does it play in terms of this at this point? has anyone commented on that? >> we heard earlier today that maybe there was one meeting. that there may be others it may be better placed to answer that and i am. >> i see that they are all looking at you. >> okay. from my perspective, as a community that has collectively worked on this, and our opinion is that this plays a very important role. for the comments at the state department didn't know about, that was a problematic response and there was potential opportunity for congress to ask

about his possibly the case and i would love for you to. >> i kind of did ask. to follow up and say that we now have interagency structures to raise red flags to the highest level. how is it possible that the state department wasn't looking at this intentionally in november and december and i think that is a follow-up opportunity. and he did play an important role. they were convening behind the scenes at the state department was the key of sharing information in august, september, october, and november. and they did have open sessions with the partners so that we could express what we were seeing. and that would not have happened without this and still are questions are what happened in march and were does the

atrocities prevention said on parallel with other national intelligence priorities. if it was irrelevant until these atrocities were occurring, how are we better elevating that prioritization framework and how can we get ahead. >> and had we put a better emphasis ahead of the curve instead of after the current? >> yes to in 2013, they are required to create a national intelligence estimate on threats everywhere in the world and it's not public, obviously, but we understand it is being created. so figuring out where it was on this list, i think it would be a really great case study for us to explore where the breakdowns are in that system. but we do think that there has been progress in that because of this existence and because of

the core commitment, they response was faster than ever would've done and quickly i would just add where we think there needs to be more progress moving forward and one would be unlocking this information sharing problems and have problems in long-term funding across the board. recognizing that you can't solve crises and challenges in 12 months and we need multiyear assistance programs that let us really deal with the complexity of these problems. third would be to codify or commitment in law. so under this, you know, that might not live beyond the obama administration was congress codifies it into law. >> okay. so let me bring it down. if we were to only do two things in the next 90 days, what would

be. now, i know that we need policing and all of that. but if we could only do two things and say this is the most critical time because we are underfunded and under that, and that was the focus. and they're saying we have to act immediately. and there are lives being lost. so how do we do this if we were to say the next 90 days, you could do anything that you wanted to do, what would it be in terms of how you would prioritize the involvement there. and mr. campbell, we'll start with you.

>> security would be first because we need that operating environment and the situation is so volatile that until that is stabilized, nothing else can move and then we have such a need. particularly over and above before we get to the immediate response. that has to come. and because of how this has evolved, the is a long-term disaster. particularly with food security. and as i have said, this is two years of consecutive problems even in these.

smack her for. >> i would concur that we are trying to find these peacekeepers and also to explore across the agency if there are ways for the united states to increase as the and in the near term. number two would be to pass a bill authorizing this assistance funding that transcends the regular appropriations calendar. so that not just financial assistance but for a five-year strategic response bill that includes humanitarian development and political commitments seeing this through the transition. >> but i would like is if you want, not for open testimony, but if you would cement with the budget would look like and what the parameters would look like.

i don't need a cadillac or a rolls words version. and i need something less than that. >> and we need to think a little bit outside the box. in more troops and police. i firmly believe we will be able to contain the violence. it is another method to stopping the violence that has not been tried and i firmly believe that it will make a huge difference on the ground once people stop to talk together. >> what would be their motivation to talk? >> motivation is that nobody is really in a good situation. people are being attacked daily. so my experience from talking to

local people, people are seeking leadership and seeking guidance and it is much more important to stop the dialogs and to push for additional peacekeeping. realistically speaking, i just don't see where the finance and troops are going to come from at this moment. >> let me follow up and then we will let you finish. because i know we are pressing on time limits for everyone. you mentioned diamonds and a few of the other things. including outside influences are at war component or percentage of this is whether he has a lot or any of the others, what kind of presence would use the them having and this. >> it is not something that we have dean today. what we have been is the alliance and key members using

this approach in control of these areas to finance this group. and most of those commodities went through because of the relations with the sudanese government and members of the militia. so i think that is where we would have to look. i recognize that these are more long-term issues that will not have an immediate fit. that is why do not raise it is the most crucial point. >> thank you. i also have to echo peace and security is number one. you need both police and security. but going back to the impunity issue because it has been so double-sided. first of all because it shows if you bring leadership to the justice system, you have a better chance of reconciliation happening on the ground. if people see that the leaders

that have put the country in the situation that it is in now, being brought to justice, i think that it better helps reconciliation process on the ground. >> that becomes motivation for them to talk, as the gentleman was talking about, if they can't operate without impunity? you might guess, if you have the, then what is the motivation or even if we have more peace groups. i think it encourages people when they see the leadership is brought to justice they have if they have a chance of survival and i would encourage that we begin a dialogue in looking at possibly the car and bringing some of these leadership to justice. last, and it was touched on briefly, the complicity issue by various elements throughout the region. i do think that that has historically been a problem with

car. and you do have various complicity is and supports coming from different countries around the world and what their role is, whether it is in the economic resource side order of the political influence side. we have an influence in terms of outside complicity in helping to destabilize this. that has not changed. so we need to bring the voice to some of the leaders around the region and those that we know that are there. >> mr. chairman, i yield back. i appreciate your patience before we conclude, a couple of final questions as relates. yesterday in this room the foreign affairs committee passed a resolution that i introduced way back in september and held a hearing on and did an op-ed on the need for a war crimes tribunal that would be patterned

after an ad hoc that we had in sierra leone in the former yugoslavia. and as we all know, it has not had anything other than one conviction in over a decade. eighteen investigation, and it seems to have all kinds of internal constraints, which a lot have to do it the way it is configured, it does not have an affect. in one of the things that it did is we had a number of scenarios of what that ad hoc tribunal would look like, but you have to have the ability to go after more than one after order what they often do, only 18 indictments in over a dozen years, it is not a record that gives a lot of hope that we will

have a consequence for here. so my question would be, should we be looking at an ad hoc tribunal as it relates to this and what we are trying to get off the ground for syria. and secondly, ms. rose, you mentioned and talked about target intentions towards protecting women. our landmark law, greg simpkins is our chief of staff on the subcommittee and i learned horrifyingly that peacekeepers were raping little girls. here are the peacekeepers with a duty to protect and a mandate to protect that had not been properly vetted and were actually raping little girls. we have three hearings on it. the u.n. did issue a

zero-tolerance policy to its credit and did good work at least on paper and some try to do it for real. but we went there and visited not only the peacekeepers but also a place called heal africa, where so many women were being gang raped by armed individuals, as he pointed out in testimony, getting a faith-based approach helping them get their lives back to deal with it, that is just unthinkable, yet they were getting real help. ambassador sanders, is it a problem of trafficking and we haven't heard a lot about that, have they been complicit in any way? just the other day we heard of all of those young girls students being trafficked in nigeria because people are so frustrated. and those young girls were sold

into slavery. abducted and sold into slavery. and i'm wondering if anything like that is happening. have there been any reports of trafficking and are we all making sure that the peacekeepers that are being deployed are vetted so they are able to be a part of the solution. >> thank you, mr. chairman. on the question about this, the bigger macro issue is the impunity. whether it is a tribunal where the icc, think it is the message that it sends in the vehicle that we choose. and i think that most vehicles will be useful because you do have this international.and you're right on the number of convictions and at least it

brings an international zeroing in as well as you could probably do this as well. but i think it is a question of impunity. i haven't heard acerbically on trafficking. but let me just say that i would not surprise if that is also an underlying issue that is going on. if it hasn't started, there is always the potential instability for that to become another weapon of war. of trafficking young men and women in that circumstance. so i think that is another thing that you are right to put on the table and it's one thing that we have to watch. and in fact, i am headed to nigeria right now and so i don't know but my flight leaves at 2:30 p.m. so if that is okay, thank you so much. >> thank you so much again.

i will talk to the issue of the peacekeepers. there have been several incidents where peacekeepers have been involved in violent acts against civilians and we talked about this earlier today were 30 civilians were killed. some soldiers were even special forces inside the country, which is just horrible and needs so much more international scrutiny. and i would also just take this opportunity to day that i am publishing a report about the violence in the country or we can learn a lot more about ideas or to thank you for this opportunity. >> we deeply appreciate that c-span has given the american people the opportunity to hear about this tragedy from experts who are living it.

