were there to be another crisis we still have the system that we had before, which wasn't -- >> with greater exposure. >> with greater exposure. so i believe reform is very important. i think there's a lot of progress that's been made in the senate working towards a bipartisan approach. i think there has to be a bipartisan solution. the key to a solution is making sure that there is access to finance, making sure that there is a clearly delineated responsibility that's not a government responsibility in terms of losses, particularly first losses. and to the extent there is any remaining government backstop, that if the extraordinary circumstances are well defined. i think a process in the senate didn't make great progress. it's not finished and manitoba that he built can't get to conference so it's a scenario that we can seek bipartisan legislation on. ..

>> it is hard to have a hard view that there's a size that makes you financially significant and creating the risk. the question is, does the combination of your size, your structure, your interconnection to the system and, you know, it's something that requires our ongoing analysis. >> thanks very much. >> time of the gentleman has expired. the chair now recognized the gentleman from wisconsin, mr. duffy. >> thank you, mr. chairman.

welcome, mr. lew. it's nice to see you back at the committee again. just a couple questions on e-mails. how does the treasury back up their e-mails currently? >> the main treasury, i believe, has an autot2 backup, but i'd e to get back to you on the specific details. >> so with all the information about e-mails and backups and irs and treasury, you have no idea how your e-mails are backed up? >> i'll just}ñ that the main treasury is much smaller than the irs, it has different volume, so it's a different kind of an e-mail system. >> how about with the white house? >> it's my assumption that everything is backed up. >> sure, okay. how about the white house? how does the white house -- >> i'm not an i.t. professional, congressman. >> neither am i, but i know how the state of wisconsin backs up our e-mails, i know how the house backs up our e-mails as a congressman. you're the chief of staff, and i'm not an i.t. expert either,

but you can't tell me how they're backed up? >> when i was at omb and the white house, there was auto backup, but there were also periods where machines broke. >> and in regard to that, when you were at the white house, did you have a hard drive crash? >> my personal hard drive? >> yes. >> not that i recall. >> okay. when you were the chief of staff at the white house, did you have meetings or a meeting with any irs employees? >> um, i do not remember. i mean, it's quite a while ago, and there's been a lot since then. i would have to go back and check. >> so you haven't pondered that question with all -- >> i did not -- i certainly -- >> if i could ask the question, then you could respond. >> no, look, i'm happy to go back. there were meetings that involved people from different agencies. >> so answer's yes? >> i don't -- the answer is i don't remember. but i could go back and check, if i could. i mean -- >> i'm sure you can't recall. >> i never had a meeting on any

irs policy matter that i recall. the question -- >> political matters. >> pardon? is. >> political matters? >> not on political matters either. >> did you have an e-mail correspondence with anyone at the irs? >> none that i recall. >> did, when did you first learn about lois lerner's e-mails being lost, her hard drive crashing? those e-mails from 2010 and '11 having gone missing. when did you learn about that first? >> i only learned about it roughly the time the congress did when it was -- >> so you learned about it in the pressgnin. >> what? >> you learned about it in the press? >> no, i learned about it right before the report was made to congress. >> so you were just given, what, a day notice? so the 12th of june you learned about it? >> i don't remember the day, but i believe -- >> a week before? >> no, i believe it was more like the day before. >> okay. so you're the secretary of the treasury. the irs is the biggest bureau in treasury, and you only learn

about this the day before we do. but isn't it true that treasury was notified by the irs that these failures existed, and they were notified in april, and then it was treasury who notified the white house in april that the lois lerner e-mails were gone? but you only learned about this in mid june? >> yeah. the timeline as i understand it is that, you know, lawyers at irs and treasury, you know, discussed the matter, they were notified about it -- >> in april. >> in april. >> and you, and you didn't know anything about this, right? >> and the guidance that was given at that time -- >> but you didn't know anything about this, is that your testimony? >> the guidance that was given, as i understand -- >> so you didn't know about the e-mails, the news about it, the lawyers know, but mr. lew, the

treasury secretary -- >> i'm happy to answer your question if you'd give me a moment. >> if you'd answer the question, i'd appreciate it. when you don't answer the question, it's a problem. >> the lawyers at treasury advised the lawyers at irs, i believe correctly, to make sure -- >> not advise you? >> congressman, i'm happy to answer the question if you give -- >> you're not answering the question. there's a level of frustration not just in this committee, not just throughout congress, but with the american people. the arrogance that the administration has shown, that the irs has shown, that treasury has shown with regard to this investigation is unbelievable. and i'd say why wouldn't you be arrogant? you go, well, listen, we have the presidency, we have the doj, we have the fbi. why not be arrogant? we have the press, no one's going to report on this. we're not going to answer your forthright, we're not going to be honest because who's going to come after us? i've got to the el you, this is a sad disservice the way this

crisis has been handled. i yield back. >> i would have been happy to have answered the question if i'd been given an opportunity. >> i suspect there will be members on this side of the aisle who will be more than happy to accord you more time, mr. secretary. the chair now recognizes the gentlelady from alabama for five minutes. >> mr. secretary, i'll give you more time. you can use some of my time, if you'd like to, but i think it's better served that we talk about the matter at hand, what you're here for, which is your annual report for fsoc. i'd like to turn back to the sifi designation. in your testimony, you highlight that is not the only alternative to address potential risk posed by firms in their activities. what are some of the other policy options fsoc could look at, and how does the fsoc weigh the pros and cons of the different regulatory mechanisms in your tool box? >> congresswoman, the initial inquiry is whether or not there is systemic risk, and if you

don't make the determination of that risk being there, then one option is to do nothing. so there's always the option not to designate. the question then becomes what is the risk, where is the risk, is the risk in a firm, is it in a product, is it in a business line? and depending on the answer to the question, it could lead to different actions. so i believe there's been a kind of oversum myification of the process -- oversimplification of the process which is if you ask the question, the next step is -- [inaudible] i actually don't think that is the case. there will be many instances where the right answer is there's not a risk, or the right answer is you don't need to designate the firm. regulators have sufficient authority, and there will be some cases where it will be, it will be a product as to -- as opposed to a firm that is the issue. so i new we need to let the

process run -- i think we need to let the process run its course and that means have full analysis, full awareness of the facts and not be in a place where we're afraid to ask the question>ly because the answer might be designation. i mean, i think we have a responsibility if we're going to have a system that prevents financial crises in the future, to ask those kinds of questions and not prejudge the answers. >> i also wanted to know if the fsoc in its examination of an industry or individual firm indicates that a particular activity or business practice may cause systemic risk, are companies given an opportunity to address those concerns? one result of additional notification throughout the designation process could be to encourage companies to reduce their own risk. and so with fsoc, would they consider establishing a process by which a sustain would be given the opportunity to reduce its own risk profile before designation as a sifi? >> well, it's not only a

question of does the company have the ability to modify in some way its business structure before, but fsoc looks at an annual basis to see whether or not the designations continuing is indicated and what the status so companies have the ability afterwards to make changes. you know, i think that as far as the involvement with the company goes, it begin withs in the middle of the process, not at the beginning of the process. we have a lot of information that's available within both the public record and that regulators have and that you don't these to create a situation where by asking a question you trigger a public debate at the first instance of asking a question. if it gets serious, a huge amount of back and forth between the company and the fsoc staff. >> yeah. i'd like, my last question is really about cybersecurity. i sit on the house permanent select committee on intelligence. i think cybersecurity is one of the biggest threats the

