workers throughout Europe--this isn't 
just workers in Russia. And we think this is a perfect example 
of where sanctions work. There was a change in behavior by the 
company. The company was delisted.
    But I would be more than happy to--
    Mr. Himes. I'm sorry. Tell me what the change in behavior 
on the part of the company was.
    Secretary Mnuchin. The change in behavior is the company 
has separated themselves from Deripaska and has agreed to an 
unprecedented compliance program with the board--a Russian 
company now controlled by a board of non-Russians. It is 
somewhat unheard of.
    Mr. Himes. Well, first of all, they haven't separated 
themselves when Deripaska continues to own a 45-percent stake 
in the company, and there are questions about whether he 
continues to control it.
    And I understand you may feel some obligation to European 
workers, but my question really was, what American interest, 
what American strategic interest was served by this deal, which 
had the effect, undeniably, of massively enriching Mr. 
Deripaska?
    Secretary Mnuchin. Again, this was never about kind of 
trying to make Deripaska's net worth go up or down. This was 
about separating Deripaska from the company. His voting 
interest went down to 35 percent. He has no management 
responsibility. We have unprecedented visibility into one of 
the largest Russian companies and the second-largest aluminum 
company in the world. This is why--
    Mr. Himes. I understand the mechanics, sir. I am having a 
hard time understanding--and Ms. Gacki came and spent a lot of 
time with me. I got the mechanics; I understand them. I still 
do not see what American interest was served here, and that is 
my question to you.
    Secretary Mnuchin. Well, I believe the American interests 
were served in separating the company. But I would be more than 
happy to talk to you more about it.
    Mr. Himes. Thank you, Mr. Secretary.
    And I yield back.
    Chairwoman Waters. The gentleman from Oklahoma, Mr. Lucas, 
is recognized for 5 minutes.
    Mr. Lucas. Thank you, Madam Chairwoman.
    Mr. Secretary, I really only have one question, and I think 
it is a relatively simple question.
    I would open with an observation that you are obviously a 
man of patience or you wouldn't be here again today. I consider 
myself also to be a person of patience. That might be a better 
way to describe that.
    And before I ask my question, just to observe that I have 
been, like the chairwoman and a handful of other members, a 
member of this committee for a very, very long time. And I view 
us, in many ways, like a corporate board: responsible to the 
entities that own the enterprise; responsible to customers; and 
responsible for the success of the process. So I come at that 
from--with my question.
    In 2017, the Treasury Department's ``Capital Markets'' made 
recommendations related to the lack of harmonization between 
CFTC and banking regulators regarding initial inter-affiliate 
margin.
    As you are aware, the regulators have not yet decided to 
implement your recommendation. Last week, I asked the heads of 
the banking regulators if they intended to prioritize 
implementing your recommendation. Based on their answers, I am 
now very concerned they may try to make it a part of a much 
larger review of the Fed's regulations, one which could 
literally drag out for years.
    So this is my concern, and I have been raising it for 
nearly 5 years, but it remains unaddressed. Do you agree that a 
fix on inter-affiliate margin requirements should be a 
priority? And will you impress upon those agencies the 
importance of acting?
    Secretary Mnuchin. Yes and yes. And thank you for 
acknowledging my patience.
    Mr. Lucas. Absolutely, Mr. Secretary. Because if we don't 
address this, we will drive resources and we will drive 
business out of this country--a reflection, I think, of the 
topic of this hearing.
    And after pursuing this for nearly 5 years, I would simply 
say, when I chaired another committee, it took me 2\1/2\ years 
to pass a farm bill that would successfully pass a Republican 
House, a Democrat Senate, and be signed by a Democrat 
President. I and my former colleague from Tennessee, when it 
came time to do what was necessary to reauthorize the Export-
Import Bank, literally used an extraordinary legislative 
process from 1910 to take it away from a then-chairman and over 
the heads of an entire majority leadership to get a piece of 
legislation all the way to the President's desk to be signed.
    I would just simply observe that after 5 years, it is time. 
And if the agencies can't bring themselves to focus to address 
this issue, perhaps it is time to help them. I simply use you 
as the courier of the message, Mr. Secretary.
    I appreciate your responses.
    I yield back, Madam Chairwoman.
    Chairwoman Waters. Thank you.
    The gentlewoman from Iowa, Mrs. Axne, is recognized for 5 
minutes.
    Mrs. Axne. Thank you, Chairwoman Waters.
    And thank you, Secretary Mnuchin, for being here again. I 
appreciate it.
    I would like to talk to you a little bit about tariffs and 
trade. I am from Iowa, so of course we are being hit hard.
    First of all, I appreciate the removal of the Section 232 
tariffs on steel and aluminum. However, those were put on by 
your Administration. But thank you so much for removing those.
    But I want to talk to you about the tariffs that were just 
placed on Chinese goods this month. And the tariff is on almost 
$200 billion of imports, and it was just increased from 10 
percent to 25 percent.
    Do you agree with President Trump that China is footing the 
bill for these tariffs?
    Secretary Mnuchin. I agree that China is footing most of 
the bill for it, yes.
    Mrs. Axne. So who is paying the price for these?
    Secretary Mnuchin. Well, again, when you look at the 
tariffs, there are probably three or four different things that 
are going on. One is a change in the currency, which leads to a 
lower price for us. We can buy things. Two, it is margins that 
are being absorbed by companies in China. And, three, there may 
be in certain cases an impact passed on to our consumers, and 
we are closely monitoring that. And that would be part of the 
exception process.
    Mrs. Axne. Well, I appreciate you bringing up that last 
piece, because major retailers like Walmart have said they will 
raise prices as a result of your Administration's tariffs.
    Do you understand how a tariff operates, and could you tell 
us a little bit about that?
    Secretary Mnuchin. I am not sure if you were here when I 
mentioned earlier that I just spoke to the CFO of Walmart. We 
speak on a regular basis. So I am monitoring with them very 
carefully--
    Mrs. Axne. So are tariffs a tax on imports?
    Secretary Mnuchin. Tariffs are a tariff on imports. They 
are not a tax. They are a--
    Mrs. Axne. Well, tariffs are a tax on imports, and they are 
paid for by the U.S. companies who import those goods.
    So do our companies like Nike and Adidas and Walmart, who 
have said they are going to pass on these prices to consumers--
would you not consider that an increase on costs on folks like 
mine in Iowa and Americans across this country?
    Secretary Mnuchin. Well, what I mentioned earlier and the 
reason I spoke to Walmart is because, obviously, they have a 
lot of these consumer issues. The way the tariffs were designed 
was the last tranche was really the consumer issue.
    We are monitoring carefully. There will be some exceptions. 
My expectation is a lot of this business will be moved from 
China to other places in the region so that there will not be a 
cost to--
    Mrs. Axne. So, reclaiming my time, I am not getting a 
straight answer here. Do you agree that American consumers will 
be paying more as a result of these tariffs?
    Secretary Mnuchin. I don't necessarily agree with that. And 
that is something we are monitoring very carefully, and we will 
be issuing exemptions--
    Mrs. Axne. So you disagree with all of our key retailers in 
the country and experts who understand that a tariff is most 
likely passed on to consumers because that is historically what 
happens? You disagree with that, as the Secretary of the 
Treasury?
    Secretary Mnuchin. I just spoke to many of these CEOs.
    Mrs. Axne. Do you disagree with that, that the tariffs 
won't be passed on to consumers in any way, shape, or form?
    Secretary Mnuchin. Again, there may be a small number of 
items where the tariff may be passed on, and those are the 
things we will specifically--
    Mrs. Axne. So you agree that American consumers will be 
paying more because of the tariffs?
    Secretary Mnuchin. No. We have made no decisions on that. 
The last tranche is subject to the President's approval and 
subject to exemptions. So, no, I don't--
    Mrs. Axne. I think it is the importers that make the 
decisions on that. Isn't that correct? It is their products 
that they are importing?
    Secretary Mnuchin. Excuse me?
    Mrs. Axne. The decision is being made by the folks in our 
country who own the companies who are importing the products, 
not necessarily you, who is deciding what price they are going 
to put on their product.
    Secretary Mnuchin. Well, again, if we issue an exemption, 
then there will be no price increase.
    And, again, most of those companies are moving products to 
other places--
    Mrs. Axne. So, reclaiming my time, moving on, can you tell 
me what the average Iowan makes in a year?
    Secretary Mnuchin. I can't tell you exactly, but I would 
guess it is--
    Mrs. Axne. Can you tell me what the average American family 
makes in a year?
    Secretary Mnuchin. Yes. Depending upon whether you use the 
mean or the median, it is between $45,000 and $65,000.
    Mrs. Axne. Yes. Median is $60,000, closer to $79,000 for 
the mean.
    Can you tell me what cost these tariffs will put on these 
American families?
    Secretary Mnuchin. I don't expect there will be significant 
costs on the American families. And that is something that we 
are absolutely focused on.
    Mrs. Axne. Have you done research on this?
    Secretary Mnuchin. I have. As I said, I have just spoken to 
all the major companies that provide consumer goods.
    Mrs. Axne. So, if you have done research on this, why 
haven't we seen this research? I haven't seen it. I don't think 
my colleagues have seen it. Why hasn't that been passed on to 
us to ensure that the constituents in our districts aren't 
paying the cost for this?
    Secretary Mnuchin. Well, let me just comment, the last 
tranche is under investigation. The President has not yet made 
the decision, and the consumer products are, by design, in the 
last tranche.
    Mrs. Axne. So will you commit to providing us this 
research?
    Secretary Mnuchin. Again, at the appropriate time, we will 
brief Congress on what the economic impact is of it, yes.
    Mrs. Axne. Okay.
    Well, let's move on--
    Mr. San Nicolas [presiding]. Time has expired.
    Mrs. Axne. Thank you.
    Mr. San Nicolas. The gentleman from Texas, Mr. Gooden, is 
recognized for 5 minutes.
    Mr. Gooden. Thank you for being here, Mr. Secretary. I also 
wanted to congratulate you, because after today you will hold 
the record for the longest time served in a hearing by any 
Secretary of the Treasury. So, apologies for not marking the 
occasion better.
    Secretary Mnuchin. Thank you. I think it will be 5 hours.
    Mr. Gooden. Oh, very good. Well, we are happy to have you.
    I was going to ask more about these tax returns. My 
colleagues across the aisle seem to be so obsessed with these 
tax returns. Has anyone in the Administration asked you to 
release tax returns for Members of Congress or anyone else for 
political purposes?
    Secretary Mnuchin. No, they haven't. And neither Chairman 
Brady, when he ran the committee, nor now-Chairman Grassley 
have asked for those returns, which they would have the right 
to ask for, subject to constitutional protections.
    Mr. Gooden. And I have also heard that it is important for 
the Ways and Means Committee and others in Congress to 
determine whether or not the IRS is actually auditing our 
President and Vice President. Is there any reason to think that 
the IRS isn't doing their job with respect to audits?
    Secretary Mnuchin. No. We have offered to brief the 
committee on the audit process. They haven't taken us up on 
that. But I don't see any reason why they need access to actual 
returns to understand that the process of the audit is fair and 
going through correctly.