>> you will find that you can get that at our budget page. >> thank you. >> on the question of justice, i would have three points. mercy corps is an agency. i don't have an opinion on whether they have an opinion. but there are three points to think about. one would be that we really need to talk to central africans and asked him what his justice. and that's one of the questions that we asked on the ground. is a community-based or statutory and will make you feel safe. and there are funds to do those types of surveys, but not enough and we need to allocate their voices in the debate. so we do have some structures where we engage in the dialogues and put together the survey if it takes time and secondly just to highlight that i think that in the immediate term in

preventing violence, community-based conciliation is the best approach. so with these centers the justice system has ground to a halt and we have adjusted our strategy to do a community-based healing and reconciliation we found out to have got the result. and so also i would say that there is a third point about support to this day. police are there, please still have civil servants that want to serve that haven't been able to. so that is a piece of the justice puzzle. and then of course, the issue of silence. i don't have information on complicity of peacekeepers, but i'm have to ask my staff. regardless of whether it happened or not, the priority is ensuring the due diligence that is put into place immediately so that any new troops that come in and those that will be transitioned are going through

that process now. so the sooner, the better. third, on the point of holistic services and whether we are adequately funding them, mercy corps is funded from the peace and security act and africa bureau for our services. as to highlight something that started in congress is working on the ground to really save lives. but we aren't seeing the international response carved out right now. i would like to highlight that that secretary of state john kerry wants this say from the start initiative. it is supposed to wrist on the grants would be made available. but i think this is a good example of asking if this is coming to realize because we haven't seen it yet. so thank you so much. ..cecececececes suspend the

quorum call. the presiding officer: without objection. mr. paul: mr. president, it is often said that foreign aid from america is to project american power, to project the things that america believes in. unfortunately, over decades, the only thing consistent about foreign aid is that the money continues to flow, regardless of the behavior of the recipients. this is extraordinary, and we have seen this decade after decade. studies will show often that 75% of foreign aid throughout many continents is simply stolen, taken in graft. the mubarak family in egypt is an eangs example of this.

the point that i would like to make today is if we are going to project what america stands for, that if we want our money to go to people who are supporting activities that america is for, we should write that into the law. now, we've made attempts at this in the past. senator leahy several years ago attached to foreign aid an amendment that says that countries need to be evolving towards democracy or showing an ability to go forward towards democracy. the problem is that every time we have restrictions on foreign aid, they're evaded. we always give an out. the president has always got an out. so this week in egypt, 683 people were condemned to death in one trial and yet your money still flows to egypt without interruption. we have another contingency that says, if a country has a military takeover, if you have an election and then you have a military junta or a military

takeover of the government, then our aid should end. didn't happen in egypt. we had a military takeover. the only thing consistent about foreign aid is that it flows to all countries regardless of behavior. so it's the opposite of what many of the proponents say. many proponents say, we do this so we can modulate behavior, so we can try to improve and make things better around the world. and yet they steadfastly oppose restrictions on foreign aid. so i have a bill that i'm going to ask in a few minutes for the sna the tsnoot tosenate to unan. this should be an easy lift for most senators. this a bill to support our ally israel and to say to the palestinian authority that in order to receive american moneyen, imoney,if you wish to e -- and the american taxpayer gives hundreds of millions of dollars yeem each year to the

palestinian authority, but there's always an out and they always get their money. so i am asking is let's have some restrictions. shouldn't they gray to recognizy agree to recognize the state of israel? we now have a problem -- and the reason this has become a more pertinent issue -- is you have hamas, a terrorist group, in ga gaza, now allying themselves with the people in the palestinian authority. are we going to send mean to a unity government? part of the charter of hamas is not only just not recognition of israel but actually for the destruction of i will rail. -- israel. so what i would ask to americans and what i would ask to those who will object to this bill -- because there will be an objection to my bill today -- i would ask to those who object, how can you object to something

that calls for the recognition of israel as state? how can you object to and how can you continue to allow the flow of money to a group that calls for the destruction of israel? and they will say, well, we've got contingencies for that and we'll stop it if they become part of or control the west bank. when i was in israel a year ago, i asked everybody this question. i met with the prime minister of israel. i met with the president of israel. i met with the king of jordan. i met with the leader of the west bank, abbas. i met with them and asked, can there be a separate peace? can there be peace with the west bank and peace with gaza in they all said, no, it has to be one peace. they lobbed missiles at us a. they are at war with us. they don't recognize our right to exist as a state. not only that they openly advocate for the destruction of

israel. but realize in the objection you will hear today, you will hear an objection that despite arguments to the contrary weal how money to go to a iewngtsy government that will include hamas. i'm simply asking that if we're going to send good money after bad, frankly money we don't have -- we're $1 trillion in debt; we got bridges falling down in our own country and your government is end ising hundreds of millions of dollars to palestinian authority, now going to be unified with hamas, and without restrictions. restrictions that have a hole so big you can drive a whole hole h the restrictions. this always happens. every contin yen circumstance -- every contingency that you would think would be practicable and reasonable always has an exception for the president to overcome. the president always does it. so the only thing consistent about foreign said that money continues to p.l.o. -- to flow.

so, mr. president, i would ask unanimous consent that we pass my bill, senate bill 2265, stand with israel. i ask unanimous consent that the committee on foreign relations be discharged from further consideration of s. 2265 and that the senate proceed to immediate consideration. i further ask that the bill be read a third time and passed and that the motion to reconsider be considered made and laid upon the table. the presiding officer: is there objection? a senator: mr. president? the presiding officer: the senator from new jersey. mr. menendez: reserving the right to object to senator paul's request to discharge s. 2265, the committee. this legislation that senator paul has been referring to has not been considered by the committee. i mean, it was just introduced in the last day or so, i think. as chairman of the senate foreign relations committee and on behalf of the republican ranking member, senator corker, who had to depart to return back to tennessee but otherwise would

have joined me in making remarks, i come to the floor to express our opposition to an effort to circumvent the normal legislative process and deprive the members of our committee the opportunity to decide whether to take up this legislation, the authorization to provide or cut u.s. assistance to the palestinian authority is clearly in the per view of the senate foreign relations committee, and it should have its members decide if it is appropriate to be fully and openly considered by the committee. the bill is a blunt force instrument that would risk the collapse of the palestinian economy in the west bank. that is not in israel's interests, and it is not in our interests either. the bill would shift the burden of dealing with a failed state on its borders to israel. that's certainly not my goal and i would hope it's not senator

paul's goal either. our goal should be to get back to a process and a negotiation towards a two-state solution that will allow israel to live in peace and security. we need to allow the parties, particularly mr. abbas, the time to steer back towards a productive path to peace. to be clear, his time is limited. and unless -- i'm in agreement with senator paul. president abbas must ultimately choose between a future that envisions two states living side by side in peace and security or a destructive unity pact with a terrorist organization whose stated objective is to make sure there is no two-state solution. a unity government not a unity announcement, but a unity government between fatah and hamas has consequences that are clear under existing u.s. law. if mr. abbas definitely opens the door to hamas, exercising

influence of the palestinian authority, i will encourage my colleagues to stand with me in exercising the existing legal authority to halt assistance to a government that includes parties that rejects israel's right to exist as a jewish state and continues to support terrorism. for those reasons, mr. president, i must object to the senator's

well, good morning. good morning. the hearing will come to order. welcome members of the subcommittee and to our witness, jack lew, from department of treasury. mr. secretary, glad you're here to consider the president's 2015 budget request. we also welcome yesterday's announcement about the many new treasury sanctions against individuals and businesses undermining ukraine's stability

and sovereignty. we expect the department to use its power to both fully and forcibly against those who threaten ukraine's security. mr. secretary, i know you're pleased that the deficit dropped to 4.1% of gdp last year. but the deficit is still the highest it has ever been, both in real and constant dollars, other than the four past consecutive deficits that exceeded a trillion dollars. under this administration. so that string of trillion dollar deficits is why the gross federal debt last year exceeded 100% of the gdp. and will remain there, it looks like, for the rest of this administration. and i doubt that you or the president should be pleased about this legacy. so, when we look at the mandatory spending in the president's budget, it's estimated to grow from $2.5 trillion in fiscal year 2014, to $3.6 trillion by the fiscal year 2019. and by then the gross interest