disruption of the financial industry along with operational risk that it poses. wanted to know what the fsoc thought about cybersecurity and what with its recommendations -- what its recommendations have been to its firms. >> um, cybersecurity is something that i must say i, as treasury secretary, as chair of fsoc, think about constantly. it is one of the kind of new i believe that we have in the financial services sector made more progress than in some of the other sectors of our economy, but there's still a lot of work to do. >> would you be open to information sharing and reducing the liability so that companies can share? >> yeah. i think information sharing is very important, you know? there's a big difference between what we see and what companies see, and the information needs to flow in both directions. i also think there's a big difference between what large companies have the capacity to do and what smaller businesses

have the capacity to do, and where they're working together either directly or through an intermediary whether it's a utility or a contractor, makes a great deal of sense. we have sought legislation on cybersecurity. the president has issued an executive order that goes as far as he can with his executive authority, but legislation in this area would be very important. i think the industry would be very pleased to see more ability to collaborate. >> thank you, sir. >> time of the gentlelady has expired. the chair now recognizes the gentleman from virginia for five minutes. >> thank you, mr. chairman. and thank you, mr. secretary, for being here and presenting us the fsoc annual report. i do want to ask some questions about that, but i was curious based, just on a follow-up to mr. baucus' questions about the irs issue, you know, it seemed to me your response was, well, in 2011 there was a hard drive crash. that's life, and the irs has really done everything it can

to, to comply with congressional requests. but i guess my question would be -- three of them. one is, i mean, do you think that it's important for the irs or do you think it's important for congress to get answers to its questions, and is it important for congress to be able to see those e-mails whether they, we recover them from irs or some other agency? do you think that's important? >> not only do i think it's important, i think that's what the irs has been trying to do and commissioner koskinen has been working to assemble the e-mails to provide them for review of the lerner -- >> all right. but in your role as secretary of the treasury and, ultimately, the authority over the irs,))r o you believe you have the authority to independently look at what the irs is doing to make sure that this gets done, and what have you done, what are you going to do to make sure that we pull out all the stops to get these e-mails? >> yeah.

i believe that they are working quite hard. the number of hours and man years, person years that have been put into this, the amount of money that is spent is astronomical. they have made an enormous effort. commissioner koskinen has testified at length on it. obviously, it is not a situation that anyone chose to have there have been a machine failure in 2011, but they've worked as hard as they can to reconstruct, and 70,000 e-mails, i believe, were turned over for review. >> i understand. obviously, a very critical time period, and i guess what i would love to hear as a member of congress who has constituents who are very worked up about this, i would love to know that the secretary of treasury is exercising everything within his power to make sure that the irs is doing that, and it doesn't sound as if you've taken any direct role whatsoever, and that concerns me. >> no. when i became aware of this, what i was told was that the message had been sent from

treasury -- i believe appropriately -- find out everything you can, find whatever you can and give a complete report when you have that. that report was completed. i concur with the advice that was given, and if there's any more that can be done, it should be done. but -- >> but you are the doer. i mean, it seems like to me that's a passive -- >> right. no -- what i can't do is make a hard drive that broke not be broken. >> i understand that. >> what they've gone and done, is they've looked at all the recipients of e-mails to pull them out from the recipient e-mail records. you know, they're doing everything they can and an enormous amount of information has been provided. >> okay. thank you. let me just ask my, i've only got two minutes left, but let me just ask you this question. i represent a rural district. a lot of main street small businesses, family farms, working virginia families, and access to capital is very important. community banks and credit unions play a huge role in reaching the people that i represent. in the last 30 years, as i'm

sure you know these figures, d seeing 180 community banks that held 40% of bank assets, 18,000 to now, today, less than, fewer than 7,000 community bank withs. 18,000 to 7,000 and assets amounting from 40% thousand down to 15%. and i guess my question is as a part of the mission of the financial stability oversight council, does -- your role as chair, does that trend concern you, the idea that we are reducing the number of community banks and the assets that are held there? and does that in and of itself, does that in and of itself present its own systemic risk when you have the consolidation of these assets in banks the way we've seen over the last 30 years? does that concern you, and if it does, what do we do about it?

what can you do about it? what is the fsoc doing about it? >> congressman, the different agencies with responsibility for implementing dodd-frank have taken action. each and every one has made efforts to try and treat community banks in a way that reflects the importance that they play in our economy and the fact that they're different from large institutions. there's a lot of discussion about it, there's a lot of attention to it, and i believe the rules reflect that. we have a dynamic and changing landscape in the financial services world. we have the keep an eye on what those changes are. i think the community banks play an important part in it, and as we've acted, tried to reflect that. >> but do you -- does that trend concern you? where do we -- well, i'll yield back. >> gentleman from illinois, mr. foster, is recognized. >> thank you. i'd like if we could to turn our attention to the upcoming july 20th deadline for the talks with iran which, obviously, these can succeed, fail or come is to some -- these talks can come to,

you know, they can succeed, fail or come to some intermediate result. and what sort of contingency plans are you looking at for the financial part of the sanctions which may have to be strengthened or weakened or held in place? and secondly, what is the role do you envision for congress in the overseeing and concurring in any changes to the financial any chanhat may result as al result of these negotiations? >> congressman, we have kept in place the architecture of our iran sanctions even during the period of negotiations. so the joint plan of action had very narrowly defined, nominated, one-time relief, and the rest of the sanctions stay in effect. so since we began the negotiations under the joint plan of action, we've taken over 60 enforcement actions on the underlying sanctions. so we don't have to do anything to put it into place. it remains in place. the question really is what

happens if the talks fail, do we then go for tougher sanctions? we've made it clear that if the talks fail, there would be, i believe, the need to take tougher action on sanctions -- >> my question, do you have contingency planning for the possibility of tougher sanctions, possibility of effectively monitoring relaxed sanctions if there's a, if there's -- >> well, if -- in a world where there is an agreement, that's obviously a very different situation, and i'm not going to prejudge what the sanction regime would be after that. we have multiple sanction regimes with iran, and i can tell you that we will be vigilant about implementing all zapses that re-- all sanctions that remain in effect after agreement. if there's an agreement, obviously, there will be some change. but we're not announcing in advance what that is. frankly, we're not at the point yet where we're ready to say that we've seen a basis for making the decision to do that. we're going to have to see iran

making the kinds of concessions that it has to make which means not having nuclear weapons. >> okay. let's see. in your report in the section on data gaps and data quality which were some of your systemic concerns, you mentioned that, let's see, they are still unable to effectively monitor securities lending transactions and reinvestment of the cash collateral. so what is the nature of that situation? what action is needed? how worried should we be about that? >> look, i think that there are, there is both an increasing concentration of activity in certain places because we now, for example, in!h commodities he a registration that's transparent what's happening. that puts more transactions in one place. we also have the challenge of communicating amongst systems which are different systems. the reason it was highlighted as a risk there is we do have more work to do on that. it is both a technical

challenge, but it's also a question, ultimately, of, you know, the stability of the system. so i think that the observations in the report reflect the fact that we're going to keep working on it. >> well, do you feel like you have enough, all the legislative authority you need in that specific area, or is this something where congress might -- it's my recollection that during the crisis something like 40% of aig's losses were from -- >> right. >> so this is not a trivial thing. and, you know, despite what was said earlier in this hearing. >> we obviously have a lot more tools now. we have a whole set of rules particularly in the derivatives area that weren't there before. so we've madexd a lot of progre. i actually don't know the answer to the question of whether we have all the authority we need, and i would like to follow up as we learn more. >> okay. all right. well, i will do everyone a favor and yield back early. >> i'm sorry? >> yield back.