    Mr. Gooden. And you were asked earlier today--in today's 
Washington Post, there is a story about a confidentiality memo 
from the IRS. Do you make your decisions based on what is on 
the front page of The Washington Post or confidential memos 
that you haven't seen? Is that how you do business at the 
Treasury?
    Secretary Mnuchin. Very rarely. I don't think I have made a 
decision on that basis.
    I would also just comment, the memo was marked, ``Draft.'' 
It was not a final memo. But I don't know how it got to The 
Washington Post. It would have been more interesting if it had 
gotten to me or the Commissioner to review.
    Mr. Gooden. Well, I want to thank you for your work. I want 
to thank you for standing up for the American taxpayer.
    I don't believe that tax returns should be used for 
political purposes, and I believe you share that view. 
Republicans certainly shared that when they were in power in 
the House a few months ago.
    And I want to encourage you to continue fighting for the 
American taxpayer. And thank you for your work.
    Secretary Mnuchin. I assure you, weaponizing the IRS is a 
major concern of ours that affects all taxpayers in both 
parties.
    Mr. Gooden. Well, I think if you are looking for evidence 
that the U.S. Congress doesn't need tax returns of American 
citizens, you can look no further than the House Financial 
Services and Ways and Means Committees. So, thank you.
    I yield back.
    Mr. San Nicolas. The gentlewoman from North Carolina, Ms. 
Adams, is recognized for 5 minutes.
    Ms. Adams. Thank you, Mr. Chairman.
    And thank you, Secretary Mnuchin, for returning.
    You know, you said you are patient. I am patient too, but I 
have to tell you, I am losing patience with the President.
    Do you know how many times President Trump has publicly 
offered to release his tax returns?
    Secretary Mnuchin. I do not.
    Ms. Adams. Well, we should have something on the screen. He 
has personally offered to give us a glimpse of his tax returns 
at least 24 times. It was scrolling on the screen, and it will 
probably be back up.
    It was April 19, 2011, in an interview, when he first said 
that--he said if President Obama would release his birth 
certificate, then he would release his tax returns. But, of 
course, President Obama did do what he said he would do, and 
President Trump did not do what he said he would do.
    So do you think the American people have a right to know 
what is in those tax forms?
    Secretary Mnuchin. No, I don't. Presidents are not required 
to. And the American public knew that he didn't release them 
before they voted for him. So that is--
    Ms. Adams. All right. I am reclaiming my time now.
    Do you know what the President is hiding?
    Secretary Mnuchin. Can you repeat that? I'm sorry.
    Ms. Adams. Do you know what he is hiding? I mean, he 
doesn't want anybody to see them, certainly not the Congress.
    Secretary Mnuchin. I don't think he is hiding anything, 
but--
    Ms. Adams. Okay. So you don't know.
    Secretary Mnuchin. Correct. I don't know anything about his 
tax returns.
    Ms. Adams. All right.
    We have heard a lot of excuses over the years about why he 
could not release them. He said, well, it was under audit, but 
once they finished that, he would release them. But an IRS 
Commissioner confirmed that an audit is not necessary for you 
to release your tax returns. Are you aware of that?
    Secretary Mnuchin. I am. But that is the President's 
decision, and I am not involved in the President's decision.
    Ms. Adams. All right. Let me reclaim my time. I want to get 
through my questions
    Are you familiar with Congress' oversight authority?
    Secretary Mnuchin. Yes, I am.
    Ms. Adams. Okay. So it is found in the Constitution and 
public laws and the House and Senate rules, and it does say 
that when the request is made by the appropriate offices, that 
he should release them. Are you aware of that?
    Secretary Mnuchin. I have read the law. I have also been 
advised of the interpretation of the law. And I understand the 
constitutional issues.
    Ms. Adams. All right. So why haven't you complied with 
Chairman Neal's request?
    Secretary Mnuchin. Because I think that would be unlawful, 
as advised by the Department of Justice. And that is why there 
is a third branch of government that most likely will review--
    Ms. Adams. All right. We are aware of that. Let me reclaim 
my time, sir.
    So are you aware, then, that by denying this you are in 
direct violation of the law?
    Secretary Mnuchin. No, absolutely not. I have been advised 
I am not violating the law. I never would have done anything 
that violated the law. And quite the contrary, I have been 
advised that had I turned them over, I would be violating the 
law--
    Ms. Adams. All right. Let me move on, sir.
    Secretary Mnuchin. --which I would not do.
    Ms. Adams. So are you alleging that Chairman Neal lacks a 
legislative purpose, and that is the basis for your refusing 
his request?
    Secretary Mnuchin. Well, given that this is now most likely 
going to litigation, I think my letters have been quite clear 
in why we have denied the request. And that is based upon the--
    Ms. Adams. All right. Okay, sir. Let me move on.
    Secretary Mnuchin. --advice of the Department of Justice.
    Ms. Adams. Thank you very much.
    So are you intending to comply with the request at all?
    Secretary Mnuchin. No. I have made clear that--
    Ms. Adams. You are not. Okay.
    Secretary Mnuchin. --we have sent him a letter that it 
would be unlawful for us to--
    Ms. Adams. All right. Okay, sir. I am reclaiming my time.
    Now, have you told the IRS not to respond to Chairman 
Neal's request?
    Secretary Mnuchin. The IRS independently--the chairman 
independently wrote a letter concurring with my position.
    Ms. Adams. So can you give me a yes-or-no answer? Have you?
    Secretary Mnuchin. Can you repeat the question?
    Ms. Adams. Have you told the IRS not to respond to the 
request?
    Secretary Mnuchin. Again, I just said, the IRS 
independently wrote a letter concurring with--
    Ms. Adams. Sir--okay. Let me reclaim my time. Can you give 
me a ``yes'' or ``no?''
    Secretary Mnuchin. I don't understand the question.
    Ms. Adams. All right. Okay. You will not--you won't give me 
a ``yes'' or ``no.''
    So let me ask you--first of all, I did a little research 
myself, and I know that you have done some work with Goldman 
Sachs in the investment banking sector. Have you ever lost a 
billion dollars?
    Secretary Mnuchin. I have never lost a billion dollars.
    Ms. Adams. Would you enter into a business relationship 
with someone who had a track record of losing a billion 
dollars?
    Secretary Mnuchin. It depends. If they made $10 billion and 
lost $1 billion--
    Ms. Adams. All right. Okay. Let me move on. Would you 
invest in a business venture that has lost a billion dollars?
    Secretary Mnuchin. Again, if it made $10 billion and lost 
$1 billion--
    Ms. Adams. All right. Thank you very much. Thank you, sir. 
Let me reclaim my time.
    Really quickly, I do have some concerns about the 
Opportunity Zones. I sent a letter to you. We haven't gotten a 
response yet. I hope that you will be able to respond to the 
questions that I have asked in that letter. Did you get the 
letter?
    Secretary Mnuchin. I assure you that I will check with my 
group this afternoon. We very much support the Opportunity 
Zones, so we will be very responsive.
    Ms. Adams. All right. I hope that you will ensure that the 
program does not accelerate disruptive gentrification in those 
designated census tracts.
    Secretary Mnuchin. I share your--
    Ms. Adams. Sir--I yield back. Thank you very much.
    Secretary Mnuchin. I share your concerns.
    Ms. Adams. Thank you.
    Secretary Mnuchin. Thank you.
    Mr. San Nicolas. The gentleman from Colorado, Mr. Tipton, 
is recognized for 5 minutes.
    Mr. Tipton. Thank you, Mr. Chairman.
    Mr. Secretary, thank you again for taking the time to be 
here with us today. My home State of Colorado is home to a lot 
of institutions that play a very important role for rural 
customers as part of the Farm Credit System. As you know, 
despite the fact that the Farm Credit Bank focuses on rural 
America, they have deep ties in the global financial system.
    As developments around Brexit continue to unfold, there is 
concern over possible spillover effects for rural borrowers. 
Could you help us understand what Treasury is doing to mitigate 
consequences that may arise out of Brexit, both in your 
discussions with your U.K. counterparts and with your 
colleagues in Brussels?
    Secretary Mnuchin. We have been very closely involved in 
these discussions now for close to the last 2 years. I think 
you know we are not primarily involved, but we have been having 
very close discussions, and I am relieved that there is an 
extension. And I just hope that the U.K. and the Europeans take 
advantage of that so that we don't get to the brink again with 
a hard Brexit, which could have very detrimental economic 
impacts.
    Mr. Tipton. Thanks.
    I want to be able to revisit a topic that my colleague, 
Mrs. Wagner, brought up in regard to the Belt and Road 
Initiative, and then also to the Asian Infrastructure 
Investment Bank. What is Treasury doing to pressure Beijing so 
the Chinese do respect some of the same standards and 
principles that we and our allies uphold in terms of financial 
transactions?
    Secretary Mnuchin. Well, this is something that we are 
absolutely unified in working with our allies on. It is a topic 
at the G7 and the G20. I will be going to Japan in the near 
future and focusing on this issue. The IMF and World Bank are. 
And I think there is a consistent view that proper lending to 
developing countries is appropriate; inappropriate lending is 
not. And we have concerns about that, and it should be full of 
transparency. They should play by the rest of the rules as does 
everybody else.
    Mr. Tipton. I would agree with that, and it is obviously 
problematic, when we are talking about the Asian Infrastructure 
Investment Bank seems to be the go-to creditor right now for 
nations that are in need. Do you think that they ought to be 
able to have better development standards through that bank, 
and are there tools we can use to try and force that?
    Secretary Mnuchin. Absolutely, and that is something, as I 
said, we are very focused on.
    Mr. Tipton. Great.
    When we are talking about the World Bank, it is often 
rewarded for churning out large loans to middle-income 
countries, including billions each year to China itself. 
Tougher environments do tend to get left behind when we look at 
who they are lending to, even though the Bank is supposed to be 
able to prioritize them. How can we address Beijing's Belt and 
Road Initiative when it has major ambitions, obviously, in 
Africa, and isn't and shouldn't the World Bank be more 
incentivized to be able to tackle some of the challenging 
projects on the continent?
    Secretary Mnuchin. Well, let me just say I couldn't be more 
pleased that my Under Secretary for International Affairs, 
David Malpass, is now leading the World Bank. It is the first 
time in an awfully long time that we had an uncontested vote on 
this. I think David is very focused on reforms at the World 
Bank and is very focused on these issues that you have talked 
about, making sure that the World Bank is lending to countries 
that really need the money and making sure that there are 
consistent standards throughout the developing countries. So we 
look forward to his progress on that.
    Mr. Tipton. Thank you.
    Before I close, I do want to make mention of your work 
related to the IAIS capital standards for insurers. We have a 
150-year-old system of State-based insurance regulation that 
seems to work well for consumers and for the market, and there 
is concern that the European-centric rules of the road will 
raise insurance rates in my district.
    Are you working to ensure that our system of insurance 
regulation isn't governed by foreign regulatory bodies?