payments on the debt alone will exceed $750 billion, which will dwarf our defense spending. and because of that, it troubles me, and i wonder why the administration didn't propose any serious entitlement reforms to prevent this further intergenerational inequality. so i hope that you will work with the budget committee, and the authorizing committees, to give the next generation the opportunity to forge their own way forward rather than saddle them with the debt of our grandparents -- of their grandparents and their parents. and over in the appropriations committee we've driven down discretionary spending every year since fiscal year 2011. and i'm a little concerned that more progress has not been made on the mandatory side of the ledger. the department's own budget request also raises some questions. the request seeks to, number

one, add more than a billion dollar increase to the irs. it seeks to authorize language to pay certain irs employees bigger salaries and bonuses that are actually allowed under the civil service system. it seeks to eliminate language enacted in the omnibus to prohibit the irs from targeting groups for additional scrutiny based on their ideological beliefs, and to prohibit the irs from targeting citizens of the united states for exercising any right guaranteed under the first amendment. it also seeks to eliminate language requiring the videos produced by the irs to be appropriately reviewed. requesting a billion dollars more, eliminating prohibitions against targeting that were negotiated by this committee, and proposing a new rule for the 501(c)(4)s before investigations by congress and the department of justice have been completed will not build trust in the irs, the department of the treasury, the federal government, or over

all government. so, i think that if you were to explain how the inappropriate criteria came into use, how they were allowed to be used for years, that's what we need to bring back some trust in the irs, and make sure the irs can administer the tax code in a partial and nonpartisan manner. similar to the department's 2012, '13 and '14 budget requests, the department is seeking discretionary spending for the irs above the spending caps by relying on discretionary cap adjustments that are not part of current law. absent a change to either the budget control act, or the ryan murray agreement, $480 million of the irs request is both pointless, and meaningless. if the $480 million is of importance to the administration, then the president would have found a way to pay for it from the $1.14

trillion allowable under the ryan/murray rather than use a gimmick that the budget committees have rejected for the past three years. in addition i'm interested to hear from you today an update on the final regulations to implement the foreign account tax compliance act, which will take place on july 1 of this year. the so-called fatca has far reaching impact on u.s. based companies as well as foreign companies with assets in the united states or clients and i'm concerned with the amount of time that's going to be available to comply with these regulations when the final rules weren't released until the end of february and that's going to give a lot of the global companies less than five months to comply. again i want to thank you, secretary lew for being here today. i'd like to turn to ranking member mr. serrano for his comments. >> thank you, mr. chairman. i'd like to join you in

welcoming secretary lew before the subcommittee for the second time. you lead a department with a variety of missions important to our economy, our government, and our nation as a whole. the treasury department plays a central role in promoting economic growth, and opportunity through programs like the cvf-5 fund, ensuring financial stability through dodd-frank, enforcing our tax laws fairly and managing our nation's finances. your budget request for fiscal year 2015 promotes all of these things, most of the agency is held to pretty austere budget levels. but there are significant requests in investments at the irs, which is the largest part of your budget. and those requests and increases are much-needed. as i said at our hearing on the irs a few weeks ago, almost $1 billion has been cut from their budget over past -- the past four fiscal years. and we should not be -- as a result of reduced service and an

increased tax cap. since that hearing, we have even more evidence of the negative impact that these budget cuts are having on the irs. a recent gao report found that the budget cuts to the irs instituted over the last few years have resulted in reduced enforcement, and reduced taxpayer services. this comes on top of reports that irs audit rates are at their lowest level since the 1980s. as it currently stands these cuts have had the perverse effect of promoting noncompliance for those who want to cheat the system, while at the same time, deterring people who want to file their taxes currently from getting their questions answered. your budget request for the irs attempts to reinvest in the agency, restore those losses, and reverse these wrong-headed incentives. on a different topic i'm a strong supporter of the community development financial institution's fund, which has helped promote vick investment

and traditionally underserved areas. i understand that you're proposing a small decrease in the fy-2015 budget request for the cdfi fund. although i hope we will get to discuss this in more detail i'm particularly concerned by a separate proposal within this request to eliminate the bank enterprise award program within the cdfi fund. i have heard numerous concerns about this idea from various stakeholders and just recently visited a cdfi that has been able to do great work in my district with funding from the b.e.a. this is part of a program that's long-standing and i don't know that it makes sense to try and eliminate it at this time. secretary lew there remain great challenges for your agency in the year ahead with the continued implementation of the tax provisions, of the affordable care act, the ongoing stewardship of our economic recovery, and the need for further investment in key areas. we will work with you to ensure

that you have the resources to accomplish all of these goals, but you know you and i have worked together through this appropriations committee and other committees many times before. i have great respect for you and for your abilities and we hope that we can continue to have that as we move forward. thank you, mr. chairman. >> thank you. i'd like to now recognize chairman of the full appropriation committee mr. rogers for any opening statement that he might like to make. >> chairman, thank you for yielding. having marked up our first two bills, in full committee before we broke, that's the earliest since 1974, the adoption of the present budget act. so we are well under way with the fiscal '15 process and mr. secretary we're pleased to have you with us this morning to discuss the president's budget for treasury. like the chairman, i have some very significant concerns. about the request.

we worked on this committee in a very bipartisan, nonpartisan way for the most part, to construct bills that comply with the budget control act, and the ryan murray agreement the administration's request for treasury seemingly cast these statutory budget caps has cast them aside as merely suggestions. we obviously understand that it's more difficult to operate in these constrained budget environments, but, these challenging times calls for leadership and tough choices. not a $480 million gimmick that the congress has patently and repeatedly refused and rejected on a bipartisan basis. it's sort of like deja vu all over again. in contrast, the fiscal '14

omnibus package is a prime example of what we can accomplish by working to the under regular order. this committee was able to provide every facet of the federal government with adequate, responsible funding while continuing to reduce federal spending totally $165 billion in cuts since fiscal '10 as we collaborated to reduce spending on the discretionary side of the ledger, i would be absolutely remiss if i did not if i did not echo the sentiments of chairman crenshaw and others in calling for some leadership from this administration, and your department, specifically. on the problem of mandatory spending. that squeezing aside everything else. today, mandatory spending as you know accounts for two-thirds of federal spending. but i came to congress, 1980,

'81. we appropriated two-thirds and now it's just the reverse. and it's zooming. we've managed to control discretionary. we've reduced discretionary over the last two, three years. but in the meantime the mandatories are zooming skyward and crowding out everything that you and we want to do on the discretionary side. and i see no leadership out of the administration, particularly treasury about trying to wrestle the mandatory growth to the ground, mr. secretary, unless we do something, it's going to completely eat us alive along with the interest on the dealt. from transportation projects,

medical research, housing assistance, criminal justice, everything else, including military, are going to be shoved aside. second mr. secretary, i have some very strong issues with the posture the administration has taken towards coal-fired generation in developing countries. i simply can't support many of the policies emerging from treasury in that regard. simply put these policies are bad for domestic industries in america and they're bad for areas in the developing world, in dire need of a reliable low-cost energy source. to be blunt, the u.s. environmental protection agency have thrown up roadblocks at every turn to diminish our domestic producers' ability to mine coal and burn coal. in my region in southern eastern

kentucky these regulatory attacks have resulted in some 8,000 miners laid off in just the last several months. men who were making a very skilled wage. 80,000, $90,000 a year, now trying to find a job at mcdonald's. unsuccessfully. and trying to support children and families. because of the regulatory attacks from this administration. like salt on an open wound, treasury has now sent a clear message that the u.s. should no longer be in the business of exporting coal. your department issued new rules last year and now the united states will vote against financing any new cole power plant by the world bank unless it's in one of the poorest

countries where the project uses carbon capture technologies that are not readily available even in the u.s. these policies deny our companieses ability to provide developing countries with more efficient technologies. and they encourage these countries to look at investors with lower vineal standards, particularly china. i would even go so far as to say these policies show the administration is in denial about the reality of expanding energy access to the poorest nations. for example, i do not understand how the administration can possibly meet its goal of providing more power for african countries if coal is left out of the equation. i hope that you can help us understand that. finally in response to russia's continued threats against ukraine, we want to hear about the administration's efforts to support our friends.