>> gentleman from illinois yields back the balance of his time. the gentleman from north carolina is recognized for five minutes. >> thank you, mr. chairman. mr. lew, thank you so much for being here today. i am always impressed by your presentations. you're a very eloquent man, even when we don't hear what we'd like to hear. [laughter] but you have an amazing pedigree; harvard undergrad, georgetown university, worked for the speaker of the house, tip o'neill, bill clinton in the white house. you're one of the most powerful people in the world today. my background's a little bit different. i group in central texas. i went to the university of texas, a fine university. i can't tell you i was one of the better students. i was not. my daddy told me, he said, son, if you want to be smart, you need to hang around a lot of smart people. company, and one thing i did was hire a lot of smart people. we had half a dozen attorney groups who worked with us around the country.

i'm no longer part of this company. we hired securities attorneys, we hired real estate attorneys, we hired market analysis people, hired an economist. we kept for 25 years. resulting from their good work and counsel, kept us out of a lot of trouble. i can say after 25 years and a couple thousand investors and maybe 60 or 70 partnership, we never had a failed one. that's the grace of god, but really a lot of good, smart people telling this old boy from central texas what he ought to be doing. you know, today we're looking at the operations of fsoc and what it's doing and its designations, and that's important to a lot of people. it's going to affect a lot of companies and the impact of this country. a lot of families will be affected. yet when i read some of the -- [inaudible] from some of the individuals that would be associated with fsoc and aware of it, i find

that they take a different position than the position that you have. look at doug elliot with brookings, an institution that you've been a part of yourself, who says that hiding prudential standards -- heightened prudential standards would cause broad economic harm because insurers are one of the largest providers of long-term investment funds, limiting the ability of insureers to make long-term investments would be unfortunate since many commentators have pointed out that the need to increase the supply of such funds, especially with regard to massive investigationments in u.s. infrastructure that are needed in the years ahead. look at roy woodall, fsoc member appointed by the president. his comment was that he felt that the fsoc's analysis relied on scenarios antithetical to fundamental and seasoned understanding of the business of insurance. and the insurance regulatory environment. barney frank, former chairman of this committee, stated that it

was not be his intent that asset managers be designated for heightened prudential stt(áqj or supervision by the federal reserve board because they're not, they do not pose a systemic risk. mr. lew, my point is that, you know, many of us believe that these designations undermine the market discipline, they allow some companies to be favored, to believe that they are protected from further losses. we, some of us see that there are structural flaws at fsoc that allow this to be, to continue. i think the thing that is troubling to me is that you're a bright guy. you're nobody's fool. you didn't get to where you are by just sloughing through. but you've got some capable people who understand the business like the folks who understand my business. you don't appear to be listening

to them. and i would hate to think that years ahead you'll look back and say, you know, maybe i should have listened to those people a little bit more. and the concern that i have and, frankly, a lot of my constituents have is the folks in washington think that they have superior knowledge, they're smarter than everybody else. they've got it all figured out. and i would just commend to you that there's safety in good counsel of wise people who understand the business of -- like mr. woodall. he understands this business. so that's really my comment, and you've got 30 seconds left, and you are welcome to say whatever you like. >> congressman, first, i appreciate the kind personal remarks. the process we go bo through in fsoc -- we go through in fsoc is one of a level of great detail and great rigor, and all the members of the council have views that are worthy of being

heard and considered. there isn't always a unanimous view. i believe the record that was built justified the action taken in the cases where designations were made, but i don't believe that always will. and i just would point out that particularly in the asset management area, no decision to designate has been made yet s so it's premature to know the outcome there.  time has expired. >> thank you. >> gentleman from michigan is recognized for five minutes. >> thank you. and welcome, secretary, it's always good to have you here. >> always a pleasure to be here. >> i just want to say how much i appreciate your participation and candor, but also your demeanor in this hearing. and i concur in mr. pittinger's commentary. while i might not agree with his conclusions, i concur with his commentary and applaud his demeanor as well. i wish that were more the norm, but your patience and politeness is noted, at least by some of us here. i do agree you don't necessarily get smarter when you come to washington. i also have concluded that there's a certain amount of

evidence that the trend is in the other direction. but i'll, i will say to you i appreciate that i'm not speaking of you, i'm talking about some of us on the other side of the dais. i appreciate your politeness. i want to talk to you quickly about two things. one has to do with the department of treasury's t.a.r.p. program. as you're aware, t.a.r.p. includes a program called the hardest hit fund. mr. scott mentioned it. it's intended to assist those communities and homeowners in communities that have been most negatively affected by the financial crisis. some communities have had a much more difficult time coming out of that crisis largely because many of the communities that were hit by the crisis had already been hit by a long-term crisis in housing; depressed values, abandonment, etc. is -- so last fall myself and my staff worked with your team at

treasury. it was specifically former assistant secretary tim mossad, and we were able to secure $100 million to be reallocated from the principal uses of the hard hit demolition. what i'd like you to consider is whether there has been any consideration or discussion within treasury to extend the use, the available uses, eligible uses of hardest hit that could be used for demolition beyond just residential properties, but to look at specific commercial properties in residentialg communities that have negative externalities and are depressing the value of property? i say that because before i came to congress i was involved in doing a lot of work and research and activity in this area, and we were able to conduct a number of studies that measured the impact of demolition on surrounding property values.

in flint, michigan, my hometown, for example, we took a few million dollars, were able to demolish several hundred homes and saw surrounding property values have a positive impact. in fact, just several million dollars unlocked the value of local properties to the tune of about $112 million. changing that value equation, obviously, is one of the factors that mitigates future abandon withment resulting in foreclosure. is that something that you might consider at treasury? >> congressman, the decision on using the hardest hit fund for housing demolition was one of the first issues that i made a decision on -- >> you made a good decision, i appreciate it. >> and i believe the analysis was, you know, very solid that if your goal is to keep houses from going underwater or get them from being underwater to being above water, having abandoned properties on the block was something that had a material impact. and since the purpose of those funds is to help homeowners get

out from underwater, the relationship was quite direct. i haven't looked at the question of commercial property. i would be happy to look at it. but it would have to meet a test that is permissible under the t.a.r.p. program. and i will just add, i had the pleasure of being in michigan the day that the demolition began -- >> right. >> -- in the mary grove neighborhood in detroit. >> right. >> and you go block to block in that neighborhood, and you see where abandoned houses have been allowed to sit for a year and where they've been demolished, it has everything to do with stopping the decline and helping the rebirth of a neighborhood. and i think we made the right decision, and i was very pleased to be able to join the mayor there. >> well, i very much appreciate it. it's definitely a direction that makes sense. the application of the funds to commercial properties within neighborhoods, think, will have as dramatic if not a more dramatic effect. so i'll be communicating with you on that in the coming weeks, and rather than ask a question, i just want to reiterate on aó

completely different subject my support for the work that treasury continues to do in implementing sanctions regarding iran. as you may be aware, i have a constituent who continues to be held in an iranian prison, and it has certainly made it difficult. sanctions are what have brought the iranian government to the negotiating table. i can't prejudge what will happen in the p5+1 or with july 20 soon approaching, but we know we wouldn't be in a position to even have the possibility of an agreement without that sanctions -- without those sanctions. i appreciate your work. >> the chair now recognizes the gentleman from pennsylvania for five minutes. >> thank you, mr. chairman. thank you, mr. secretary. good afternoon. now that we've passed the noon hour. just a few days after you testified before this committee in may, douglas holtz eke p, the former director of the congressional budget office, released a study in which he estimated that if the fsoc designates asset managers as

sifis, investors could see their returns reduced by as much as 25% over the long term. as he puts it, designating asset managers could cost each investor more than $100,000. and while the asset management study considers far fetched and remote, hypothetical situations, it never considers the cost imposed on investors and on the economy if the fsoc designates asset managers. nor does it consider whether the benefits of designation outweigh those costs. shouldn't the fsoc's sifi designation process consider the costs of designation as well as benefits? >> congressman, i just want to underscore that no decision has been made on whether to designate the asset managers or not. so the ofr study was one piece of analysis as part of a process. >> and should they consider costs of designating? >> the designation process is one that is aimed at determining whether or not there is systemic risk.