    Secretary Mnuchin. I am, and I actually can tell you, I 
just gave a speech to the large insurance group here. It was my 
longest speech I have given yet on this issue, and we will make 
sure you get a copy of it.
    Mr. Tipton. Great. I appreciate that, and I yield back.
    Mr. San Nicolas. The gentleman from Illinois, Mr. Garcia, 
is recognized for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Mr. Chairman.
    Good morning, Mr. Secretary. I would like to switch gears 
briefly and talk about the Financial Stability Oversight 
Council. Last October, the Financial Stability Oversight 
Council, known as FSOC, which you Chair, removed the 
systemically important financial institution (SIFI) designation 
from Prudential, meaning that no nonbank financial institutions 
are currently designated as SIFIs.
    Do you think it was appropriate that Prudential, which New 
York University rates as the third most systemically risky 
institution in the U.S., now has as its chief regulator the New 
Jersey Department of Banking and Insurance?
    Secretary Mnuchin. We absolutely support the State-based 
regulatory system, and at FSOC, as you said, we have moved to a 
different system of risk-based management.
    Mr. Garcia of Illinois. FSOC then announced in March that 
it would no longer designate nonbanks as SIFIs and that, going 
forward, nonbanks would need to demonstrate a high ``likelihood 
of distress,'' before being more closely scrutinized--a very 
high bar that nonbanks would likely fail to meet until their 
impending collapse.
    Last week, former Fed Chairs Ben Bernanke and Janet Yellen 
joined former Treasury Secretaries Jack Lew and Tim Geithner in 
criticizing this move by FSOC, warning that it would ``neuter 
the designation authority.'' Writing of their experiences at 
the helm during the financial crisis, the former regulators 
noted that the failure of nonbank financial companies was 
central to the propagation of risk from the financial system to 
the U.S. economy, international finance markets, and the global 
economy as a whole during the crisis.
    What do you make of this criticism? Isn't it true that FSOC 
just made it harder to protect against risks taken by nonbanks?
    Secretary Mnuchin. Well, first, let me say I think it is 
good that we have a system where people can put in comments on 
proposed regulations. I actually spoke to Secretary Lew about 
his letter. They have a different view on regulatory issues. It 
is a different time, but not unlike their letters, we will look 
at other letters before we put in final rules.
    Mr. Garcia of Illinois. And their views stem from the 
experience of the meltdown that we experienced in 2008. Would 
you please explain what recourse FSOC would have in a scenario 
like we saw in 2008 when AIG, for example, greatly expanded its 
sales of credit default swaps, becoming a major contributor to 
the financial crisis?
    Secretary Mnuchin. Again, because of the way we are looking 
at it, we would have picked up AIG in their risk associated 
with credit default swaps. Their risk was primarily in the 
holding company and not in the insurance companies, which were 
regulated, and that is the type of activity under our new rules 
that we would indeed pick up.
    Mr. Garcia of Illinois. Mr. Secretary, last week the 
Federal Reserve released its financial stability report which 
found that leverage lending has grown and that protections that 
shield lenders from default on those loans has eroded. In light 
of stern warnings like these, why has FSOC only convened on one 
occasion this year?
    Secretary Mnuchin. Actually, FSOC and specifically the 
private working group, the President's private working group, 
which is also associated on this issue, has addressed this. We 
have calls in between formal meetings, so the primary 
regulators are studying this issue, and it is something we are 
not particularly concerned about at the moment. We are 
monitoring very, very carefully to make sure this doesn't 
become an issue.
    Mr. Garcia of Illinois. So you are not very concerned about 
a change in the economy and a potential recession looming?
    Secretary Mnuchin. No. I think, in the near future, the 
chance of a recession is quite low. I think the credit quality 
is extremely good, and in the case of leveraged lending, most 
of it has moved outside of the banking business into nonbank 
areas and areas that don't have insured deposits, and we take 
great comfort in that.
    Mr. Garcia of Illinois. Thank you, Mr. Secretary.
    I yield back my time, Mr. Chairman.
    Mr. San Nicolas. The gentleman from Arkansas, Mr. Hill, is 
recognized for 5 minutes.
    Mr. Hill. I thank the Chair. Mr. Secretary, welcome back to 
the committee. We never get tired of our Treasury Secretary 
visiting House Financial Services. I want to raise an issue, 
first, on Puerto Rico and the Virgin Islands. Congressman Duffy 
and I wrote you a letter last November 30th about challenges in 
getting the appropriated funds by Congress out into the 
contracted private sector both in the Virgin Islands and Puerto 
Rico. Obviously, both of the Territories have a huge cashflow 
problem. So we appropriate money here. We give that money to 
HUD or to FEMA. That is approved by OMB and fully in compliance 
with Congress' wishes, and then it is allocated for projects in 
Puerto Rico or the Virgin Islands. But they have no money to 
pay the contractors.
    So, while I am not suggesting that we should have a line of 
credit to Puerto Rico, there has to be a way within OMB and 
Treasury, with you as our chief financial officer of the 
country, of having that money flow because I have 
subcontractors in Puerto Rico who live in my district who 
haven't been paid in over a year. It is just an accounts 
payable. The work has been done. It has met standards. Puerto 
Rico commissioned to do it, but Puerto Rico has no money to pay 
the contractors, and yet we have appropriated funds at FEMA to 
pay those services. So this is a puzzle.
    I got an answer back in February from your office, which 
was a nonanswer, saying that, ``We will contact other Federal 
agencies for input and investigate the issue of barriers to 
timely payment.''
    And so today, I won't debate whether that was a nonanswer 
or not, but I would like to get your personal commitment that 
you will help Congressman Duffy and I engage with FEMA and 
drive an outcome on this where funds can flow to the 
Territories.
    Secretary Mnuchin. I would be happy do that. I actually 
spoke to the Governor of Puerto Rico yesterday. We are very 
focused on opportunity zones there. We actually are, within 
Treasury, very involved in the finances of Puerto Rico. We 
negotiated a standby line in case Puerto Rico, through 
effectively its bankruptcy--what you are referring to--and I 
apologize. It was a nonanswer. I acknowledge it was a little 
bit of a form letter. The issues that you are focused on are 
issues of FEMA and HUD. I would be happy to speak to the 
Secretaries in DHS and HUD, Secretary Carson--
    Mr. Hill. I think it would be helpful because I think at 
the sub-Cabinet staff level, we haven't made any progress. So, 
I appreciate your attention to that.
    Turning to North Korea and sanctions, on March 5th, the 
United Nations Security Council released a report on sanctions 
compliance. It said that financial sanctions remain some of the 
most poorly implemented and actively evaded measures of the 
sanctions regime. Individuals in power to act as extensions of 
financial institutions of the DPRK operate in at least five 
countries with seeming impunity, and that includes to say 
diplomats of the DPRK in those countries. And, of course, 
diplomats have immunity when they are functioning as diplomats 
in certain countries.
    My question to you is, how can we work with the U.N. 
sanctions regime and tighten financial sanctions on influence 
peddlers in China and in the diplomatic corps across the world 
with North Korea?
    Secretary Mnuchin. So my Under Secretary for TFI, she has 
recently traveled abroad to specifically talk about these 
issues, talk with financial institutions. We are very focused 
on money transfer items. We are focused on people doing money 
laundering. We are working very closely with the intelligence 
community on declassifying certain information and enhancing 
the U.N. sanctions with our specific sanctions against people 
who are trying to use the financial system. So, I assure you we 
are on top of that.
    Mr. Hill. Thank you. I was pleased to see in The Wall 
Street Journal today that additional sanctions are being 
proposed for Venezuela, and I congratulate the President and 
our U.N. representative for getting a U.N. Security Council 
resolution on sanctions on North Korea with Russia and China's 
approval. So my question to you is, in our national security 
work, is there a possibility we could get a U.N. Security 
Council resolution in a similar way with Russia and China 
actually being constructive on Venezuela?
    Secretary Mnuchin. I can't comment on the outcome of a U.N. 
resolution. I can tell you I was personally involved in the 
North Korea situation, and the Chinese were particularly 
helpful in getting that done. I, personally, have had 
conversations with the finance minister in Russia about the 
situation in Venezuela. I have also had conversations with my 
counterparts in China. I believe that Secretary Pompeo has had 
similar conversations. So this is something we are very focused 
on.
    Mr. Hill. Thank you, Mr. Secretary.
    I yield back.
    Mr. San Nicolas. The gentleman from Georgia, Mr. 
Loudermilk, is recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary. I want to continue on the 
conversation about FSOC and SIFI designation, but before that, 
I want to congratulate you on making free trade advocates out 
of people who just in recent history have been totally opposed 
to free trade and never found a tariff that they didn't like. 
And so that gives me confidence from what I am hearing about 
some on the other side of the aisle that is in the majority at 
this point. It appears that we have free trade advocates which 
I think will pave the way for USMCA to get approved. So 
congratulations on achieving something. I remember, in the 
previous Administration, many in the other party were even 
opposed to the previous President trying to get some free trade 
agreements because they liked the tariffs. So I think we are 
making headway.
    And also the obsession of some on this committee with the 
President's tax returns is not new. From the moment that he was 
inaugurated, there were some on this committee who began 
immediately calling for the tax returns. So I also want to say 
this: I am not expecting a particular answer from you. So, if 
you give something different than what I am expecting, I will 
let you answer. Okay?
    Regarding FSOC and the SIFI designation process, I am 
usually supportive of it. I think it is important to relieve 
the regulations on especially those nonbank entities. In fact, 
I am working on reintroducing a bill from last Congress that 
actually passed the committee on a--and passed the House nearly 
unanimously.
    So this is a bipartisan effort, and the bill would 
basically ensure that nonbanks, such as investment advisers and 
mutual funds, are not subject to the bank-centric stress test. 
Quick question, do you agree with that approach, that they 
should not be under the same stress test as the banks?
    Secretary Mnuchin. Yes, generally, I agree with that.
    Mr. Loudermilk. Okay, and I appreciate that. What are the 
differences between the banks and nonbanks where it makes it 
where the stress tests are not appropriate for nonbanks? What 
are those differences?
    Secretary Mnuchin. Well, the biggest difference is that 
banks have taxpayer-insured deposits that create risk for the 
government.
    Mr. Loudermilk. Okay. I appreciate that. I think if we can 
continue in our efforts to reduce the regulatory burden on a 
lot of our industries and understand that, even in the 
financial services arena, one size does not fit all, we will do 
more to benefit the cost to consumers than anything else we are 
doing.
    Another topic that I want to address--and I appreciate the 
Administration starting to address housing finance reform. I do 
agree with the FHFA Director that Fannie Mae and Freddie Mac 
need to raise significant capital, but I strongly believe that 
we should start reforms in housing finance. How much housing 
finance reform can be done administratively?
    Secretary Mnuchin. I think a lot can be done 
administratively. We are working on that. We are also working 
on a report for the President, but I would also encourage there 
is an opportunity for Congress on a bipartisan basis to make 
some significant reforms. These were not entities that were 
intended to be under government control forever and funded by 
taxpayer money forever. So I would hope that Congress would 
look at this with us, but if not, we will do things 
administratively.