and allies, particularly yesterday's announcement of additional sanctions. unquestionably the u.s. mist send a strong signal, and demonstrate leadership in the international community that such acts of aggression in violation of ukraine's territorial sovereignty are unacceptable and should not be allowed to continue with impunity. mr. secretary we look forward to hearing your testimony. welcome to the committee. >> thank you. i'd like now to recognize miss lowey who is the ranking member of the full committee for any opening statement she might have. >> thank you, mr. chairman. and i'd like to thank you, and ranking member serrano, for holding this hearing, and to my friend, secretary lew, thank you for joining us today. we are, indeed, fortunate to have a person of wisdom and

talent in your position today. mr. secretary your fiscal 2015 budget requests $13.8 billion to support the department of treasury. as you note in your testimony, businesses have added more than 8.9 million jobs over the last 49 months. and the economy and housing markets continue to improve. and yet, much more must be done to provide access to capital and get people back to work. taxpayers need clarity in the tax code and responsiveness there the irs. the budget would address the funding shortfalls at the irs, which amazingly have resulted in 39% of phone calls going unanswered in fy-2013. this is unacceptable, the

american people deserve better, i am pleased that your budget would address this deficiency. i'm also pleased to see that the budget proposes to extend the terrorism risk insurance program for tria, this vital program which is scheduled to expire at the end of this year, provides a fed cal backstop for insurance claims resulting from acts of terrorism. if tria were to expire, infrastructure investments, and capital projects throughout the country would come to a halt. my friends on the other side of the aisle often say the government should not be in the business of doing the private sector's job, as there is no affordable and accessible terrorism risk insurance program in the private sector. tria is very much a federal responsibility, and tria should be reauthorized without delay.

unfortunately your hearing before the subcommittee on foreign state and operations could not be rescheduled. i want to take the opportunity now to reiterate my strong support for imf reforms. the imf is an excellent tool to help stabilize struggling economies, and protect our own financial institutions from getting directly involve d in bailouts caused by foreign financial emergencies. we need to maintain our leadership within the imf, expand its lending capacity, and support the code of reforms in order to protect our own economic and security interests. i also want to commend your department's work, specifically under secretary cohen's office in disrupting terrorist financing networks and enforcement of sanctions against countries such as iran, and north korea.

in particular, sustained implementation of these efforts must remain the backbone of our iran policy. especially while new korean negotiations continue. i hope to hear what additional economic actions and sanctions the administration will seek if negotiations with iran fail to yield an agreement permanently denying iran nuclear weapons capability. before i close i want to apologize not because of lack of interest, but i have another hearing directly across the hall, so thank you, again, for appearing before us. >> thank you. now i'd like to recognize the secretary for his opening statement. your written statement will be made part of the record and if you could limit your oral testimony about five minutes it will give us more time for questions. so the floor is yours. >> thank you, mr. chairman. ranking member serrano, members of the subcommittee and thank you for the opportunity to speak about the treasury budget. i appreciate your cooperation on

rescheduling the hearing, and i'll keep my opening remarks brief. let me start by saying what an honor it is to work with the dedicated men and women at the treasury department. they're talented public servants who are focused on strengthening our country and they performed with excellence under quite difficult conditions over recent years. and i want to thank them for their service and commitment. the president's budget addresses the fundamental challenges our nation faces. and the requests for treasury is part of that comprehensive strategy. this request will allow the department to help maintain a strong economy, sensibly manage the government's finances, foster a greater investment in american communities and small businesses, protect our national security, monitor risks to the financial system and promote conditions that support economic growth and stability at home and abroad. over the past five years treasury has met its responsibilities efficiently and at a lower cost. today's budget request builds on that progress and includes even more ways to reduce costs and achieve savings while offering carefully designed proposals to

increase the department's effectiveness. for instance we're seeking a second round of funding for the state's small business credit initiative which has been enormously successful in strengthening small businesses across the country. we're working to reduce the risks from cybersecurity attacks by helping to improve the financial sector's resilience to such attacks, and investing in treasury's own defenses and infrastructure. and we're requesting sufficient funding for the internal revenue service so it can provide the kind of quality service that american taxpayers deserve. as we consider what's in the best interest of taxpayers, it's important to note that it's been 5 1/2 years since fannie mae and freddie mac went into conservatorship. now is the time to reform our housing system and i'm encouraged that the senate banking committee is making bipartisan progress on this very complex issue. since the financial crisis treasury has played a central role in designing and implementing the most comprehensive reforms to the financial system since the great depression. one major piece of unfinished business is housing finance reform and we need legislation that protects tack payers, ensures continued guidespread availability of consumer

friendly mortgage products like the 30-year fixed rate loan and provides liquidity during times of economic stress and facilities the availability of affordable housing in an explicit and transparent manner. before i take questions, i'd like to talk briefly about ukraine. the united states and the international community have made it clear that we will continue to stand with the ukrainian people during this critical time. that's why we're united in our effort to impose costs on russia for its unlawful and provocative acts. on monday the united states responded to russia's latest actions with additional sanctions, which will increase the impact we've already begun to see on russia's economy, from u.s. and international sanctions. we urge russia to pursue a diplomatic solution to the situation, especially as ukraine moves forward with presidential elections next month. finally, we continue to vigorously enforce our highly effective iran sanctions regime. as a result earlier today we sanctioned individuals and entities for providing support for the government of iran and evading oil sanctions and facilitating iran's ballistic

missile procurement. with that let me thank you for the opportunity to appear before you today, and i look forward to answering your questions. >> thank you very much. members, we're going to try to conclude our hearing in an hour and a half, so we'll observe the five minute rule. and we'll have as many questions as we can possibly handle. let me start mr. secretary by a follow-up question. when commissioner kuskin was here with the irs, we asked a lot of questions about this proposed 501 c four regulation, and he told the subcommittee that he didn't think that the draft would be finalized before november and i wonder is that -- is that your view, as well? >> mr. chairman, i've said on a number of occasions that there are many steps from where we are now to the final rule. there is -- there have been extensive comments, as you know, roughly 150,000 comments. there's a process for reviewing them. there's going to be a need for the administrative process to go

step by step, as revisions are reviewed. so, i think his estimate of the time frame is consistent with our expectations. the challenge is to have a conversation about what to do to limit the discretion in this area so that we don't ever see the kind of problems that we saw that were reported last year. >> do you think, i know that you mentioned 150,000 comments, that's a fairly large number, maybe historic. but will there be, do you know yet whether there will be any further hearings when you have that kind of comment? >> well, i expect that there will be further comment. you know, further opportunities for public comment, both on the written material that's issued, subsequently. and potentially with hearings. >> it's hard for you to say when you think it might be finalized. >> i think it's going to take awhile. i've been very clear about that. the goal here is to get this done right. this is a very controversial and

complicated area. the proposed rule made clear that there was an active request for comment. so, we weren't surprised by the comment. we -- the rule is not even complete in every regard because it says there are some areas that without comment it would be very difficult to pave the path forward. so it was meant to open a process. i would just point out that last year when this whole issue came to light through an ig report there were a number of recommendations in the report, one of which was to clarify this rule. and the proposed rule was a first step in that process. >> got you. >> we implemented all the other recommendations. >> i appreciate that. let me ask you, i mentioned in my opening statement about the foreign account tax compliance act. that's going after tax evasion. and, it's an extensive regulation. it's going to have a profound and far-reaching impact on our economy but sometimes i think when those kind of rules are

proposed, they have unintended consequences. and for instance, i think the concept is that you have -- you don't want people hiding cash offshore, but if you have a noncash value insurance, in other words like property and casualty insurance, that's basically a promise by the insurer to provide payment to cover a specific event. now in florida, we have hurricanes and we have catastrophic events so people buy insurance, noncash, value insurance, property casualty insurance, reinsurance, and so it seems like they can't be used for the purposes of tax evasion, and i don't know that the irs can see any additional money there so the question becomes, did -- how did they happen to include premiums that have no cash value in this regulation? do you know that? and for instance, did somebody -- because i'm told that these companies are going to have to spend an awful lot of money to demonstrate that there's no cash there, and i wonder if somebody did an economic analysis of the