it is not a -- >> so there's no consideration for the -- >> the statute creates a standard that we use which is whether or not there is that level of risk that warrants a decision. obviously, aswc regulators if ty take responsibility for an area, they then weigh different approaches in terms of how to regulate, and then it's a different issue. but the statute does not actually create a cost benefit standard. i can't speak to the analysis that you're describing. i've, obviously, am aware of it, i've seen it. but it make assumptions about actions that have not been taken yet, so i think it's premature for anyone to draw a conclusion. >> if we could take a look at the ofr, the office of financial research's september 2013 report. ofr argues that mutual funds with a floating net asset value are risky because they could create a run on redemptions during a time of stress. then when i look back to fsoc's

attempts to subvert the sec's jurisdiction over money markets in 2012, fsoc promoted a diversion. shouldn't regulating the industry be left to the sec who has the needed expertisesome is. >> well, the sec, as i mentioned earlier, is in the process of considering a rulemaking with regard to money market funds, and i certainly hope that they reach a conclusion that's one that provides the kind of oversight of -- >> should that be within the discretion of the sec and not the fsoc? >> well, the fsoc reached a conclusion with the sec being very much a part of the process that this was an important area to address. the fsoc made recommendations, now the sec has a rulemaking. and i'll also add that in the process of going through the asset manager review, the sec is fully a part of that process. they review drafts of the ofr

study, they are part of the decision that fsoc will make because the chair is a voting member of fsoc and the staff work on all the preparation to it. >> i'd like to ask a question about getting back to too big to fail and whether it's been ended. you know, the president and this administration has a sad history of overselling its policy objectives and initiatives. the oversold clash 800 billion -- they oversold an $800 billion stimulus saying unemployment wouldn't go above 8%. they oversold the affordable they oversolith the famous if yu like your health care plan, you can keep it. they shockingly oversold -- i would say misled -- about the impact of a video in benghazi. they oversold the ability to reset relations with russia. they oversold the record retrieval capacity of the irs with the e-mail scandal. they oversold their ability to manage the va. they discover sold the demise of al-qaeda. now, as recently as july 2013

you stated as law dodd-frank ended the notion that any firm is too big to fail. and you also said the taxpayer will not bear the cost of that failure. now, secretary geithner -- or today, you said, you seemed to backtrack on that when the chairman asked you if too big to fail has been ended. you testified we won't know until the next crisis. but that's not how dodd-frank was sold to the american people. secretary geithner now say that, of course -- now says that, of course, too big to fail still exists. would you agree that the administration oversold the premises of dodd-frank? >> mr. chairman, can i have a few seconds to answer? >> brief answer, mr. secretary. >> congressman, i tried to address that issue at some length earlier, but i believe we have taken enormous steps to make our financial system more safe and more sound and to make it so that if a bank fails, a financial institution fails, they will bear that risk themselves.

that's what the capital is going to help do, that's what the resolution rules will help do. what i said in response to the earlier question is a matter of fact. the true proof comes at the time of the next financial crisis. i believe we've taken very dramatic steps and made very dramatic progress. >> time of the gentleman has expired. the chair now recognizes the gentleman from washington, mr. heck. >> thank you, mr. chairman. thank you, mr. secretary. thank you so much for your presence here today. e extension of the ebbs port-import back, the secretary of treasury in your department was directed to enter and pursue negotiations with other major exporting companies. with an objective of substantially reducing and with the goal of eliminating a role of export credit authority subsidies of goods sold.%r i am curious as to whether or not as a result of that process or think of your other

conversations with finance leaders there other countries has there ever been an indication to you of a willingness on the part of those other countries to, quote, substantially reduce, end quote, their export credit authority? >> congressman, there actually is a working group on export credit subsidies that met at treasury two weeks ago, and there were 15 countries represented at that. i have raised, the issue has come up in my conversations from time to time with other finance ministers, and i've made the same point to them that we have made in public which is that there has to be a level playing field be, it cannot be a question of the united states unilaterally withdrawing from these kinds of programs while other countries stay in because that would put our firms at a disadvantage. so i think the working group is a good thing and a level playing field is the goal. >> have any of those cups indicated a willingness -- countries indicated a willingness to do away with

their credit export authorities? >> i'm not sure it's gone that far yet, but that's, obviously, one end point that would leave a very level playing field. but it can't be that the united states steps back while everybody else is subsidizing their exports. >> as you're aware, china is -- as we sit and speak -- developing a commercial aircraft for sale, the c-919. it is my impression that it is being substantially subsidized by china in it development. would that be your impression as well? >> i do understand that there is a chinese aircraft industry, and i don't know the exact structure of it, but they do have many state-sponsored enterprises. >> and they also have a state-sponsored enterprise to develop small aircraft which are being sold with the assistance of china's export credit authority already. what would your opinion then, mr. secretary, be as to whether or not china with -- in absolute

dollars and ask as a percentage of gdp about the largest export authority on the face of the planet -- what is your opinion about whether or not the chinese wdpq,port credit authority would engage in financing of the sale of their c-919s once they're developed? i realize that there's no memo been issued by them, but you're a worldly guy with a strong, firm grasp of how the economy works. would you fully expect china to provide export credit authority for the sale of their commercial aircraft? >> identify seen, i think we've seen in the commercial aircraft i have worldwide -- aircraft industry worldwide that there is a willingness of governments to provide export support. i have no reason to believe that china would choose not to do that. i don't know of the specific intention. i do think that thes a case where -- the it is a case where we either all have to agree to not do it, or the united states

has to maintain the export-import bank kinds of support so that our industries can compete on a fair basis with other manufacturers who have access to export support programs. there's not a place that's for the middle ground where we withdraw and others don't. >> i don't want to put words in your mouth, to be sure. so let me do a little reflective listening. here's what i think i heard you say. if our future is that airbus is provided export credit authority for purchases of financing sales and the chinese may at some point in the future c-919 aircraft is provided with chinese export credit authority financing assistance and airplanes made in the united states of america are not provided with export credit authority financing, that would put us at a material disadvantage to compete in the global market. in yeah. i think that's correct, and i also think that our administration supported the

export-import bank has been clear. we think it's an important aspect of how not just our aircraft industry, but many large and small u.s. firms can play on a level playing field in a world where other exporters have access to credits. we can discuss a world where there were no such credits, but in a world where others engage in that, we can't unilaterally disarm. >> thank you very much. >> time of the gentleman has ebbs pyred. the chair now recognized the gentleman from new mexico,r.p mr. pearce, for five minutes. >> thank you, mr. chairman. and thank you, mr. secretary, for being here today. mr. secretary, you had written in your comments on page 2 that we learned from the financial crisis, that is of 2008, that regulators should have asked more, not fewer questions about the institutions and the activities they oversaw. so why do you think that we weren't asking enough questions

going into this 2008 time period? >> you know, i can't go back and tell you exactly why different institutions and individuals behaved the way they did, but i think we saw the results, that there was, you know, a financial -- >> no, i mean -- >> -- crisis that took everyone by surprise. >> i think it wasn't the institutions themselves, it's that regulators should have asked more. why were the regulators not asking more questions? >> well, there were, there was no regulator that had broad responsibility for looking across the financial horizon and asking about financial stability. regulators each had their siloed areas of regulatory authority, and in their areas they asked questions the way they had in the past. >> there hadn't been anything in the past that had caused people to say, hey, we need to start asking more questions? we ought to work back and forth across these silos?