    Mr. Loudermilk. So is the Administration willing to work 
with Congress to make some significant reforms?
    Secretary Mnuchin. Absolutely. I would look forward to 
working with this committee and others. This is a priority of 
ours.
    Mr. Loudermilk. I am also encouraged that several private 
sector industries, mortgage insurers and reinsurers, for 
example, have a strong interest in absorbing risk from the 
GSEs. Does the Administration plan to expand the involvement of 
these types of private capital in the housing finance system?
    Secretary Mnuchin. Yes. Our fundamental view is that there 
should be risk capital in front of the government's money and 
whether that is a government guarantee on securities or 
Treasury lines, fundamentally there should be private risk 
capital that supports a liquid 30-year mortgage market.
    Mr. Loudermilk. I appreciate that, and in my opinion, 
reform is not just relieving debt and walking away from it. I 
don't think that changes any behavior when you just relieve 
debt and you reward an agency for bad behavior. So, thank you. 
I look forward to working with you on these reforms and I 
appreciate you being here.
    Secretary Mnuchin. Thank you.
    Mr. San Nicolas. The gentleman from Minnesota, Mr. Emmer, 
is recognized for 5 minutes.
    Mr. Emmer. Thank you, Mr. Chairman.
    It's good to see you, Mr. Secretary.
    Secretary Mnuchin. Thank you.
    Mr. Emmer. I appreciate your work to produce the report on 
nonbank financials, FinTech, and innovation last year. As you 
may know, after 5 months, the committee was able to get around 
to creating a FinTech Task Force, on which I am going to serve.
    Can you give us an update on your work to implement some of 
the changes, and are there any specific urgent recommendations 
you have for Congress in this area?
    Secretary Mnuchin. Well, I just participated in--the FDIC 
hosted a Fintech conference. It was extremely well-received. We 
are working with the regulators on all these. We appreciate the 
work that you are doing. We look forward to sitting down and 
prioritizing what things you think you could get through on a 
congressional basis.
    Mr. Emmer. Thank you.
    How is the communication between other agencies like the 
CFTC, the SEC, and the OCC, and is there anything we can do to 
better facilitate communication to reduce regulatory 
uncertainty in this area?
    Secretary Mnuchin. I would say now versus 2 years ago, the 
communication is excellent between the people who run these 
regulatory entities, again, whether it is through the 
President's working group when we convene, whether it is 
informal sessions on issues. I have regular conversations. We 
have monthly calls. So I think the communication is excellent, 
and one of the things that all of the people who run these 
agencies are trying to do is make sure down through their 
agencies, the regulators, that the message is sent to make sure 
that they work together.
    An example I would use is cyber, a very important issue. 
Different regulators should have cyber exams, but there is no 
reason that the OCC, the FDIC, and the Fed have to conduct 
three separate exams at different times. We are trying to get 
them to do that together. That's just one of the many examples.
    Mr. Emmer. Right. Another report of the Treasury covered 
community bank and credit union relief. I have been hearing 
frequently from small community banks, particularly those that 
engage in banking from Minnesota's agriculture sector.
    Are you hearing from these community institutions, and are 
there any statutory changes you would recommend to deliver more 
relief to keep rural communities growing?
    Secretary Mnuchin. We are very focused on the regulatory 
burden on community banks. As I have said before, I think, in 
many cases, these community banks understand their customers. 
They know their customers. They know how to underwrite credit. 
They are a very important part of our economy, so we want to 
make sure that they are not struggling in overburdened 
regulation, and there shouldn't be a one size fits all. 
Community banks don't need the same level of regulation as 
trillion-dollar global institutions.
    Mr. Emmer. Secretary Mnuchin, I just want to thank you for 
paying particular attention to every financial institution or 
entity within the financial services food chain because, as 
your last statement and your testimony indicates, they are all 
important, whether it is the Main Street community bank or 
credit union, all the way up to some of the largest banks in 
the world that are here in the United States that service all 
kinds of things here and around the globe, we need them all, 
and we need to make sure that people on the street get access 
to the capital they need to grow new opportunities that not 
only benefit our local communities, but ultimately today's 
small business obviously is tomorrow's big business.
    Secretary Mnuchin. Thank you. I agree with you.
    Mr. Emmer. Thank you, sir.
    I yield back.
    Mr. San Nicolas. The gentleman from Colorado, Mr. 
Perlmutter, is recognized for 5 minutes.
    Mr. Perlmutter. Mr. Secretary, good morning.
    Just a couple of questions. First, you know, and you 
probably had it a dozen times, and I am just now coming into 
the hearing room--the tax returns are something that we have 
been seeking for a couple of years now and have tried to, 
through the proper procedures, bring them to the Floor based on 
the fact that every other President has released theirs. It has 
been a traditional--it is just sort of a matter of course. But 
then we have run into this stonewall, which is how we perceive 
it.
    And I understand--and I guess I didn't hear your testimony 
earlier, but the fact is that you hadn't seen a memo, but there 
was some sort of draft memo, is that right?
    Secretary Mnuchin. I was just contacted by The Washington 
Post 2 days ago. We heard about it--I first saw it this morning 
in the paper and, yes, it is some draft memo that never did get 
to us.
    Mr. Perlmutter. Who drafted it?
    Secretary Mnuchin. I have no idea. We are looking into 
that.
    Mr. Perlmutter. Okay. In your dealings with the President, 
has he asked you just to hold the tax returns and not--
    Secretary Mnuchin. I have never had any conversations with 
the President or anybody in the White House about what we are 
doing with his tax returns.
    Mr. Perlmutter. Okay. So this is all within the Treasury 
that you are making certain decisions and--or not?
    Secretary Mnuchin. Treasury, IRS which is within the 
Treasury, and the Department of Justice (DOJ). We have 
consulted DOJ, who are effectively our lawyers.
    Mr. Perlmutter. How has the--at least the tradition of 
every other President releasing their tax returns, how has that 
played in your decisionmaking?
    Secretary Mnuchin. It hasn't played into my decision at 
all. I think that is an independent decision of the President. 
The American public knew that he wasn't releasing his tax 
returns prior to voting for him, and they made that decision. 
That to me is a personal decision of his and the American 
public. I have nothing to do with that.
    Mr. Perlmutter. Okay, and I guess, from our perspective, 
obviously, we think there's something that is being withheld or 
covered up, but until we actually see it, till you release it, 
till a court orders it, we are not going to know; it is going 
to be all supposition on our part. And that is just the way it 
is. So I am going to change the subject because--
    Secretary Mnuchin. Thank you.
    Mr. Perlmutter. --really, you and I were sort of 
adversarial on Deripaska--or however you say the guy's name. I 
don't want to do that. I want to talk about marijuana.
    Secretary Mnuchin. Thank you, I appreciate that. It is rare 
that I would say I would prefer to talk about marijuana than 
those other two subjects, but I am happy to.
    Mr. Perlmutter. Mr. Secretary, and thank you, obviously, 
FinCEN and the Treasury have been willing to work with us as we 
have moved this subject forward. And I would advise you, sir, 
that, at this point, we have had a hearing. We have now had a 
markup. We passed the bill out of this committee, 45 to 11, I 
think, or 45 to 15, 34 Democrats, 11 Republicans. It is now 
going to eventually get to the Rules Committee and to the 
Floor, and we have included the FinCEN guidance as part of the 
legislation.
    So I don't know if you are familiar with how this thing is 
proceeding, but again, the basis is to try to get the cash off 
the streets. For me, it is a public safety kind of a matter, 
and I don't know if you all have been talking about it or if 
you have been following this at all.
    Secretary Mnuchin. I have been following it, and first of 
all, I appreciate what you are doing on this. I have testified 
before that this is an issue for Congress to decide. We have a 
big problem, and the problem is there is a Federal law and 
there are State laws, and from our perspective at Treasury, we 
are caught in the middle of this, both from the standpoint of 
the IRS, where we have to build cash rooms to take in cash, and 
from the banking sector. And I would encourage Congress to 
address this issue. It has to be resolved one way or another, 
but it is not in anybody's interest to have this amount of cash 
on the streets, which, obviously, will just end up in illicit 
hands in a bad part of the economy and things that are unsafe. 
I can tell you that we are having an interagency review on your 
bill, but in one format or another, this is an issue for 
Congress to address one way or another.
    Mr. Perlmutter. And I want to thank you. I want to thank 
you, and I want to thank the Department and a number of your 
regulators because you have been working with us. As we have 
moved this along, we have made some modifications based on 
suggestions, and we will continue to press this forward. I know 
it is going to pass the House, and then we will see where it 
goes from there.
    I thank you, and I yield back.
    Mr. San Nicolas. The gentleman from Illinois, Mr. Foster, 
is recognized for 5 minutes.
    Mr. Foster. Thank you, Mr. Chairman.
    I am going to raise the issue of the pending debt crisis, 
the potential default. What is the best estimate for when that 
may happen if we continue on with business as usual?
    Secretary Mnuchin. I haven't given it an exact date, but I 
would say it is late summer. And I share your concern, and I 
would urge Congress to raise the debt ceiling as soon as 
possible.
    Mr. Foster. Are you familiar with the Treasury report on 
the macroeconomic effects of the debt ceiling brinksmanship?
    Secretary Mnuchin. I don't think I need the report to know 
the impact, which would be quite significant.
    Mr. Foster. Were you in finance at the time and during the 
2011--
    Secretary Mnuchin. I was. And let me just say that I had a 
meeting with the Big Four yesterday, and I raised the issue of 
the debt ceiling with them. And, again, I would urge Congress 
to raise the debt ceiling. We should have a situation where, 
when we commit funds, we commit that we have the capacity to 
borrow. So I have no issue with--Congress should have the 
ability to control borrowing and have the control of spending. 
But these things should be done at the same time.
    Mr. Foster. I concur on that. The whole situation is sort 
of analogous to refusing to pay for a meal after you have eaten 
it. But, actually, without objection, I would like to enter 
into the record the Treasury report entitled, ``The 
Macroeconomic Effect of Debt Ceiling Brinksmanship,'' dated 
2013, so--
    Mr. San Nicolas. Without objection, it is so ordered.
    Mr. Foster. And I urge you to have a look at it. It is just 
a few pages. It goes through the drop in consumer confidence, 
small business optimism; S&P 500 took a hit; the VIX spiked; 
corporate bond spreads, mortgage spreads. It was just bad. You 
know, household net worth, the wealth of American families 
dropped by more than, I think, multiple trillions of dollars. 
This was a big deal when it happened, and yes, there is a 
danger of it recurring.
    Yesterday, I introduced a bill that would just clean repeal 
of the debt limit so that we would actually use the budget 
rather than the debt limit to limit spending, and I am not 
going to ask you to opine on any specific thing. I understand 
there isn't really a consensus on the issue, and I personally 
remain committed to working in a bipartisan manner.