proposed rule before it was -- >> i'm happy to go back and look at this specific issue about insurance. the general goal of fatca is one i know we all support, which is to make sure that taxpayers cannot evade u.s. taxes or taxes anywhere, by, you know, hiding their income in overseas accounts. it is a complicated area. one of the reasons that we extended the period was to make sure that we had time to enter into agreements with other countries. there was a great deal of interest, in having bilateral agreements. i think it actually has been a tremendous success. as i go to international meetings, i don't like to use acronyms at meetings so i wouldn't use an ack know nip like fatca but in various accents i've heard people saying we need fatca for all. we need a global standard. so we'll work on getting the details right. i'm not familiar with the

specific issue on insurance premiums. i'm happy to look at it. >> i think we all think it's a great concept that we want to stop but if you think about it, if somebody is buying reinsurance or property casualty insurance and there's no way to understand it, they can hide any cash in there and it would probably be appropriate that just to revisit that and do some sort of economic analysis. and if it's not something they cannot be part of that. but certainly it's a great concept overall. >> i'm happy to look at it and get back to you. >> thank you. now turn to mr. serrano. >> thank you, mr. chairman. i'm going to try to get in at least two questions because i know we have a short time, and mr. secretary, you draw a big crowd. as you can see. great attendance. your request eliminates the bank enterprise award program, something i'm very concerned about. i have heard very good reports about the impact this program is having in my district and elsewhere. in fy-14 we provided $18 million for it. why are you proposing to zero it

out this year? and i must tell you that it's been awhile since i've gotten so many comments from constituents on an issue as i'm getting on this one. >> congressman, we had to make a lot of tough choices in this budget, as you have to make in the appropriations process. and, based on the current fiscal environment, you know, we thought that concentrating the cdfi funds in other areas was on balance the right tradeoff. the appropriated funding level for the bencht >> a. program has decreased overtime, and it really was a question of concentrating our effort in other very important areas. but we understand that there are some concerns because of the decision. >> well, the big issue here is that you've got programs up and running, you have situations, for instance, in my district, an

area that for years the biggest complaint was that there were no banks around, and through this kind of funding that this committee put forward, you know, local banks were able to spring up, and that's a bad pun, because one of them is called spring but anyway, so now, they run the risk of falling apart. i don't know what process you have going forward, we certainly have our role to play. but i must tell you that this is one that has support in the community, and support on this committee so you should keep that in mind as we move forward. >> i appreciate that congressman, i know there's support for the other activities that cdfi funds, as well. so it's a question of competing goods, and obviously with unlimited resources we might make other decisions but we did try in this budget in a number of areas to concentrate our effort in a world of very tight

budget resources, and this was a tradeoff that we made. but i'd be happy to follow up and discuss the matter with you. >> thank you. my next question is one that miss lowey wanted to ask you at her hearing, at this hearing, and i wanted to ask you so that merits being asked. the fy-14 omnibus required treasury to submit recommendations for reducing the response time for applications to the office of foreign assets control for a general license for humanitarian nongovernmental organizations seeking to provide aid to famine victims in south central somalia. while we appreciate the response you've given us, it doesn't really respond to the report language. we'd like to see a more thorough response delivered to the committee. what time frame do you think can have to get that to us? >> congressman, i might have to go back and check exactly what the time frame is. i do know that the issuance of licenses in somalia has been a

very challenging undertaking. i've had the responsibility to work on it from multiple different perspectives when i was at the state department, and now obviously at treasury, and the challenge is to make sure that humanitarian goods are going where they need to go and should go, but that we're not seeing support for organizations that are listed, terrorist organizations. and we've tried very hard to work to strike that balance, to make sure humanitarian supplies can continue to go forward. i'm not sure of the exact schedule. i'd be happy to get back to you. >> right. in terms of security issues to tell us what the challenges have been? >> well, the whole process is one that is some things are public, some are not. rather than cross the line, perhaps we should have the conversation separately. but, over time, you know, there have been concerns about payments that got -- that were used to support organizations essentially charging tolls on

the roads to raise funds for terrorist organizations. so there are real concerns on both sides. obviously our goal in humanitarian programs is to get the money in, to get it in safely, and to get it in without having there be the kinds of collateral support for people who are not intended to get benefit from these programs. and i'm happy to follow up on the timing, obviously, the -- humanitarian licenses are very important part of what affect us. >> i realize i put on your plate two questions that are some people would see them as being that far apart, because one is very local, and one is part of our foreign policy. but both speak about growth and support for people so we'll be talking in the future. thank you, mr. chairman. >> thank you. mr. rogers? >> mr. secretary, let me ask you about marijuana. washington state and colorado

have legalized recreational use of marijuana. but it remains illegal in most states, and certainly under federal law. nevertheless department of justice told the governors that it will not challenge their legalization laws, and has told federal prosecutors to de-emphasize marijuana prosecutions. in addition, and what i want to ask you about, the treasury department's financial crimes enforcement network issued new rules that give banks a green light to do business with mare juan shops, illegal shops. the combination of this guidance should allow both medical and recreational marijuana related

businesses to make full use of banking services, and institutions. even though dealing with an illegal operation. dea administrator recently told a congressional hearing that cash is the driving force for these drug trafficking organizations, and dea has already seen signs, they say, that gangs are attempting to exploit the new banking rules. the issuance of a green light for banking institutions to do business with these illegal marijuana shops and subsequent action by the treasury department to in effect rubber stamp that gives me some pause. because this is still an illegal product in practically every state. is it wise to offer regulatory guidance from the federal government on illegal activity?

congressman this is a very complicated area. obviously when two states pass a law making an activity legal in the state there's going to be an increase in activity in that area. obviously the justice department guidance provided guidelines for how prosecution matters would be considered. we believed it was important for there to be clarity in terms of the consistency between the prosecutorial guidelines and the banking guidelines. the risk of cash transactions is actually something that we were quite concerned about. without any guidance, there would be a proliferation of cash-only businesses, and that would make it impossible to see when there are actions going on that violate both federal and state law. and that would be a real concern. we thought that the clarity, bringing it into daylight, was a better solution. obviously the -- the real clarity here would require

legislation that conformed to policy. since we don't have that it was an attempt to have as much clarity as one can have given the complex situation with the state laws. >> what about cocaine dealers? shouldn't they be given the same break? >> i'm not aware of any state that has legalized, you know, activity in that area. >> but aren't you aware that practically every state, marijuana still is considered illegal? >> so, we -- the actions we took really just apply in the states where the state law makes these shops legal. where the business would be done with cash, if it weren't done through banks. and we think that the actions we've taken taken provide greater transparency and less likelihood of the kinds of behavior that i think we're all most concerned about. i will note that there have been quite a number of bsas, suspicious activity reports filed which give us the ability to see where there are transactions in those two states that would violate both their

state laws and federal laws. and i think would indicate the kinds of troublesome behavior and activity that we would all want to see. >> well department of justice apparently qualified its approval of legal marijuana only if that state created, quote, strong and effective regulatory and enforcement systems, end quote. washington's medical marijuana dispensaries still are not licensed, or regulated, by the state. and yet, you waive all of that and allow these regulations, and help with banks in doing business with those shops which are illegal under the state law. much less the federal law. i wouldn't -- >> i can't conclude whether or not it's legal under the state law. obviously the states have to enforce their state law.