nothing had come up about thatsome. >> in retrospect, there were people saying there were questions that needed to be asked, but the system didn't respond. >> wouldn't you say -- when you say the system didn't respond, what does that mean? >> well, i think, you know, in the '90s there was a debate about derivatives in, in the early 2000s there was a runup in the housing market and development of a highly leveraged -- >> system was not surprising, in other words, what system was not responding? >> i mean, depending on the issue, different regulators. you had lax positions in some of the regulators -- >> was anyone calling attention to that? >> was anyone calling attention -- >> yeah, sure. any;pmt in your field of interest, your sphere of interest -- >> look, i was not in washington at the time, so i don't want to pretend to having been participating. but the buildup in, you know, mortgage credit on riskier and

riskier terms was viewed as -- >> nothing in your experience, nothing in your experience gave you cause where you would elevate the concerns? >> well, look, it was not my set of responsibilities at the time, but -- >> well, if i would take a look back at 1994 to 1997 or '8, you were deputy director of omb, and in 1998 you were made the director. and when i take a look at the web page for omb, it says that it is oversight of agency performance, oversight of all agency performance, measures quality of agency programs, policies and procedures. now, it was exactly during that period that long-term capital did almost exactly the same thing. they almost collapsed the world economy according to the leading articles of the day. and under your watch you had the ability to see that this

extremely dangerous thing was occurring in the markets, and what they were doing was ramping up their assets, or taking their asset value down as low as 3%. that's exactly what bear stearnss did ten years later, down to 3%, and it was one of the original partners at long-term capital who was the head of bear stearns. and so we had ten years to assess. the system knew exactly what was going on. you were the one in charge of the omb, you were the one in charge at the white house, and yet you make the statements here that regulators should have asked more, not new or questions. -- not fewer questions. you should have been saying to the regulator, your system's not working. this is a very dangerous thing that went on. and yet now then today we're sitting here, and on page 3 you say as the distance of time since the financial crisis grows, we must not forget the financial and emotion alpine endured by millions of american families who lost their homes, retirement savings or jobs.

it would be nice if that same perspective had been kicked out after long-term capital failurer saying let's not let this go again, but instead, ten years later, the same thing happens again, and i find your statements to be surprising. i yield back, mr. chairman. >> congressman, if i could just respond briefly. >> if i've got time, sure. >> first of all, when i was at omb, the office of management and budget has relatively little insight into independent regulatory agencies, their rules and the actions they make. they're independent regulators. one of the reasons fsoc was created was to have an ability to work across all of the independent regulators and work together. i think fsoc, actually s an important solution to that problem. >> thank you. the warning sign was there. we almost collapsed the world economy. you were the guy in charge of checking the economy. >> time, time of the gentleman has education expired. the chair now recognizes the gentleman from california, mr. sherman, for five minutes. >> thank you.

mr. secretary, last two or three times you've come here i've focused your attention on the worldwide group tear system of tax -- unitary system of taxation. last time you were here you said your assistant secretary for tax policy had reviewed that and was anxious to talk to me about it. he hasn't reviewed it. i would hope that you would commit now that your department would devote some serious high-level time to reviewing what would be a system that would increase our tax revenues by over a trillion dollars over ten years. and is the system that has been used by the 50 states to deal with multijurisdictional income taxes long before globalization occurred and we started, and multijurisdictional income tax meant international rather than multistate. can i, can i get a commitment

that you and your department are going to look at -- >> well, congressman, he has reviewed it. if he hasn't been in touch with you -- >> oh, no. he has been in touch. we talked for a few minutes, but he had not looked at the issue. >> well, that -- my understanding is that there are people in his office that have looked at it. >> they're strained on other things.dbñ um, i've read ayn rand. ex-im bank is not mentioned in any of her books. i dream of a world in which all competition is fair and as uninfluenced by government as possible. do you think you could be successful in getting germany and france and japan to eliminate their analogs to the ex-im bank if we would just eliminate ours first? >> i don't know the answer to that question. obviously, the engagement that's underway is aimed at trying to answer that question.

what i do believe is that it would be wrong for us to unilaterally withdraw from the export-import bank while other countries are providing export subsidies, putting our manufacturers and exporters at a disadvantage. there needs to be a level playing field. >> i -- it's strange because i'm in the foreign affairs committee where sometimes members of our party are accused of being in favor of unilateral disarmament. and then i come here, and it's folks on the other side in favor of -- or at least some -- in favor of unilateral disarmament. >> and i don't disagree with the notion that it would be a good thing if there were no export subsidies. the two positions are not inconsistent. >> right. but wouldn't it -- if we eliminated the ex-im bank, wouldn't our foreign trade oring partners have absolutely no incentive to -- >> i think if we did it on a unilateral basis, yes. if it was part of a negotiation, obviously, very different. >> right. that would be like doing missile control with the soviet union by

eliminating all our missiles and then -- >> not sure i'd want to compare the stakes, but i understand the analogy. >> okay. you've got to define sifis. the tendency is based on the size of their assets. i want to urge you to do instead, to look at the size of their liabilities. what causes a sifi to bring down the entire economy is that people were expecting that they would meet their obligations, and they're unable to do so. for example, if you had a company with a great name but modest assets that went out and incurred a trillion dollars of contingent liabilities by writing a bunch of credit default swaps, that entity would be aaç sifi -- assuming defaultg on a trillion dollars of credit default swaps would bring down the economy, maybe the number would be bigger -- regardless of the size of it assets. as a matter of fact, the smaller its assets, the worse that the situation we're in they're

engaging in more than a trillion dollars of credit default swaps. with that in mind as to mutual funds, they don't have liabilities except if they're leveraged except for one thing, and that is they have the contingent liability that if custodian function is not handled correctly ask you open the safe and there's nothing there, then they have a liability. so i would hope that when you're dealing with an unleveraged mutual fund with extremely strong custodian functions, that you would not be designating that as a sifi. i don't know if you've got a comment. >> as i've said a number of times this morning and afternoon, we have not made a decision yet, but we definitely understand that there are different kinds of assets in mutual, in asset management funds, custodial funds. i understand the important difference between leveraged and unleveraged funds. we will complete this process and reach a determination as to whether or not there's a basis for designation. but asking the question does not mean we decided to designate.

>> okay. and likewise, insurance companies seem to be well regulated. it's when you let the unregulated portion of aig write credit default swaps that you've got a sifi problem. i yield back. >> the chair now recognizes the gentleman from illinois, mr. hultgren, for five minutes. >> thank you, mr. chairman. thank you, secretary lew, for being here. i want to follow up on how we can work together in a bipartisan manner. we've passed a couple of dozen bills by supermajorities out of this committee including many by voice vote, and many of those have passed the house as well that made sensible reforms to dodd-frank. notably, ben bear bernanke in his last performance here when asked where congress should focus and where the fed would be interested in engaging, he stressed a couple different can things. one, he stressed a swaps pushout which creates more systemic risk in impacts andqpq users' abilito

hedge. another one he mentioned was end user margin which congress never intended and where regulators need clarity. and also, third, he said regulatory relief for banks, especially smaller financial institutions. wonder, does the administration intend to support any of these sensible reforms? and does treasury have a list of bipartisan reforms that we can work on? >> congressman, as we have indicated, we think that many of these issues are premature, that regulators are dealing with these issues and that the need for legislation is not yet clear. and as i mentioned in my response to an earlier question, the idea of going in and amending dodd-frank if a question of truly technical fixes that don't open other issues, obviously, it's different than if it's part of an effort to take a broader look at dodd-frank. we have not thought that the legislation was appropriate up until now, that continues to be our view, but we look forward to working with you going forward. >> well, i would say, you know,