    There are proposals that were hammered out in the 
bipartisan policy group that would give cover to a number of 
Republican members who want to, sort of, at least maintain some 
sort of fig leaf. These are proposals that would defuse the 
issue, basically defang it so that, although it would 
technically still be there as a threat, it would just 
effectively not--be so unlikely to be triggered.
    And so I was wondering if you would consider supporting 
proposals or maybe even taking leadership and trying to hammer 
out some sort of bipartisan permanent fix so that this thing 
doesn't come up again and again?
    Secretary Mnuchin. I would be pleased to meet with a 
bipartisan group. We would also be pleased to provide technical 
assistance. Again, in one format or another, the debt limit 
shouldn't be used as hostage to other things. So I am fine with 
keeping the debt limit as long as we have a mechanism that we 
kind of do these things simultaneously.
    Mr. Foster. Some mechanism where it would never be the 
limiting factor that would cause us to default?
    Secretary Mnuchin. Well, as you said, so we don't end up--
you used the example of you had the meal. I think it is more 
like: We had the meal. We left the restaurant. We don't want to 
pay the credit card bill.
    Mr. Foster. Do you have confidence that the market will 
react appropriately, or is there a danger of overreacting if we 
threaten to default on our debts?
    Secretary Mnuchin. I have confidence that this Congress 
will not let that occur. From my meetings with senior 
leadership, everybody understands this issue, and I surely hope 
we never get to the point in late summer where we are even 
contemplating these things.
    So that was one of the topics we talked about yesterday, 
and I would hope, for the benefit of the American people, we 
raise the debt limit soon.
    Mr. Foster. Thank you.
    I yield back.
    Mr. San Nicolas. The gentlewoman from Michigan, Ms. Tlaib, 
is recognized for 5 minutes.
    Ms. Tlaib. Thank you so much, Secretary Mnuchin, for being 
here.
    I would like to ask you about the announcement this past 
March that the Treasury Department will allow companies to 
offer employees and current retirees a lump sum payment for 
their pensions instead of paying out the lifetime guarantee 
that employees expected.
    In Michigan, the Office of Retirement Services lists over 
280,000 retired employees who participate in public employee 
pensions. That is a lot of people, and this move by your 
Department will have a huge impact on the retirement savings of 
my residents in Michigan's 13th Congressional District.
    Do you believe that lump sum retirement payments 
shortchange our retirees as they would be getting far less than 
they would have received over time with their pensions?
    Secretary Mnuchin. Let me just comment, I pride myself that 
I am on top of a lot of issues in Treasury and in the pension 
area. I am focused on the multi-employer pensions and others. 
This is not an area that I am up to speed on. So I will follow 
up with you and get back to you.
    Ms. Tlaib. Yes. I would recommend that you look at the 
Government Accountability Office, who reported that retirees 
who take lump sum payments could see their assets drop, and 
Forbes estimates that by choosing the lump sum payment, 
retirees could receive a staggering 20 to 30 percent less than 
what long-term pensions would provide.
    Do you currently have any rules--and maybe you can ask your 
staff behind you--or do you plan to implement any rules that 
require companies to disclose this information to retirees?
    Secretary Mnuchin. We are, unfortunately, not sure 
specifically what you are referring to, but we would be happy 
to follow up with your staff today.
    Ms. Tlaib. It is a decision the Department, your Department 
that you oversee, in March made a decision to allow lump sum 
payments for retirees.
    Secretary Mnuchin. You may be referring to the PBGC, which 
I am a board member of, so let me--again, we would be more than 
happy to follow up with you for clarity.
    Ms. Tlaib. Thank you so much.
    Your Department is also responsible for implementing the 
Employee Retirement Income Security Act, correct--are you 
familiar with that, before I continue?--which is designed to 
protect and preserve pensions.
    Do you think cutting benefits by 20 to 30 percent is a 
threat to pensions? You can answer that without actually 
referring to the rule.
    Secretary Mnuchin. Well, obviously, the pension issue in 
this country is a very serious issue and, particularly, the 
serious issue with the PBGC in taking over pensions. I will 
tell you, as it relates to this rule, Treasury's role is purely 
mechanical in that people apply to us for this. We run the 
tests and then determine whether it fits the tests and then go 
to a vote. It is not a subjective issue.
    Ms. Tlaib. What my residents are also really concerned 
about though, Mr. Secretary, because with the huge amounts of 
profit that corporations are making off of these lump sum 
payments that you should be aware of, Michigan's Whirlpool 
Corporation, for example, estimated that these payments would 
cut $39 million off of its pension obligations.
    I want to ask you if your Department will look into any 
plans that would require companies, again, to disclose their 
profit at the employee's expense when they shift to lump sum 
payments?
    Secretary Mnuchin. We would be more than happy to look into 
that and get back to you. And as I said, the PBGC issue, and 
pension reform, is a significant issue.
    Ms. Tlaib. Thank you. I would like to discuss one last 
issue, if I may. U.S. pension plans with assets in Peruvian 
reform bonds--many workers and retirees in Michigan, Mr. 
Secretary, have pension plans that are invested in these bonds. 
And, unfortunately, the Peruvian government has not paid the 
U.S. investors the debts they owe. This negatively impacts 
workers in Michigan.
    In the 13th Congressional District, about 30,000 people are 
in danger of losing a big portion of their retirement funds 
with the government of Peru owing them over $34 million. Are 
you aware of that?
    Secretary Mnuchin. I am broadly aware of it, yes.
    Ms. Tlaib. What actions in your Department are you going to 
be taking in regard to solving this issue?
    Secretary Mnuchin. Well, again, this is not the only 
situation where pensions buy foreign government debt. There are 
other areas. And we assist the pensions although it is not our 
obligation to enforce it, but we do assist in these areas.
    Ms. Tlaib. Well, you know this. U.S. investors purchase 
these bonds in good faith and expect that the Peruvian 
government would uphold their end of the agreement, and I hope 
you will do something about it.
    I would be remiss as somebody who truly believes in the 
rule of law, as somebody who has practiced law and is an 
attorney--I would advise you, Mr. Secretary, to get personal 
legal advice because the cover-up by this Administration goes 
beyond just providing the taxes. You can consult the Department 
of Justice, but you personally making decisions not in the best 
interest of the American people, but to cover up the occupant 
of the White House, I think you need to be very, very clear 
about what your role is and what your responsibility is to the 
American people.
    This goes beyond just providing taxes, right? It is about 
transparency and the fact that no one is above the law. So, Mr. 
Secretary, please seek out legal advice personally of what your 
obligations are because the Department of Justice is not 
protecting you; it is protecting the President.
    Chairwoman Waters. The gentleman from New York, Mr. Zeldin, 
is recognized for 5 minutes.
    Mr. Zeldin. Thank you, Madam Chairwoman, and thank you to 
Secretary Mnuchin for being here today.
    One thing that comes up in this committee a lot when we are 
talking about effective policy is that a one-size-fits-all 
approach usually doesn't work. This may sound like another 
boring D.C. policy debate, but in my district on Long Island, 
imposing regulations meant for large international 
multibillion-dollar banks on a small community lender or the 
same capital standards meant for a massive international 
insurance giant on a small, family-owned broker is not helpful.
    This subjective style of regulation that isn't tailored to 
the size of a company translates directly to less credit, 
higher premiums, and less opportunity for homeowners and 
businesses and hardworking families. That is why I want to 
start off by saying I appreciate your work at FSOC to formalize 
an activities-based approach for addressing systematic risk.
    I commend you for moving away from the arbitrary 
designation of certain firms as risky, which is what the last 
Administration did enthusiastically, and instead focusing on 
actually protecting markets and consumers from real financial 
risk by dropping the questionable one-size-fits-all approach.
    Mr. Secretary, last week, your colleague at the Financial 
Stability Board, and its current Chairman, Governor Randal 
Quarles, received a letter from 42 bipartisan Senators 
regarding concerns about an ongoing attempt by bureaucrats in 
Brussels to export European insurance regulations around the 
world and into the United States.
    We then echoed those concerns in this committee during last 
Thursday's hearing. The European model is another perfect 
example of an arbitrary one-size-fits-all approach that would 
not work in our country where we have 50 different States with 
50 different markets that suit the needs of local consumers.
    I appreciate your commitment to protecting U.S. sovereignty 
in the State-by-State system in any negotiations where Treasury 
is taking the lead.
    The most important goal is to ensure the U.S. insurance 
regulatory system is deemed outcome equivalent. That means our 
system and, most importantly, our companies that are creating 
jobs in the U.S. can be competitive in a global marketplace but 
not subject to European standards that don't make sense for 
American companies or consumers. This is a priority nationwide 
and in my district for the local brokers who are insuring our 
farmers, our fishermen, and our working families.
    What I would really appreciate from you today is an update 
on some of these international negotiations and what you are 
doing to prioritize American consumers. How can we put America 
first but also open up markets overseas for American companies 
that want to be competitive abroad?
    Secretary Mnuchin. Thank you. On the international 
insurance issue, I just did give a significant speech last week 
on this. We would be more than happy to get a copy of it to 
you. Team USA, which is what we call the interagency group of 
the regulators working with the Europeans, are very much 
focused on defending the U.S. State-based regulatory system.
    Mr. Zeldin. Thank you. We are here in this committee having 
an ongoing debate about how hardworking Americans are going to 
have access to the American Dream and how to keep our booming 
economy growing so it can continue to deliver opportunities for 
prosperity to all. We all have to work together to keep our 
system competitive in the global economy but always put the 
needs of American consumers and businesses first. There are 
tremendous opportunities for American companies, including 
companies in my district, as we look abroad for those 
opportunities all throughout the entire world.
    On a personal note, I want to say thank you. You staffed up 
quickly when you took this position, and incredibly, there are 
a lot of really high-quality people at the highest levels of 
your agency, and it has been fantastic to work with all of 
them. So I just want to thank you for making them an open 
resource because I am confident, not just as a New Yorker, not 
just as a member of the House Financial Services Committee, but 
as a Member of Congress that I am able to go to any one on your 
team on any calls, any question. It helps me represent my 
constituents as effectively as possible. So thank you for 
bringing in the best of the best to fill these important 
positions.
    Secretary Mnuchin. Thank you for the recognition of our 
team because many people, some of whom are here with me today, 
have given up very big careers to come and serve the government 
and are proud of being part of Treasury. So, thank you.
    Mr. Zeldin. Thank you.
    Thank you, Madam Chairwoman, and I yield back.
    Chairwoman Waters. The gentleman from Minnesota, Mr. 
Phillips, is recognized for 5 minutes.
    Mr. Phillips. Thank you, Madam Chairwoman.
    And greetings, Mr. Secretary. I come from the great State 
of Minnesota, home to a lot of farmers and particularly from 
the Third District, the district I represent, home to a lot of 
multinational corporations from Cargill to Polaris and a number 
in between.
    And as you can imagine, I am hearing from all of them on a 
weekly basis with concerns about trade policy and other things 
right now, but I want to begin with just a quick question for 
you, as you reflect on your first 2 years in your role, is 
there anything as you look back that you might have done 
differently or anything from the Administration's perspective 
that might have been done differently?