but they did legalize the opening of that's shops and these transactions. the question was whether the transactions would be in cash or through a transparent banking system and that really is the area where the guidance was meant to provide some clarity. >> but as i say in washington state, these dispensaries are still not licensed by the state nor regulated by the state. if they aren't licensed or regulated, from a legal perspective, how are they different, any different from a drug dealer on a street corner? >> i'm happy to follow up with you on some of the details of how things are being done in washington, and -- >> this is not complicated. >> but the -- >> i think -- >> both states passed laws that created space for transactions that under state law are legal, and the guidance we put out was clearly meant to facilitate having transparency so that would not become a kind of cash

economy where there's no way to see when there are transactions that suggest, you know, large-scale transactions that would actually violate the state law. >> well, mr. chairman, my time is up. i'm sure, but it's not complicated. washington state is not regulating those drug -- those marijuana dealers. and yet the u.s. government, through your department, is putting a stamp of approval on banks doing business with illegal shops, even in the state of washington. >> i would just note that when there are suspicious activities that would violate state law, they're being reported and being followed up on. i think the transparency is something that actually makes enforcement of law more likely

to happen in effective ways. >> thank you, mr. quigley. >> thank you, mr. chairman, welcome, secretary. secretary, before i go on i'd like to just go ranking member's concern about the bank enterprise award program. i understand we all have different priorities. all we're doing today is telling you, this is a program that's high priority for your communities. and we understand your response, but in the meantime, half a world away, the president said that something like he thought the odds of the iran talks succeeding at about 50/50, and that if they broke down, that additional sanctions could be under way, and they could be passed by congress in a very short period of time. you have a sense of what kind of additional sanctions might be in place? what kind of sanctions seem to be working right now? >> well, congressman, i think we've seen that the sanctions

that are in place on iran's oil sector, and their financial sector, have been very effective. there has been a consistent degradation to iran's economy. you see it in their gdp. you see it in their exchange rate. you see it in their inflation rate, their unemployment rate. you see it in their willingness to come to the table and negotiate. and we don't know the outcome of the negotiation. obviously the president puts the assessment out there, made it clear we're going into this with our eyes open. you know, sanctions cannot force an outcome. what they can do is create an environment where a leader is feeling the pressure so that if they want to do what it takes to improve conditions for their people, they have to change their policy. if, in fact, the negotiations don't succeed, we will look for other means to tighten the pressure. working with the world community is one of the reasons that the iran sanctions have been so successful.

is that we have not been alone. we have worked with most of the rest of the world to have it be a sanctions system that has very little leakage. you know, we obviously are hoping and working hard to make those negotiations successful. but we are very much aware of the fact it could go either way, and i'm not going to prejudge whatprejudge what steps we would take, but i think the president's determination and mine is that if the negotiations do not go well, we'll have a full set of options to pursue. >> i appreciate that. in a different country, looking at what's worked here, the second round of sanctions involving ukraine seem to be meet with underwhelming response by their stock market. having just returned from there, you get the impression that the type of sanctions that would work versus russia might be the same. those dealing with the more

specifically with the energy sector and the banking sector. have those been considered are is this an issue with the european union? >> congressman they've been considered because the president signed an executive order that creates the authority for us to designate sectors should we make the determination that that's the appropriate step. i think that if you look -- >> this would have been stronger. >> if you look at the impact on russia's economy, it's a little misleading to look at what happens day by day. you have to look over the period of time since russia went into crimea. since we imposed sanctions. there has been quite a substantial deterioration in russia's already-weak economy. we see it in their stock exchange, their exchange rate, in a number of important economic indicators. they were down graded one notch above junk. with the rationale and bond

rating was, in part, the sanctions being imposed. i think the question here is how do we proceed in a careful way, step by step, building pressure? president putin has acknowledged that the sanctions are creating pressure on them. obviously, they didn't change their policy. i think that we need to continue to keep our options open. we are prepared to take more action and we've made clear we're prepared to take more action if the policy of russia doesn't change. the reality is again working in partnership with our allies is the most effective way to do it. and we're seeing movement there. we're seeing even yesterday that the europeans made additional designations. i think if you look at the individuals designated in russia, they are some of the leading business people closest to the government. igor sechen, ceo of a huge oil business. the ceo of a big industrial complex that includes arms deals.

a ceo of gun vore, the biggest energy trading platform. the regenberg brothers are close personally and support the people in the inner circle. i think they've gotten the message we are serious and we have more actions we can and will take. we need to remain determined and push ahead and work with our allies to do it in a way that is an effective way to change the situation on the ground. >> we appreciate that and look forward to working with you in the future. >> thank you. mr. womak. >> thank you, mr. chairman and thank you, secretary, for your testimony here today. i want to go back for just a moment. i've got a couple of other more brief questions. as has already been mentioned, and i associate my remarks with that of the chairman and others who indicated that our collective effort to detect and

deter offshore tax evasion is a goal that we all share. i know that some treasury officials have insisted that the july 1st fatca withholding deadline should remain in place. can you explain for the panel and our constituents what the risks are to u.s. financial institutions and the u.s. economy if large numbers of banks are required to withhold the 30% tax on routine cross border transactions? >> i'm not sure which risks you're -- the risk of not having the reporting is that transactions go undetected and tax avoidance and evasion goes ahead. >> more to the concept of the regulatory requirements. let's just go in that direction. >> this is a new regulatory

approach. the facta law put in place the authorities being implemented. we have been cognizant of the fact that it is going to require new reporting procedures to be put into place. we are cognizant of the fact it requires cooperation with banks and governments overseas, and we extended the deadline in order to facilitate a smooth, effective transition. i think at whatever point it goes into effect, there's going to be a new set of requirements, but i think they're appropriate requirements because if we don't have that reporting, we can't see where the tax avoidance is taking place. the bipartisan effort to make sure we can see what's going on so that we can stop illegal tax avoidance is the purpose of it. i wish it could be done without any burden at all. obviously, any reporting program

has some, creates some extra work. we've tried to keep it simple. we tried to extend the timeline to do it in a way that makes it as unburdensome as possible to meet the higher requirement. >> this year, what will be the estimated deficit, budget deficit in this country? >> the current estimate, i was not looking at budget numbers before i came up here. >> round numbers. >> i'll give you a single number. it's around 600. it's been coming down. the reason i'm hesitating, each time it's estimated, we thought it would come down 30 or 40, now 70. it's coming down more rapidly. >> $600 billion. we are going to throw that on top of an already nearly $17.5 trillion public debt. do you agree that this -- because when i go home and i've

got the debt clock on my website as a lot of my colleagues do. people are concerned about this public debt. when i make my presentations in large group, i try to explain i'm an appropriator as much to the credit of the people on this diaz today and mr. rogers, we live done a very credible job in trimming discretionary spending. as our overall chairman said in his remarks, we still have mandatory spending that has not been addressed. and honestly, i'm not seeing the leadership there. i guess my question, mr. secretary, is do you agree that this debt under the interest rate structure we have today is a major national concern, and that the sands in the hour glass are running on us? >> congressman, i spent much of

the last 30 years working on trying to have a responsible fiscal policy, so i certainly agree thought is a critically important issue. we made more progress reducing the deficit at a faster speed than since world war ii and demobilization after world war ii. we had an enormous coming together of drivers that drove the deficit up. first we had policies that created policy gaps in the early 2000s. then the worst recession since the great depression. we are now seeing a recovery from that. i agree mostly or very substantially it's been discretionary spending reduction. there were tax increases since the beginning of last year. we've seen entitlement savings. we have proposals for medicare savings. we have looked forward to working on a bipartisan basis for many years to reach agreements there. i think we are on a path where the deficit will be below 3% of gdp.

we're in a place where we have a little bit of time to deal with it. i have always believed that you shouldn't wait until your time runs out. i'm not going to say let's wait ten years to have the conversation, but we are in a much better place than just a few years ago. >> my time is up. i yield back. >> thank you. >> thank you. mr. chairman, i would like to request at some point with the secretary's willingness special briefing of our committee, subcommittee on the sanctions relative to ukraine and contrary implications. i don't know if the chair would be open to that or not. i think it's terribly important. i want to make the formal request. secretary lew, thank you so much, particularly someone's career has spanned helping to restore the solvensy of social security in 1983 up to the balanced budgets of the clinton administration. president obama has put the right american in charge. we welcome you before our committee today. i wanted to focus in two areas

in this round. first of all, in the housing sector where our secondary market is in a bit of a jam at this point. we know that wall street's terrible mortgage securitization record created the largest transfer of capital from main street to wall street in our history. african-americans lost all their accumulated equity since world war ii. hispanic americans similarly, working class people across this country. i represent communities terribly impacted by the securitization meltdown. my question is, what is treasury doing to perhaps working with the justice department to recoup some of those assets for these hard-working americans in communities that have been so devastated?