please hurry. people are suffering under these things, again, as chairman bernanke recognized. these do have an impact, and further delay is absolutely impacting the economy and many of these institutions that are just trying to get answers and trying to figure out how to work. again, when these are done in a supermajority way, to me, it would seem like it would draw a light to the administration and to the treasury that this is important, this isn't just something that we're tinkering with or pushing on but, instead, this is what we're hearing from people who are trying to respond in a very difficult climate already, and i would say delay and confusion is making it worse. let me move over a little bit to oversight function of fso to c. i believe oversight is extremely important, that this committee has to be engaged in this because of the design of fsoc which really makes it much more opaque and unaccountable than other regulatory agencies. certainly, this includes a broad statutory discretion that the

fsoc has to designate certain companies as sifis. we've talked about that a lot to today. that's why i'm a cosponsor of chairman garrett's bill implementing common sense reform measures to the fsoc that would improve the sifi designation process. one'example of fsoc's inadequate structure is how it constitutes who a voting member is. wanted to ask you some questions on this. the fsoc is dominated by the heads of bank regulatory agencies; the chairman of the federal reserve, controller of the currency, the chairman of the federal deposit insurance corporation. not surprisingly, these regulators have a bank-centric view of the world. secretary lew, wondered can you explain to the committee why it is that expertise and judgment of bank and credit union regulators should be substituted for that of the sec in the case of asset managers or state insurance regulators in the case of insurance companies when determining how these firms should be regulated? are these persons really

qualified to vote on whether to designate nonbank financial institutions as sifis? >> look, i think the statute was set up quite correctly to require all of the members of fsoc to look across our financial system and look at risks that cut across the responsibilities of different regulators and that might not be visible if you looked at it just in one channel. the view of each member of fsoc is important, and i think that the nature of the debates, the discussions within fsoc are very collegial and very respectful. and if you look before fsoc existed, there were barely relationships between many of the regulators. so we've come a long way in terms of closing a gap that was part of what contributed to the financial crisis. >> well, i think the problem is, so much of it is bank centric focused and not seeing different risks out there depending on the group that we're talking to. let me, in the last few seconds that i have, shift over to ask about the possibility that certain mutual funds could be

designated as sifis. in fact, 14 largest u.s. funds had an average leverage ratio of 1.04 to 1 compared to u.s. commercial banks which had an average ratio of 9 to 1. does the fact that mutual funds are not leveraged make it impossible for them to fail in the same way that banks do? >> look, we're in the process now of looking at the asset management industry and the product of the industry, and the answer to your question will come at the end of our inquiry -- >> my time has expired, and i yield back. thn impact on industry, and the sooner the better. this is taking a long time. thank you, i yield back. >> chair now recognizes the gentleman from nevada, mr. horsford, for five minutes. >> thank you, mr. chairman. and to the ranking member, mr. secretary, thank you for being here today. i want to ask a question about the effect of the housing crisis on the majority of u.s. homeowners who are still struggling to recover.

i'm from nevada. unfortunately, our state is still the third highest in the country with 1 in 717 housing units currently in or pending foreclosure filing and some 34% of nevada homes are still seriously underwater, the highest in the nation. ..

affect access to credit and relief that might be available to homeowners. i would refer back to the announcements made by the fha and the fhfa to deal with this issue of putback risk that is closing down the credit box so that people who are fully credit worthy are not getting access to mortgages. i think that is going to make a big difference. we need to finalize the risk retention rules. so we remove any uncertainty as what final rules are. we're constantly looking in the making home affordable program what we can do with authorities we have based on the current situation in the market provide

appropriate relief to homeowners and i hope to be able to make some more comments about that on thursday. >> wonderful. i'm eager to hear about the treasury's efforts in this regard, particularly for struggling homeowners as you said. like those in my home state of nevada. and i would like to ask if i can meet with you and members of your staff following your announcement on thursday so that i can make sure that these initiatives are helping the people who need the relief the most at this time. >> i'm happy to have our staff follow-up with yours. >> thank you very much. secretary, as well, are there any other areas that you see, particularly around the housing area, where this committee should be working with you and other leaders to help provide the relief that homeowners are seeking? >> congressman, obviously a very important question. i mean if you look at the

recovery to date, we're doing pretty well in most areas, most sectors of the economy. the place where it is not recovering is construction and housing. some of that is market conditions. we had a financial crisis with huge overhang of inventory and credit stressed institutions and investors and borrowers. as we get to a point of more healthy economy we have to make sure credit worthy people have access to credit. that we don't have the pendulum go to the point where it is blocking out of the market people who are not a risk. it is, it is certainly not, that we need to return to the days of before the crisis when we had low doc, no-doc loans. people got into mortgages that they couldn't afford. if you have somebody with a fico score of 740 who can't get a mortgage and the system has

overcorrected and putback decision, the announcements on putback risks should have effect on that. i talk to ceos of banks who think it will have material effect. as we go through the process of seeing what the effect of what we've done administratively, i look forward to continuing conversation as to whether there are other actions and tools we don't have the authority to do on our own. >> one other area in my concluding time i would ask that we have a conversation about is the review of the criteria, the credit reporting agencies use in which to measure consumers. that is an area i think needs review. this committee has not had a hearing on that in well over a year. we're in a different landscape in setting today than we were pre2008. >> i think that's correct. i think also the case there are many people for whom the credit rating agencies miss the test of their true creditworthiness because paying utility bills and other things on a regular basis.

>> time of the gentleman expired. the chair recognizes the gentleman from florida, mr. ross for five minutes. >> thank you, mr. chairman. let me ask real quickly if i can because i know your time is coming to a close here. companies are notified under stage three of the sifi designations that they have been designated as sifi, correct. >> that's correct. >> there is really no other opportunity to be notified other than stage three? >> well the, notification of stage three and there is plenty of time -- >> let me just, there is the sifi designation states, quote in general this analysis, stage two will be based on quantitative and qualitative information available to the council including industry and company specific metrics beyond those analyzed in stage one and any information voluntarily submitted by company. if they're not aware until stage three how do they know to volunteer any information after the the stage two level?

>> the, i guess -- >> what i'm betting at almost like a gotcha situation. they don't want to be a sifi if they don't have to be. they would like to work with you. >> companies know if they meet the stage one standard because the stage one standard is a publicly -- >> but they're not notified that they're being reviewed. >> companies know that if they're in the group of companies that meet the threshold, they can voluntarily provide information. >> but they don't know they're in stage two. don't you think it would be better and more transparent if there was opportunity for notification of the stage two level of a company that is under review for sifi purposes? >> the process was set up in a very careful way to try to bet information that was available to use to make preliminary determinations before engaging a did in a process -- >> could be a cooperative process i agree. >> if a company is notified that creates all kind of other issues -- >> but it cause shelf

correctness. >> could what? >> it could cause self-correctness. they would want to cooperate i think and not only want to cooperate but other companies in the same industry may want to have the opportunity to prevent them from being under that review. wouldn't that be more transparent and cooperative process. >> the transparency of the process is very high. stage three is the detail back and forth between the company and fsoc goes on. >> i agree. if they could have some opportunity to avoid stage three would that not be better inure to the benefit not only of the company -- >> not sure it would benefit the company. i think for many companies, if there was kind after preliminary designation they were notified of, that would create a sense that they were about to be going through stage three. they may have to disclose it. it could have an effect on their business. >> but most companies don't know really they're even going -- >> i think the financial firms that are, at the stage one threshold level do understand