    Secretary Mnuchin. Broadly, I would say no. We have been 
incredibly busy across a large range of issues. So, broadly, I 
would say no. We are pleased--
    Mr. Phillips. Anything?
    Secretary Mnuchin. Nothing that comes--I am sure there are 
small things here and there that, with experience, we may have 
changed.
    Mr. Phillips. Quick question about OFAC, approximately how 
many people work at OFAC with the Treasury Department? Do you 
know that number?
    Secretary Mnuchin. We have several hundred people in OFAC.
    Mr. Phillips. And how many dedicated to the Western 
Hemisphere and Cuba, particularly, roughly?
    Secretary Mnuchin. Well, the way we manage these teams is 
they are not necessarily--we move the resources around, whether 
it is North Korea, whether it is Russia, whether it is Iran. We 
tend to move all these resources. So it is a team--
    Mr. Phillips. So, not dedicated to certain regions. Okay. 
As you surely know, farm income is down substantially, over 50 
percent in the last 4 years. I'm curious, why would we not open 
up Cuba to agricultural trade and help our farmers right now?
    Secretary Mnuchin. Well, the number one reason we wouldn't 
do that is that Cuba is probably the single biggest problem 
with Venezuela today. They effectively have a national police 
there. The situation in Venezuela is just horrible. I convene 
these meetings, the economic situation--this is a rich country. 
The people are starving, and Cuba is a major reason for that.
    Mr. Phillips. Which I agree, so hopefully when Venezuela is 
resolved, is that a possibility? We might allow our farmers to 
sell product to Cuba?
    Secretary Mnuchin. You know, I would think, okay, that if 
Cuba changed their bad activities, that would be an incentive 
for them and a possibility. So, again, the reason why we have 
the current Cuba policies is because of the way they are 
behaving.
    Mr. Phillips. Okay. My next question is about our China 
tariffs, and Polaris is an example of a corporation in my 
district being significantly impacted, probably $150 million to 
$200 million to the bottom line because of our policy right 
now. What do I tell companies like Polaris, and what is the end 
game? How can I communicate why this policy is in our best 
interest and in their best interest?
    Secretary Mnuchin. Well, first of all, I speak to literally 
probably a hundred different CEOs. So I would be more than 
happy to speak to the CEO of Polaris if it is impacting them. 
If you get me their contact information, I actually find it 
interesting speaking to people.
    Mr. Phillips. And I would welcome it.
    Secretary Mnuchin. The President has been very clear. He 
wants fair trade, and we made enormous progress. Ambassador 
Lighthizer and I have literally spent the last 6 months 
negotiating a detailed agreement that would take up this whole 
book, as I have said, going word by word by word.
    I publicly said I thought we were close to an agreement. We 
were beginning to set up a date for the two Presidents to meet 
and a signing ceremony. I think it would have been the most--
the biggest change in their economic relationship that we have 
ever had, it would have been great for our farmers, for our 
companies, for our American workers, and, unfortunately, China 
has taken a big step backwards.
    Now, sometimes you have to go backwards before you go 
forwards. So I am still hopeful we can get back to the table. 
The two Presidents will most likely see each other at the end 
of June. I can tell you the President is very focused on 
farmers. The idea is not to have tariffs; the idea is for them 
to treat our companies fairly.
    Mr. Phillips. My last question is about our national debt 
and deficit. I am gravely concerned. I wish this institution 
was as concerned as I am. I would welcome your thoughts about 
what you think this nation needs to do relative to our fiscal 
policy and the risks inherent in the current status quo.
    Secretary Mnuchin. Well, as I said, when we designed the 
President's economic plan coming in, the number one issue was 
growth, that we have to grow our way out of this; we can't cut 
our way out of this. I think the good news is we have achieved 
this growth, and we are way on our way to sustainable growth.
    Having said that, we also have to be conscious of expenses. 
Yesterday, I met with Mick Mulvaney and the Big Four in trying 
to reach an appropriate 2-year budget caps deal. We are happy 
to do that if the numbers are prudent. I think that the debt--
we have to be careful of the debt-to-GDP ratios. In the prior 
Administrations--in the Obama Administration and prior to that, 
the debt has doubled.
    Some of that was as a result of costs in the Middle East. 
Some of that was as a result of fiscal policies. But I share 
your issue that right now our debt is fine, but we have to be 
careful that it doesn't continue to grow disproportionately to 
GDP.
    Mr. Phillips. So you share my concern?
    Secretary Mnuchin. I do.
    Mr. Phillips. Okay. Thank you. Thank you, Mr. Secretary.
    I yield back.
    Chairwoman Waters. The gentleman from Massachusetts, Mr. 
Lynch, is recognized for 5 minutes.
    Mr. Lynch. Thank you, Madam Chairwoman.
    Madam Chairwoman, I would like to use my time for the 
purpose of a question of order before this committee.
    Madam Chairwoman, this witness, the Secretary, has been 
requested by the House to deliver to Congress certain documents 
that are pertinent to a legitimate inquiry before this 
committee. And my question is, basically, where the statute 
says that the Secretary shall deliver such documents and does 
not anticipate or embody any consideration regarding discretion 
on the part of the Secretary, would it be in order before this 
committee to hold the current witness, the Secretary of the 
Treasury, in contempt of Congress? That is my inquiry, and I 
would love a response.
    Chairwoman Waters. Thank you very much, Mr. Lynch.
    The question that you have put before this committee is one 
that we are unable to address at this time. We will take your 
question to the General Counsel, and we will put it in writing, 
and we will seek an answer from him or her about what our next 
step could or should be, given the way that you have described 
what you think may be contempt based on what the law says. So, 
we will move forward with that as quickly as possible.
    Mr. Lynch. If I might just add, Madam Chairwoman, the 
tactic of this Administration and the strategy of this 
Administration has been to circumvent the oversight 
responsibility of Congress and to basically negate the 
constitutional power that we have as a body by, in my opinion, 
unlawfully refusing to deliver pertinent information to an 
active inquiry before this committee and others, and that for 
us to continue to allow that delay to occur without meaningful 
consequences will cripple our democracy and be contrary, I 
think, to the Constitution itself.
    So I am hoping that counsel can act expeditiously so that 
we can actually respond to whether or not the Secretary is, 
indeed, conducting his job in contempt of Congress.
    Chairwoman Waters. Thank you very much, Mr. Lynch. I think 
everyone who has read the information that is available to us 
about the responsibility--
    Voice. Time--
    Chairwoman Waters. I beg your pardon. The time has ceased 
for us to have this colloquy, but we will take the information 
directly to the General Counsel. Thank you.
    Mr. Lynch. I yield back.
    Chairwoman Waters. The gentleman from California, Mr. 
Vargas, is recognized for 5 minutes.
    Mr. Vargas. Thank you very much, Madam Chairwoman.
    Before I yield to Mr. Cleaver, I would like to say to the 
Secretary that I did read the story about your father and Jeff 
Koons. I have to say it was a delightful story. I have never 
met your father, but after reading about him, he must be a 
great guy.
    Secretary Mnuchin. Thank you. And I would just say, for the 
record, he didn't buy it for himself; he bought it for a 
customer.
    Mr. Vargas. No. It was very clear in the article, but 
again, just reading about him and his successful career in 
business, and then his enthusiasm for art, was a very happy 
reading for me. I just want to say that.
    But I do want to yield to Mr. Cleaver. Mr. Cleaver?
    Mr. Cleaver. Thank you, Mr. Vargas. Mr. Secretary, just one 
short question. When you were here last--I represent Kansas 
City, Missouri, and the rural areas around it, about 125 miles 
away from the City--I asked you about soybeans. And you 
responded that there had been a very large purchase--your exact 
quote was, ``a very large order while we were negotiating; they 
have committed significant orders in soybeans.''
    So I responded, ``Already?''
    And you said, ``Yes, already.''
    I was excited about it, and so I started sharing that 
information to reporters and people back home, and my staff 
followed up the next day, and the next day, when I raised the 
question, you talked to some of the gentlemen behind you, and 
we can find no such orders that have been made, and it put me 
in a really awkward situation. I am sure you misspoke, but 
something needs to be done--I think you need to acknowledge 
that you misspoke. I have your exact comments here. I don't 
want to be nasty. I just want you to know that you put me in an 
awkward situation.
    Secretary Mnuchin. Am I allowed to respond to that?
    Mr. Cleaver. Yes. It is Mr. Vargas' time.
    I yield back.
    Secretary Mnuchin. I don't believe I misspoke. I apologize 
that my staff didn't get you the information. We will share it 
with you.
    I will tell you that, since the recent actions of trade--
    Mr. Cleaver. Mr. Secretary, I hate to interrupt you. This 
is Mr. Vargas' time. I have your exact quote of what you said. 
I am not trying to be mean or nasty, but when you tell me that 
I made a mistake, that is creating a whole new environment that 
I don't want to go into. And all I want you to do is just 
acknowledge that you misspoke and that you are going to get the 
correct information out.
    And if you say you didn't misspeak and you are not going to 
get the important information out--I yield back to Mr. Vargas. 
I don't want his time running out, Madam Chairwoman.
    Mr. Vargas. I do want to make sure that you have time to 
respond, Mr. Secretary, if you would like to respond to that.
    Secretary Mnuchin. Well, I just--I apologize. I wasn't 
implying you made a mistake. So, we will follow up with you 
this afternoon to clarify exactly what I said and get you the 
information. So, my apologies.
    Mr. Cleaver. Thank you.
    Mr. Vargas. Reclaiming my time, I know that--Mr. Secretary, 
again, thank you for being here. I know that you have already 
been asked about this, but I have to ask again about Chairman 
Neal's request. I think it does have a legitimate legislative 
purpose. I believe that you may not have been aware of the 
draft memo from the IRS, but certainly I wasn't, and now it has 
come out. And it seems to be somewhat clear that we do have the 
ability and the right to have that information. Again, I want 
to follow up. Are you, once again, going to take a look at it 
in light of this memo?
    Secretary Mnuchin. I will take a look at the memo. I had 
not seen it until this morning. We didn't receive it. It was in 
The Washington Post. So, obviously, we will take a look at it. 
To the extent it changes our analysis for whatever reason, we 
would recognize that.
    Again, I think this is a very important issue. I would just 
say we have tried to be responsive to Congress on hundreds, if 
not thousands, of requests for information. On this one 
request, we have been advised that there are different legal 
views, and this is why it will most likely go to the third 
branch of government. And if the third branch of government 
opines on Congress' right, then we would obviously supply the 
document.
    Our issue is we want to make sure that the IRS is not 
weaponized for any party, and as I said, we have been advised 
based upon constitutional issues, that it is not legal for us 
to pursue it. And we are--this has nothing to do with anything 
else.
    Mr. Vargas. Okay. I do hope you go and review it again 
because I think this memo makes it clear that we do have a 
right to this information. My time has expired, but thank you.
    Again, say hello to your father for me.
    Chairwoman Waters. The gentlewoman from Massachusetts, Ms. 
Pressley, is recognized for 5 minutes.