and have you considered, in addition to bringing back -- by the way, those banks are doing very well, the major ones that were a part of this. everybody seems to be fine up there. but have you considered, in addition to rec pens from those institutions back to the street to the people at treasury, have you considered working to develop new mechanisms such as efforts county land banks to better handle adjustment in the housing sector in these communities? does treasury have a mechanism, a, to bring the big banks to the table, and b, to get more recompense and get local

governments trying so hard to prevent further abandonment and adjust at the lower level. >> we don't directly have a role in that. there have been some settlements that have put money back into some of the programs, mostly in the department of housing and urban development. we have a series of programs where we have been actively engaged with local communities and homeowners to help homeowners refinance their mortgages, to help them modify their mortgages. we tried to be creative in using programs like the hardest hit fund to help the community as well as individual homeowners. i was just in detroit last week and saw the first demolitions done using hardest hit funds because if you have a blighted house on a block that's struggling to stay above water, you need to have the house

that's dilapidated and drawing down everyone's values dealt with. so we are trying in every way we can with homeowner assistance and community assistance to be engaged in this. we've seen millions of refinancings and modifications. there's obviously a lot more work to do. we have a number of other programs like the ssbci where we are not dealing with the housing piece but dealing with the economic development piece of it to create jobs in those communities. i think we had great success in that effort. >> i will have some follow-up for the record it. wanted to shift to ukraine for a second. just so the secretary of treasury knows this. the agricultural sector of ukraine can pay all the bills as time goes on. i don't find in what we are doing yet as a country we actually are thinking about that power. i can guarantee you under the

corrupt yanukovich administration, ordinary farmers were being charged 19% interest rate, but the friends of the deposed president yanukovich were being charged 4%. i hope in the financing schemes that the ifm and others are thinking about, that the identification of grassroots farmers in that country, not associated with the past regime, that somebody pays attention to those and competitive interest rates are offered to those farmers because that sector can ultimately pay the bills. finally for the record, because you get in meetings i don't get into, women of that country are feeding that country. in little villages, nobody sees them. we need a humanitarian effort, in my opinion, that brings in good seed, shovels, basic equipment, and i'm talking about humble things like buckets of care does around the world to help these women feed that 75% of the food is raised in those

small towns and those small villages. nobody sees those women, but all you have to do is look at the satellite over the weekend. you see all the people drive out of kiev, go get food and come back into the city because prices have gone up. i want to put that on the record. perhaps you can be a voice in the meetings that are occurring to support agriculture among those who want reform and those holding that country together as we weather this crisis. thank you for listening. thank you, mr. chairman. >> thank you. mr. graves. >> thank you, mr. chairman. mr. secretary, good to see you. wish you well on your continued recovery. i want to ask your thoughts on a recent proposal that was on the white house blog and will read a little about it. it was authored by carolyn atkinson for international economics. it described in her proposal as requiring that all companies formed in any state to obtain a

federal tax employee identification number requiring the internal revenue service to collect information on the beneficial owner of any legal entity organized in any state. for the irs to allow law enforcement to access this information without following the safeguards in current law that generally require and showing a reasonable cause. to believe a criminal act was committed before the irs shares taxpayer information under section 6103 of the code. in light of and the still unresolved question and scandals involving the irs targets prpro poen opponents of the administration, they are still as relevant after watergate when implemented. it's incumbent on the government to scrutinize irs data about citizens and protection designed to safe guard it, even when the

administration asserts the national security requires eliminating these safe guards. so i guess knowing that proposal has been issued as part of the president's '15 budget and described a few weeks ago on the white house blog, would this proposal by the president do away with requirement that ral, agencies establish reasonable cause to believe a crime was committed before sharing confidential taxpayer return information? >> congressman, the protections of 6103 are extremely important. we spend a lot of effort to make sure that we honor 6103 in everything we do. it has to do with the basic trust the american people have in their system. that's something that is our obligation to maintain. the issue of beneficial ownership is a very complicated one. it's a complicated one internationally because there is a huge demand internationally to

seek more transparency to beneficial ownership because it is considered to be one of the things driving base erosion and tax avoidance internationally. we have taken the view we have to protect vide information and act in a way consistent with the individual protections that are provided in 6103. i have on a number of occasions in international meetings said we would not make beneficial ownership broadly public, but we would only do it through proper channels, law enforcement agency and tax an enforcement agency to one another. i'm happy to look at the blog post and answer any detailed question you have about it, but that's our general policy. >> so if 6103 is in place and there's currently a process that requires reasonable cause, i guess my question would be why then propose a new concept that -- does it improve on

protections for u.s. citizens or is it removing protections for u.s. citizens? >> i'm happy to take a look at that blog post and respond in more detail to you. >> okay. i guess just for clarity, do you think it's the administration's expectation that congress will curtail the protections in the current law as it relates to 6103 and as we look ahead and we're going through the process of some of the other questions dealing with 501-cs and such? >> i think that the protection of individual privacy and information and making sure our system is a fair one and transparent where it should be transparent but not transparent on personal matters where it shouldn't be is one of our very highest obligations. i'm not aware of any effort for us to change that. i'm happy to look at this particular matter.

>> okay. i would hope that the administration would not be proposing any kind of concept that would allow the internal revenue service to share freely information to other agencies without reasonable cause. that's what i'll be looking forward to your response on. >> thank you. >> thank you very much, mr. chairman. mr. secretary, good to see you, sir. a few issues. i wasn't going to bring this up but chairman rogers brought it up and i think it got me thinking, obviously. it's your responsibility to enforce federal law. my understanding is it hasn't changed that marijuana is illegal under federal law. yet i understand now your department is doing these guidelines or guidance, giving guidance to banks as to how to deal with something that is illegal under federal law. are those guidelines going to at

least have a very clear statement that marijuana is illegal under federal law? >> our guidelines in no way change federal law. the department of justice -- >> is there going to be -- my question is this, sir. i apologize. in those guidelines, is there a statement stating that, hey, folks, this is illegal under federal law? which is the federal law, correct? >> we are in no way telling people things illegal under federal law are legal. the exact language i have to go back and look. >> it would be interesting to note in fact since your responsibility is to enforce federal law and you're giving guidelines on something that is against, is illegal according to federal law that at least there should be an indication that it is illegal under federal law which is what your obligation is. >> to be clear, the department of justice guidelines make clear

what their prosecutorial priorities are. it does not say things that are illegal are legal. i don't think any of the activities confuse the question of federal and state law. our concern is that in a very complicated situation where states have made certain activities legal, where there will be transactions, to have those be cash transactions rather than banked transactions creates more risk of illegal behavior than we need to see. we tried to put out guidelines to be clarity for banks to be able to provide transparency into these transactions. >> i understand. i think if somebody receiving, a banker receives guidelines on how to deal with certain entities from the federal government, i think that in itself will make it very unclear whether it is something that is illegal under federal law. i think making that very clear would be something that would be helpful. >> i actually think they very

much understand they are in an area where they're at risk. and they're filing suspicious activity reports. a lot of banks are not taking these accounts. i don't think there is any ambiguity in the banking world that they have to work a very narrow line. >> you do believe they are at risk if they do so. >> they are filing suspicious activity reports for behavior that warrants suspicious activity reports. >> mr. secretary, let me bring you to a couple of points brought up and one not brought up. last week, mexico i heard was considering filing an amicus brief with the u.s. supreme court taking the side of argentina. we had the secretary of state, i asked him whether the department of state would intervene even if asked, he said absolutely not. now we know by press reports that last july, junior officials in your department urged imf to file a similar brief before they were overruled by the senior

department officials. the u.s. then obviously withdrew such support. again, that would have been an unprecedented move by the imf. can you tell us with respect to this mexican brief, has any official in your department encouraged mexico, expressed approval to mexico, contacted mexico at any point in the last year regarding them filing that brief? >> congressman, be clear we did file in the lower court proceedings a brief. i am not going to defend argentina's behavior in any general way but this narrow issue of banking, of law, we do think that the rights of creditors warrants attention an we filed a brief. there is a general policy in the executive branch to only file

amicus brief. we didn't feel amicus brief. >> i had conversations with my counterparts. i told them exactly what i told you, which makes it clear what we think the right legal outcome would be. i think the conversations with the imf last year kind of reflected them just conforming to the fact we weren't filing a brief, they didn't file a brief. >> mr. secretary, my question is separate. my question is have folks in your department as far as you know, have any contact or have contact with mexico asking or encouraging them to do that. >> i said i had conversations with my counterparts. >> in mexico. >> yes. >> so you have had those. >> no. i just told you they asked us our views. i told them what i told you. >> i think i'm out of time, mr. chairman. thank you, sir. >> thank you. mr. yoder.