that they're there. >> let me change top picks here. recently the international association of insurance supervisors came out with their plan to implement capital standards for insurance companies. hopefully on a global basis. unfortunately they seem to be rushing to things. i think that naic's head, former senator ben nelson, had expressed his dismay and concern they're going at break neck speed. my question to you is, if the united states doesn't participate in these global standards for capitalization for insurance companies, really they don't become global. and in fact there may be other countries that may follow our lead. can you give us some assurances from the treasury and fio that everything is being done to make sure that the interests of domestic insurance carriers is being advocated and protected as we go through this process of assessing or -- >> congressman, there is robust participation by insurance commissioners and others who are expert in the u.s. insurance industry in that process and i can tell you that it is with,

with a great deal of input from the united states that the discussion goes forward. >> with regard to statutory accounting procedures and generally accepted accounting procedures, those two being at odds too, because you've got, most insurance companies now having to potentially have to keep two sets of accounting opinions pills which would be very duplicative, very costly, can we get on assurances from treasury we will focus on not duplication but rather continued streamlined process for accounting principles such as sap, statutory accounting principles. >> i will have to get back on the insurance accounting principles. it is broad matter. my view if we can in international account be principles get rid of some of the nice it would be a good thing. it is not always easy to accomplish as you would like. >> i agree. we would like your advocacy with in that regard. with that, mr. chairman. i yield back. >> chair intend to recognize the

gentleman from california. the gentleman from kentucky, and then we will excuse the secretary. the chair now recognizes the gentleman from california, mr. royce, chairman of the house foreign affairs committee. >> thank you, mr. chairman. at the outset i would like to set the record straight on issue i think was raised twice today and that is the story of aig. if i could submit for the record, mr. chairman, a story that ran in last week's american banker. >> without objection. >> thank you. it's by hester pierce. quote, aig's collapse, the part nobody likes to talk about, and that part of course is the securities lending portfolio run for the benefit of the state-regulated life insurance subsidiaries of aig. and if i could briefly quote from the article. government rescue money was critical to the recapitalization effort of aig. taxpayer fund were also critical in meeting security borrowers demands for cash. securities lending

counterparties received 43.8 billion in the last quarter of 08. comparable to 496.6 billion in collateral postings and payments to aig's derivative counterparties. the record is pretty clear here. the taxpayer bailout associated with aig, which i opposed by the way, applies both to its financial products unit in london and to its state-regulated insurance arm right here in the u.s. but on to my question here for the secretary, secretary lew. as you know the u.s. and e.u. are currently engaged in trade talks as part of the ttip negotiations. with regard to banking and securities regulation the e.u. put forth a limited but reasonable proposal to strengthen u.s.-eu regulatory cooperation and to create a more

results-driven dialogue that avoids market disruption and regulatory fragmentation. it is focused on consistency of regulation, limiting extraterritorial impact and laying the foundation for recognition where appropriate. so, the u.s. is, the e.u. made this a top priority. do you not believe enhancing this dialogue is important objective and could lead to a high standard, comprehensive, regulatory regime? >> congressman, i believe that both ttip and tpp are very important trade negotiations and i have spent a great deal of time working with my counterparts on the aspects of those trade negotiations that fall in my area. i could think there are challenges in ttip, particularly with regard to financial services, that have, we've not yet reached an agreement on. >> right, right. this would be a way to get there. if you feel that, that financial

services, regulatory issues, being part of ttip discussions would be important, this would be a way to bridge that. >> well our view, my view is that, to the extent that the question is, should financial regulatory standards, prudential standards, be subject to a trade negotiation, the answer there, i believe has to be no. we can't be in a place where subjecting our financial regulatory standards to trade remedies. we have to regulate to make sure we have a sound financial system and drive through the g20 and other bodies to have the international standards reflect our high standards. i think competition in the, in the marketplace, for financial service companies ought to be part of a discussion. and we ought to have open access subject to our national authority. >> well, here's point. "the wall street journal" article recently which acting

cftc chair takes issue with the process and policy. the cftc cross-border guidance. here is his quote. i don't think that was the right decision. if you have equally comparable, comprehensive regulations in europe as an example, then what's the reason? why wouldn't, why we wouldn't allow for substituted compliance in that situation? i mean, there's the question. if you, and if you can have that dialogue in order to substantiate that, and the second would be an article, i'm going to quote here. transatlantic swap liquidity split persists which highlights two polls that show concrete evidence that quote, regulators have failed in their attempts to tackle a liquidity split by two sweeps, swap market reforms in europe and the united states. now the administration has pointed to the current regulatory dialogue. the financial management regulatory dialogue is

appropriate forum. but what successes has that produced? it hasn't in terms of regulatory cooperation and consistency. so, i think you've got an opportunity here, many of the challenges we've seen today, uncertainty, market disruptions we talked about. these could be avoided, if we go down the road of this dialogue. >> mr. chairman, if i may just very briefly respond? i think in the area of substituted compliance we have made a good deal of progress. that the challenge is what is true come a built. that is -- comablety. that is working through the cftc and their counterparts both in europe and asia. if it is true substituted compliance on basis of comparable standards. i don't believe a trade complex is appropriate place to resolve these matters. >> time of the gentleman has expired. the chair recognizes the

gentleman from kentucky, mr. barr. >> thank you, mr. chairman. thank you, mr. secretary for your patience. looks like i may be the very last questioner. so i appreciate your patience. mr. secretary, you have repeatedly said an institution can appeal its sifi designation if it disagrees with the fsoc determination it proposes systemic risk. the first appeal to fsoc itself, seems useless given that the institution is not appealing to independent arbiter but instead to the same agency making the original designation. in the second appeal would be to the courts. but that appeal would also seem fairly useless given the fact fsoc has not promulgated objective standards to guide its determinations. and the court couldn't effectively review those designations and would have to defer to fsoc's original judgment. and secondly, the institution couldn't challenge the regular judgment anyway for fear of retallization in the supervisory process. just last month, former

assistant treasury secretary michael barr, pointed out that institutions may refuse to appeal these designations precisely because they fear regulatory retallization. so my question is this, given substantial flaws in the appeals process, both original and initial administrative appeal and judicial appeal does the designation process give institution as meaningful opportunity to challenge their designations and given these flaws, would you support an alternative process which would create an independent ombudsman or arbiter as an alternative to review the initial designation? >> congressman, i actually don't agree with that assessment of the current process. i think that the engagement at the stage three level is robust and it does affect the thinking at the staff level and principle level. think when we had one face-to-face hearing it was actually a very substantial exchange of questions you know, that were responded to.