    Ms. Pressley. Thank you, Madam Chairwoman.
    And thank you, Secretary Mnuchin, for joining the committee 
again here today. I do believe our diversity is our greatest 
strength and arguably the greatest contributor to our economy. 
Mr. Secretary, do you believe that representation matters in 
American politics and imagery?
    Secretary Mnuchin. I'm sorry, what was the last part, 
American politics and--
    Ms. Pressley. And imagery. Do you believe that 
representation matters in American politics and imagery?
    Secretary Mnuchin. Yes.
    Ms. Pressley. I am so glad we agree. A few years ago, 
Secretary Lew put out a call to the American people soliciting 
feedback on ways to modernize our Nation's currency. In April 
2016, following long-time organizing efforts from several 
grassroots organizations, he announced a currency redesign 
overhaul that would more accurately reflect the diversity of 
our society.
    The American people understood the importance of 
representation on the bank notes of the world's most powerful 
economy, representation that acknowledged our history and all 
those who have contributed.
    Mr. Secretary, yes or no, do you believe people other than 
white men have greatly contributed to this country and its 
history?
    Secretary Mnuchin. Yes.
    Ms. Pressley. Great.
    After 10 months of soliciting and analyzing responses, 
Secretary Lew announced that Harriet Tubman would be featured 
on the front of the new $20 bill. As it stands currently, our 
currency does not reflect the diversity of individuals who have 
contributed to our great American history. He followed the 
announcement by directing the Bureau of Engraving and Printing 
to accelerate plans for the redesign, so the final design 
concepts would be unveiled in 2020, the 100-year anniversary of 
the 19th Amendment, which granted women the right to vote, 
which we celebrated yesterday.
    As you know, 2020 is only 1 year away, and since Secretary 
Lew's departure, we have not heard anything regarding the 
status of the currency redesign. Will the redesign meet the 
2020 deadline? Yes or no?
    Secretary Mnuchin. Let me comment that the primary reason 
we have looked at redesigning the currency is for 
counterfeiting issues. Based upon this, the $20 bill will now 
not come out till 2028; the $10 bill and the $50 bill will come 
out with new features beforehand.
    So the answer is it is my responsibility now to focus on 
what is the issue of counterfeiting and the security features. 
The ultimate decision on the redesign will most likely be 
another Secretary's down the road.
    Ms. Pressley. I'm sorry. I just want to be clear for the 
record. So you are not--so, yes or no, will you meet what was 
originally the 2020 redesign deadline? Yes or no?
    Secretary Mnuchin. Again, to be clear, the redesign that we 
are focused on--
    Ms. Pressley. That is a no.
    Secretary Mnuchin. No. We will meet the security feature 
redesign in 2020. The imagery feature will not be an issue that 
comes up until most likely 2026.
    Ms. Pressley. I am just wondering if you can explain that 
to me, because after an exhaustive community process, where 
people who organized for quite some time and you said you do 
share my sentiments and opinion that our currency should be 
more reflective of the contributions and diversity of those 
contributions, and so why the delay?
    Secretary Mnuchin. Okay. I didn't say that the currency 
should be reflective.
    Ms. Pressley. Well, you said imagery.
    Secretary Mnuchin. I said imagery, not referring to 
currency--referring to lots of things.
    Ms. Pressley. Okay. So do you believe that--do you support 
Harriet Tubman being on the $20 bill?
    Secretary Mnuchin. I have made no decision as it relates to 
that, and that decision won't be made in, as I said--
    Ms. Pressley. But there was a community process, there was 
a national--there was a community process.
    Secretary Mnuchin. Again, it is a decision of the Secretary 
of the Treasury. Right now, my decision is focused on security 
features.
    Ms. Pressley. Well, let me just say this: The occupant of 
the White House, Donald Trump, said that the move to put 
Harriet Tubman on the $20 bill was pure political correctness, 
and he, in fact, suggested putting her on a $2 bill. So do you 
agree that nearly a year of collecting responses from across 
the country can simply be reduced to political correctness?
    Secretary Mnuchin. I think that, right now, I am focused on 
the security features of the U.S. currency, which is the 
reserve currency--
    Ms. Pressley. Reclaiming my time, so does that mean you 
have no intention of executing the redesign as planned by your 
predecessor?
    Secretary Mnuchin. Well, that is correct. I have not made a 
decision to execute on a redesign or haven't made a decision, 
but yes, I have not made a--
    Ms. Pressley. Can you commit to submitting a currency 
redesign timeline to this committee?
    Secretary Mnuchin. Again, the currency timeline will be 
most likely 2026, which even in the most optimistic scenarios 
is probably beyond my term.
    Ms. Pressley. And do you believe that--is it your personal 
opinion, then, since you won't offer it officially, that our 
currency should reflect the diverse representation of leaders 
who have contributed to this country, since you agree it has 
been more than just white men?
    Secretary Mnuchin. Again, I can't separate my personal 
opinion on these issues from the issue of the Treasury 
Secretary--
    Ms. Pressley. So what is your position as the Treasury 
Secretary?
    Secretary Mnuchin. Again, my position is that I am focused 
on my responsibility to deal with the security features in a 
decision--
    Ms. Pressley. Okay. You have addressed that, and what about 
imagery? What about the representation?
    Secretary Mnuchin. Again, it is not a decision that is 
likely to come until way past my term, even if I serve the 
second term for the President. So I am not focused on that at 
the moment.
    Ms. Pressley. I yield back.
    Chairwoman Waters. The gentlewoman from California, Ms. 
Porter, is recognized for 5 minutes.
    Ms. Porter. Hello, Secretary Mnuchin. Thank you for being 
here.
    In June 2017, the Treasury issued a report on banking 
deregulation suggesting that if Congress raised the $50 billion 
threshold above which U.S. banks have stricter oversight, that 
it ought to do the same thing for foreign megabanks. And last 
month, the Fed took this cue, and they massively deregulated 
foreign megabanks. And this was on a wish list that you had 
suggested would be an improvement.
    There is a lot to be concerned about with this, but the 
most glaring thing is that now Deutsche Bank would only have to 
file their living will once every 6 years. And that is the same 
Deutsche Bank that had a surprise $3 billion quarterly loss.
    Based on your oversight of Deutsche Bank, which led you to 
believe it was appropriate to deregulate them, how did Deutsche 
Bank manage to lose $3 billion and not see it coming?
    Secretary Mnuchin. Well, I appreciate your concerns.
    Let me just say what we are focused on is the U.S. 
subsidiary, and--
    Ms. Porter. I understand. Reclaiming my time, I understand.
    Could you respond specifically to how did they--how the 
hell do you lose $3 billion and not see that coming?
    Secretary Mnuchin. Well, I hate to say it, but there were a 
lot of people who lost $3 billion and didn't see it coming.
    Ms. Porter. We don't want to repeat that, you would agree.
    Secretary Mnuchin. I surely don't. I can tell you I am 
familiar with some of their really bad investments, and I find 
it hard to believe that they made them.
    But, yes, it is a staggering amount of money, we would 
agree on that.
    Ms. Porter. And Deutsche Bank has failed its stress test in 
3 of the last 4 years, was fined for a New York trading scandal 
involving laundering with Russian oligarchs, admitted to 
participating in a LIBOR interest rate scandal, and violated 
U.S. sanctions against Iran, Libya, Syria, and the Sudan.
    Most recently, it came to light that Deutsche Bank had 
failed--excuse me--had willfully decided to ignore suspicious 
activity reports (SARs) with regard to the President and his 
son-in-law.
    Why is Deutsche Bank--what is your plan to hold Deutsche 
Bank responsible for failing to do appropriate oversight and 
respond to the regulatory controls that are in place with 
regard to SARs?
    Secretary Mnuchin. Well, let me just say the SAR issue I 
did read in the paper. I am going to have FinCEN follow up and 
make sure that Deutsche Bank, as anyone else, has SARs policies 
that are on everyone. So I am not aware of whether this is true 
or not true. But we will have FinCEN follow up.
    I go back to our obligation as U.S. regulators--
    Ms. Porter. Excuse me. Would you be willing to respond back 
to this committee as to whether that did or did not, in fact, 
occur?
    Secretary Mnuchin. I understand that we can't comment 
publicly on SARs, but we will follow up with the committee to 
make sure that we have done a compliance oversight and whatever 
the result is we are comfortable with.
    Ms. Porter. Are you planning to ask the German banking 
authority to also do additional oversight of Deutsche Bank, 
especially given that we now regulate them much less than we 
used to?
    Secretary Mnuchin. Well, again, the U.S. entity, we will 
regulate considerably. So the U.S. entity, with intermediary 
holding companies, we will be comfortable that the U.S. company 
doesn't jeopardize the U.S. financial system.
    In my conversations with the Europeans, yes, I will speak 
to them and make sure that they are properly regulating the 
parent entity. And I know the Germans share our concerns.
    Ms. Porter. I wanted to ask you about FSOC's hedge fund 
working group. I had a conversation with Mr. Powell about that. 
FSOC's last annual reports in 2017 and 2018 included in each 
report 400 words about the 9,000 hedge funds registered in the 
United States which collectively have $4 trillion in net asset 
value. That is $10 billion in asset risk per word of analysis 
from FSOC. And those words are: The Council recommends that 
relevant agencies continue to review their data collections and 
assess whether they are sufficient to allow the Council to 
monitor whether and how private funds may pose risk to 
financial stability.
    Why is FSOC just copying and pasting the same 
recommendations on hedge funds in 2017 and 2018? Do you not 
have enough staff at FSOC to prepare updated content? The last 
product to come out of the FSOC working group was in 2016. You 
are repasting the same financial recommendations even as the 
markets are changing and the risks that hedge funds are facing 
are changing.
    In the 2019 report, will I see that identical 400-word 
content, or is the working group going to do some work and mix 
it up a little?
    Secretary Mnuchin. I very much appreciate your comment. I 
acknowledge that that is a lot of assets per word. We have 
talked about hedge funds. I believe you are right. This doesn't 
reflect, and we should not be copying and pasting. And we will 
update that appropriately.
    Ms. Porter. Thank you very much.
    Secretary Mnuchin. Thank you for bringing that to my 
attention.
    Chairwoman Waters. The gentleman from Texas, Mr. Gonzalez, 
is recognized for 5 minutes.
    Mr. Gonzalez of Texas. Thank you, Madam Chairwoman.
    I have a few questions regarding debt distress, which is 
quickly rising in Africa and Latin America. I come from the 
great State of Texas, and I represent one of the border 
districts, where we are dealing with the grave refugee 
situation on our border. And we are really concerned about 
Central American countries fueled by opaque loans from China, 
many lending institutions, especially those associated with 
China's Belt and Road Initiative.
    China has shown little interest in joining established 
multilateral mechanisms to coordinate forces on bilateral debt, 
let alone write them down, if needed, as major advanced 
economies have done for years.
    How likely is it that these countries are heading for a 
debt crisis? And how difficult will it be to resolve one if it 
happens?