>> thank you. mr. secretary, welcome back to the committee. i have a couple of different areas i would like to ask you about this morning. first of all is the designation that the fsoc is going forward with and i'm concerned they are not taking a deliberate and thorough process reviewing the asset management industry for potential sifi designations. the only public report was criticized for failing to demonstrate a complete understanding of the asset management business and differentiate it from banks and other financial institutions. it does not define what risks it is concerned about with asset managers or confirm specific methods and thresh holds used to evaluate asset managers. fsoc said it would hold a round table may 19th. last week "wall street journal" reported two asset managers have been moved to stage two of the sifi designation process. can you explain why the fsoc is

advancing asset managers when they are gathering information and what can be done to ensure proper decisions are made here and all voices are heard to make sure we don't make problems worse through improper designations? >> congressman, i think if you look at this issue, it is one of many issues that fsoc will be considering. it was created to look not in the rear view mirror but forward. what are the potential risks to financial stability? ofr was asked to do some analysis here. it was not a regulatory action. it was a piece of analysis. i won't discuss any specific conversations regarding any one entity. i'm just speaking to the review of the sector. there is no one on fsoc who knows the outcome of this process because we are still in the fact-finding stages. there is going to be a public session where there will be views presented and some will

disagree with the ofr study, i'm sure. some will support it. our challenge is to make sure we ask hard questions and we are not afraid to ask questions when we don't know whether the answer is yes or no. that's the only way we are going to be able to detect the threats of the future. i think this is an area where it warrants attention. it is way premature for anyone to be speculating on what the outcome is. i can tell you as chairman of fsoc, i don't know the outcome and i shouldn't know the outcome until we are fully informed. >> appreciate that. returning to the national deficit for a minute, my colleague mr. womak asked pertinent questions. anyone who pats himself on the back for a $6 million deficit knows that is not an achievement that is going to create the fiscal responsibility this country needs to get back to.

we now have revenue coming in over our 40-year average into this government. i believe we have more revenue coming in dollarwise than any time in american history. we are running the sixth largest deficit in history only because the last five were the five largest, were larger, all within this current administration. cbo projects another $1.5 trillion in debt the next ten years. i can't find anyone in my district that want to see us borrow another $6 trillion to $7 trillion. we have president's budget increasing spending beyond that, ai attempting to increases deficits greater and deficits going up attributed to health care costs, affordable health care act, debt and interest, payments. many of our colleagues are tired of sending more money to washington, d.c. they are tired of the constant request of additional taxes that

washington can't live within its means. there is $3 trillion in new taxes because of tax increases that occurred in the last couple of years. my question is will the administration, i know we talked about the short term, congratulations that the administration feels $600 billion is an achievement in a deficit. that's short term. long term will the administration get serious about our long-term debt challenges or does it intend to leave this for the next administration? if so, what are the specific ideas that the administration is going to put forward? >> congressman, i think that you have to look at where we started. we made enormous progress. i have not said that i'm happy that there is a $600 billion deficit. i'm happy we reduced the deficit and on a path towards keeping it coming down so it will shrink as a percentage of gdp. affordable care on net is reducing the deficit not increasing it. the thing that is driving

entitlements up, baby booms are retiring and claiming social security and medicare they are entitled to. these are challenging areas. unless somebody wants to say they are going to do something other than pay social security and medicare, the solutions are very hard. we tried over a number of years to work on a bipartisan budget agreement. the president put his every beth effort into it we are with not able to get an agreement on a bipartisan basis. not the with standing that, we made enormous progress. incrementally doing it on discretionary spending, doing it with the tax bill the beginning of last year. i think that right now, the most urgent thing facing americans is what can we do to promote more growth and more job creation in this economy? what do we do to get construction and housing moving again? i think we have a little bit of time, not decades, but it's not today's crisis to deal with the deficit. i think today for most middle class families, what they want

to know is what are we doing to grow the economy? the things we've been talking about in terms of helping small businesses and helping to make job creation more robust is frankly what we should be paying our current attention to. >> thank you, mr. secretary. thank you, mr. chair. >> thank you. mrs. butler. >> thank you. i have a couple of questions. the first one has to do with debt collection. "the washington post" reported on a couple of weeks ago that the government was seizing state and federal tax refunds that are, i think they were on their way to about 400,000 americans who have relatives who owe money to social security and refunds intercepted never heard of the debt and the debts were as far back as the mid century. it was the farm bill in 2008

that set up the authority to go get back taxes, but i wanted to ask, in my understanding of it, i don't see anywhere where we have given you the authority to offset payments from an individual to pay debts that are not in his or her name. where did you get that authority? >> so the issue here, treasury's role is really as an agent of other federal agencies. the 2008 form bill did create an authority here. social security administration certified valid claims. treasury executes on those claims. it doesn't create them. the social security administration has said they're changing their policy, so this is not going to be happening going forward. i think the concerns raised are frankly concerns that i share in terms of how some of these issues developed. >> so those folks who had, you

now, assets seized on behalf of a debt that his or her father had before they perhaps even perished when they war a kid, is that money going to be returned then or how do you move forward with that? >> i'm not aware of how social security is handling retro actively. i'm happy to look up on that and get back to you. >> i find it concerning with your direction or under your permission a federal agent would see fit to read what is beyond the law saying you can go back appropriately when people owe money to get it, but take it a step beyond and say we'll get it from your kids and grandkids without them having been permission in the law. >> just to be clear, the

specific collection item is not something the treasury exercised judgment over or would exercise judgment over. i'm not the right person to answer some of the questions how the climb was determined. once a claim is certified by a serial agent system. >> you do the collection? >> it triggers a responsibility, yes. it's not an independent action. >> i understand it's not independent, but if you're the one taking the money then there is some shared responsibility for ensuring you're taking it appropriately, no? >> i think we all collectively have the responsibility we do business in a way we are comfortable with. >> and abides by the law. >> different direct lines of responsibility. that's why i'm not the right person to answer some of these questions. >> switching gears.

treasury inspection general announced an investigation from october of 2010 to december 2012. more than 2,800 employees with recent subantated issued received $2.8 billion in bonus awards. more than 1,100 irs employees with substantiated federal compliance problems received more than $1 million in cash awards with more than 10,000 hours in time off. do you believe that poor performance and especially the failure to pay taxes should be rewarded through bonuses to irs employees? >> congresswoman, our position is individuals found to engaged in significant misconduct, including nonpayment of taxes should not be eligible for performance awards during the relevant time period.

the irs already had discussions with the union. this is a collective bargaining agreement this bonus program, about the eligibility standards, poor performance awards, and i understand the union agreed to work with the irs to address this issue. clearly, this has to change. >> any chance you are going to go back and collect that money paid if you believe it shouldn't have been given? >> let's first make the policy going forward, then we can look at questions whether or not there is any retro activity to it. the most important thing is -- these bonuses were for several years ago. the question is what happens with future bonuses and this will govern that. we've already changed the policy for things discretionary bonuses at executive levels that performed with this kind of performance and misconduct are taking into consideration. now will be taken into consideration for all bonuses. >> thank you.

yield back. >> one thought, mr. secretary. someone mentioned the fsoc. i would just leave you with one of the concerns i hear from time to time that there are complex issues that are dealt with fsoc that would would argue, other regulators didn't have the expertise in those areas, so i just want to share that concern that you not reinvent the wheel and duplicate regulatory aspects. that is something we heard from time to time. thank you very much for being here today, working with us to reschedule this hiring, being here under less than ideal