    Secretary Mnuchin. I share your concerns. I have made some 
comments already, but I will repeat them, which is we are very 
much working with our allies at the G7 and the G20 on this 
issue. We very much support debt transparency. And if China 
wants to lend, they should lend on the basis of everyone else 
with debt transparency. We are encouraging them to join the 
Paris Club. I think that would be important. We are working 
through the IMF and World Bank.
    So, this is an issue. I share your concerns. And it is very 
topical and timely.
    Mr. Gonzalez of Texas. What are we doing with the IMF in 
order to have them pressure China to adopt global norms and 
practices? Are we doing something in that regard?
    Secretary Mnuchin. We are at both the IMF and the World 
Bank where my previous Under Secretary, David Malpass, this is 
one of his big priorities. And I personally had conversations 
with the governor of the People's Bank and other senior people 
there on debt transparency. The French are leading an effort on 
this. There is a lot of unity on this issue.
    Mr. Gonzalez of Texas. I am concerned internationally, but 
particularly in Latin America, as my district is impacted 
directly.
    Do these developing countries have the tools, including 
internal governance systems, that will enable them to 
appropriately evaluate the wisdom of the China Belt and Road 
Initiative and other projects? And if not, what are we doing to 
try to engage that issue in itself?
    Secretary Mnuchin. Well, this is an important area of 
Treasury where we provide technical assistance. And this is a 
specific area where I think, without spending a lot of money, 
it is very, very impactful working with these governments, that 
they understand what they are taking on.
    And without me saying a specific country, I can tell you 
right now, as part of an IMF program, that we are 
contemplating, as part of that, there had been discussions 
about debt repayments and everything else. So I can assure you 
this is a timely topic that this Administration is highly 
focused on. I appreciate your focus on this.
    Mr. Gonzalez of Texas. What is the IMF trying to do behind 
the scenes to get China to come clean on its Belt and Road 
Initiative? Are they doing anything?
    Secretary Mnuchin. Well, again, I don't like to use the 
words, ``come clean,'' because to the extent they genuinely 
want to lend, that is fine. But what they are insisting, 
particularly where there are IMF programs and China is a 
lender, is that the IMF as part of its program has full 
transparency into the sustainability of China payments. And we 
will not be approving IMF programs without having that going 
forward.
    Mr. Gonzalez of Texas. So is Treasury engaging these 
countries and kind of educating them on the risks of taking 
these Chinese loans?
    Secretary Mnuchin. Absolutely. And as I said, the current 
president of the World Bank, who has worked for us, is taking 
this on as a major issue for the World Bank under his 
leadership.
    Mr. Gonzalez of Texas. Thank you.
    I yield back.
    Chairwoman Waters. I ask unanimous consent to yield to 
myself for 5 minutes.
    I would like to ask a few questions.
    Mr. McHenry. I reserve the right to object.
    Five minutes for both the ranking member and the 
chairwoman?
    Chairwoman Waters. That is absolutely correct.
    Mr. McHenry. All right.
    Chairwoman Waters. What I intended to do after my time was 
to yield to you also.
    Mr. McHenry. Thank you.
    Chairwoman Waters. Mr. Secretary, the law does not allow 
the Secretary to exercise discretion in disclosing the 
information provided the statutory conditions are met. Is that 
correct? Is that your understanding?
    Secretary Mnuchin. I believe, subject to the Constitution 
of the United States, that is correct.
    Chairwoman Waters. Okay. There was some information 
released last evening, I think in The Washington Post. And the 
memo states the Secretary's obligation to disclose returns and 
return information would not be affected by the failure of a 
tax-writing committee to state a reason for the request. And 
the only basis for the agency's refusal to comply with the 
committee's subpoena would be the invocation of the doctrine of 
executive privilege. Is that correct?
    Secretary Mnuchin. Let me just comment, I have no idea. I 
just saw that memo this morning. I have never seen it before. I 
don't know who wrote that memo. We will try to get to the 
bottom of it.
    As I have commented before, we will read the memo. And if 
it has any new information--but I can't comment on the memo. I 
just saw it today. I don't even know if it is genuine or if 
someone made it up.
    Chairwoman Waters. Since you did not see it, let me ask a 
few other questions.
    Did you discuss the memo with the President of the United 
States?
    Secretary Mnuchin. I have had no discussions with the 
President or anybody in the White House about releasing the 
President's tax returns.
    Chairwoman Waters. Did you have a discussion with anybody 
outside of the White House about this?
    Secretary Mnuchin. The Department of Justice, who is our 
lawyer in potential litigation and whom we rely upon for 
interpretations of constitutional law.
    Chairwoman Waters. I guess I want to make sure that you 
never discussed this memorandum with anybody inside or outside 
of the White House, is that correct?
    Secretary Mnuchin. I have not heard of or seen that memo, 
okay?
    Chairwoman Waters. My question is about discussion, did you 
discuss the memorandum with anybody inside the White House, or 
outside of the White House? I am referring to legal counsel. I 
am referring to lawyers. I am referring to advisers.
    Secretary Mnuchin. Let me be clear. The only person I have 
discussed that memo with is my General Counsel on the car ride 
over here, who is sitting behind me. I have not discussed that 
memo.
    Oh, and, actually, I did ask the Commissioner whether he 
had seen that memo, and he had not.
    Chairwoman Waters. My question is prior to--
    Secretary Mnuchin. No. Let me be clear--
    Chairwoman Waters. --the first time that you say you saw 
it--
    Secretary Mnuchin. No, I have not discussed it.
    Chairwoman Waters. --was this morning. Is that correct?
    Secretary Mnuchin. We received an inquiry from The 
Washington Post, I believe 2 days ago, about a supposed memo. 
And the first time I saw it was in the car ride over here.
    Chairwoman Waters. Okay. The Treasury says it is following 
a legal analysis from the Justice Department. But that analysis 
has not been released. Do you have that analysis?
    Secretary Mnuchin. We have a conclusion. And as soon as the 
Justice Department, which we have asked them to work on 
expeditiously, has the full memo, it will be released publicly 
to you and to others. That is the--
    Chairwoman Waters. I would like to, as quickly as possible, 
get a copy of the analysis as soon as it is released.
    Secretary Mnuchin. I will assure that that is the case. We 
are working with DOJ, and I want to get it released quickly.
    Chairwoman Waters. Thank you.
    I just wanted to take this moment to allow you to modify, 
to change, to expound, to do whatever was necessary to make 
sure that you were comfortable with your statement about never 
having seen it prior to the time that you indicated, never 
having discussed it with anyone in the White House, outside of 
the White House, legal counsel, advisers, et cetera. I just 
want to make sure.
    With that, I yield to the ranking member.
    Mr. McHenry. I thank the chairwoman.
    As we know, under congressional authority, it is the Chair 
of the Ways and Means Committee, and the jurisdiction of the 
Ways and Means Committee over that division of Treasury that we 
call the IRS. And I think it would be appropriate to submit for 
the record The Washington Post story in question here. I don't 
know if that has been previously done, but it is the Jeff Stein 
and Josh Dawsey story from The Washington Post that posted last 
night at 6:46 p.m., entitled, ``Confidential draft IRS memo 
says tax returns must be given to Congress unless President 
invokes executive privilege.''
    And I ask unanimous consent--
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. McHenry. Thank you.
    To that end, in my reading of the story, this was a draft 
memo. It was stamped, ``draft.'' It has no one that it is 
written to nor an author.
    And so I just want to ask you, you stated you had not seen 
the memo until today. Do you mean you had not seen--you had not 
heard of this or seen the memo until you read the news story? 
Is that what you--
    Secretary Mnuchin. Yes. I mean, to the best of my 
recollection, okay, I don't ever recall seeing this memo. The 
first I ever heard of this was when we got a Washington Post 
inquiry.
    Now, let me just also comment, what I have been briefed on 
very quickly on this is that this issue is different than the 
legal analysis that we have done. Now, of course, we will look 
at it and take it into account and make sure. But let me assure 
you, there is no smoking gun here. We did a very thorough legal 
analysis with the Department of Justice that, again, if this 
goes to the courts, the courts will decide and determine.
    I, for one, think this is an unprecedented issue of turning 
over any individual's tax return, whether it is a Republican or 
a Democrat. And I would hope--we all hope that we get to the 
right conclusion on what the right law is here.
    Mr. McHenry. So, in this regard, just to make sure the 
record is clear, have you seen the memo outlined in The 
Washington Post story?
    Secretary Mnuchin. Someone handed it to me on the way up 
here where they took it off of The Washington Post. So not that 
we received it independently.
    Again, to the best of my knowledge and the people we have 
inquired, we have not received--nobody in the senior leadership 
had seen this before. So it could be somebody in Treasury 
somewhere or another.
    Again, from what I have been told, I don't believe this is 
really that relevant to the legal analysis that we have done, 
but this is the first we are hearing of it.
    Mr. McHenry. Well, thank you. And thank you for correcting 
the record.
    The final question I had--and I ask unanimous consent to 
submit for the record my letter to the Director of FinCEN, 
dated May 6th, asking for additional briefing and data to 
support the legislation commonly called beneficial ownership 
here on Capitol Hill. I submit this for the record because I 
have not received a response back from FinCEN from our letter 
dated May 6th. I ask unanimous consent.
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. McHenry. And I this raise this to you, Mr. Secretary. 
The Director of FinCEN has yet to provide any data to justify 
the position to have a massive new collection of the ownership 
data of small businesses across America. I raise it to you 
because I know you can and will be responsive. I raise it to 
you because one of your reports has not been responsive. But 
the briefing I received from Director Blanco and his team was, 
quite frankly, insulting. It was anecdotal stories. No data in 
order to justify a substantial change in public policy. It 
would be infuriating under a Democrat Administration for me to 
receive a briefing like that. It is even more infuriating when 
it is a Republican Administration not giving Republicans on the 
Hill any sort of decency of data, nor do I actually think, when 
it comes to security matters, that partisan question should 
come into play. But it has been one of the more infuriating 
issues I have had to deal with.
    Secretary Mnuchin. You have my personal assurance we will 
be responsive to you on a timely basis and make sure you have 
the data so you--whatever your opinions are, are justified by 
data.
    Mr. McHenry. Thank you.
    Secretary Mnuchin. I share your data view.
    Mr. McHenry. Thank you. I appreciate that.
    And, with that, I yield back.
    Chairwoman Waters. I would also like to ask unanimous 
consent to enter into the record letters from ONE Campaign, the 
Bank Information Center, the International Trade Union 
Federation, and several senior fellows from the Center for 
Global Development that echo concerns I expressed at last 
month's hearing. The letter raises questions about the transfer 
of concessional and grant resources from the World Bank Group's 
International Development Association, et cetera, et cetera.
    I would like to thank Secretary Mnuchin for returning to 
the committee and for his time today.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witnesses and to place his responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    And, with that, this hearing is adjourned. Thank you.
    Secretary Mnuchin. Thank you very much.
    [Whereupon, at 10:50 a.m., the hearing was adjourned.]

                     A P P E N D I X



                April 9 and May 22, 2019
                        
                        
                        
                        
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