and i think that, you know, as far as recourse to judicial resolution, that has not, it has not been the case that financial institutions or others are afraid to challenge judgments that they don't agree with when regulators make them. >> so you would not reform the current process. >> i think it is working pretty well. >> in regard to ex-im reauthorization you said every other country has export credit agency and we shouldn't go it alone. we shouldn't unilaterally disarm export support but given the fact that we have unilaterally burdened financial institutions with the volcker rule while rest of world does not have a similar regulatory regime, since we unilaterally burdened our manufacturers with greenhouse gas standards not imposed by other countries, since we unat rally imposed our financial institutions higher capital standards than rest of the world. we unilaterally united states business community to the highest corporate tax rate in

the world, what is the difference. >> congressman i would actually counter on two of those issues and on the third agree with you. when it comes to volcker, you have processes going on through other international processes. vickers where they're looking to put in similar kinds ever systems. if you look at climate rules, the agreements made in copenhagen were very important. we're complying, you know, meeting our standards. other countries are doing the same. i agree with you, we need to do business tax reform. we should not have a statutory business tax rate as high as we do. i would look forward to bipartisan -- >> i'm glad we agree on that point. i take it you take my point on others particularly with respect to the greenhouse gas rules which other countries, developed countries, china, india are certainly not adopting. final minute i do want to ask you about the irs lost emails. we knew that targeting of conservative groups by the irs began in february, march, 2010,

despite repeated inquiries from congress in 2011, the irs responses did not mention knowledge of the targeting. in fact in march of march of, february 2012 commissioner shulman was aware of inappropriate targeting but in march of 2012, the commissioner said i can give you assurances, this is to the ways and means committee there was absolutely no target egg. there was further stonewalling. the administration said this was a rogue office in cincinnati of the as it turns out we know that was not the case. there was also the story that this was targeting of both progressive and conservative groups. george confirmed that progressive groups were not targeted. we find out about lost emails and stonewalling when commissioner koskinen knew about the hard drove program in february. when treasury knew about the hard drove program in april of early this year, we didn't find out until 11 days ago that there was these lost emails. so when the president says there was not a smidge general of --

smidge general of corruption and the hard drive crashed 11 days after chairman camp first inquired about this matter back in 2011, do you agree with this assessment there is, maybe not corruption, i'm sure you don't agree with that but, that the stonewall something inappropriate? >> time of the gentleman has expired, if the secretary wishes to give a brief answer? >> if i could respond briefly. congressman i don't believe there is any evidence of any political interference to date. i don't think any of the issues that have come up undermine that view. i think if you look at reaction that we had when the tick 10 report came in, first step we did replace top leadership. danny werfel came in. all the leadership was changed at senior executive level. program was replace so it was very different process going forward.

the fact that a hard drive broke is only evidence that a hard drive broke. >> time of the gentleman again has expired. i would like to thank the secretary for his testimony today. without objection all members will have five legislative days within which to submit additional written questions for the secretary. without objection all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. this hearing stand adjourned. >> wednesday, outgoing israeli president shimon peres met with president obama at the white house. afterwards he spoke to reporters about iran's nuclear program and violence in iraq. here's look.

>> actually we've had conversations with the president of the community. the two teams, the team of the president and my team and it was. all those meetings overriding, i'm not used to and all these meetings from my sentiment were superb, agreeable. i told the president that that i'm dullest man, that i met 10 presidents of the united states. the first i met was president kennedy. at that time, the united states

wouldn't agree to supply us arms. i came to president that answers really fully all the security needs of israel and we are grateful for it. about iran, i told him that if iran will continue to build a bomb be the result will be the middle east will become nuclear. then iran can not be an exception either. we must think about it. and the best way to reach an agreement is to follow the example of syria. send out dangerous weapons of the land -- and if this will be done, i think it will be the right solution.

then i think that the sanctions that the president introduced became effective and the president said he is going to keep the sanctions even an agreement won't be reached. he would like to have been a agreement but it is not true it is already on the table. so the negotiations will be continued but the positions, or the position of the united states is not changed. then about iraq, i told the president that the best thing that could have happened is that iraq will remain a united country but i wonder if it's possible to do so and really to send a mighty army to have the

three parties come together? i don't see the army that will do it and i don't see the policies that will agree to it. so the present situation we have two different parts. one because there are three parties are kurds, sunnis and shiites. the kurds already build a state of their own. they're supported by turkey. and they are basically democratic. for example, women enjoy equal rights which is the first indication of democracy. and i say, the difference between the shiites and the sunnis is more arabic problem than american problem. the problem of the world and i think that arabs should come in

and play a major role because i don't think it is for the west to decide who is the real heir of mohammed. the shiite position or the sunni position. and i think maybe they have contributed in lowering of the flames of this controversy. and then i think the united states should really help the people who are ready to go with the united states. the united states is not self-serving. the united states is offering help to the people that became great by helping others, but not closing eyes to the problems of others. and all of us without exception,

we can not remain neutral in the face of the conflict that is takes place and bloodshed. the middle east has changed in that sense that countries are falling apart and the place of the israeli-palestinian conflict was taken by terror. terror is a danger to the arabs as much as to israel. it destroys the fabric of their life. they are going through tremendous danger and our forces that are beginning to stand against it, including the new government in egypt, including the old policies of, including the position of the saudis and i think we have to organize all

the parties that want to stop terror and really bring peace and promise to the arab people. >> thank you very much. >> thank you. >> president what he should do differently about the middle east peace process? >> pardon? >> thank you. thank you very much. sorry. hold on. [inaudible]. >> the u.s. senate gaveling in today likely their last day before taking off for the july 4th recess. and a at noon eastern senators will take a procedural vote on nomination of attorney cheryl ann krauss to serve on the third

circuit u.s. court of appeals. this afternoon the chamber will also consider the confirmation of six other nominations including nominees to serve ambassador real posts in iraq and egypt. we'll go live to the senate here on c-span2. the presiding officer: the senate will come to order. the chaplain, dr. barry black, will lead the senate in prayer. the chaplain: let us pray. lord of the night and day, to whose will all the stars are obedient, we submit to your sovereignty and might. remind our lawmakers that you

are often closest to us when we feel far from you. give our senators confidence in the triumph of your eternal purposes. may they strive each day to do something that will strengthen their hold on the unseen world. impart to them the wisdom to release earth's fleeting things, as they seek to conform to the life of the world to come. and, lord, please bless our faithful senate pages who will be leaving us soon. we pray in your sacred name. amen.

the presiding officer: please join me in reciting the pledge of allegiance i pledge allegiance to the flag of the united states of america and to the republic for which it stands, one nation under god, indivisible, with liberty and justice for all. the presiding officer: the clerk will read a communication to the senate. the clerk: washington d.c, june 26,2014. to the senate: under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable john e. walsh, a senator from the state of montana, to perform the duties of the chair. signed: patrick j. leahy, president pro tempore.

mr. reid: mr. president? the presiding officer: the majority leader. mr. reid: i move to proceed to calendar number 384, s. 2463, the hagan sportsman's legislation. the presiding officer: the clerk will report the motion. the clerk: motion to proceed to calendar number 384 prks s. 2463, a bill to protect and enhance opportunities for recreational hunting, fishing and shooting, and for other purposes. mr. reid: mr. president, following my remarks and those of the republican leader, the senate will be in a period of morning business until noon with the time equally divided and controlled between the two leaders or their designees. i ask unanimous consent that the previous order with respect to the krause nomination be modified so the senate will proceed to vote in executive session at 11:45 a.m., and the vote on the motion to invoke cloture on the krause nomination and all previous provisions remaining in effect. the presiding officer: without objection. mr. reid: at 11:45 the senate will vote on the nomination of

cheryl ann krause to be a united states circuit judge. that will be a cloture vote. she's been nominated by the president for the third circuit. at 1:45 we'll confirm several additional nominations, but we expect at that time only one roll call vote. mr. president. h.r. 3301, i'm told, is due for a second reading. is that true? the presiding officer: the majority leader is correct. the clerk will read the title of the bill for the second time. the clerk: h.r. 3301, an act to require approval for the construction, connection, operation, or maintenance of oil or natural gas pipelines and so forth and for other purposes. mr. reid: mr. president, i would object to any further proceedings at this time. the presiding officer: objection is heard. the bill will be placed on the calendar. mr. reid: mr. president, the

late committee on leslie nelson said -- quote -- "doing nothing is very hard to do. you never know when you're finished." doing nothing is very hard to do. you never know when you're finished. mr. president, perhaps that's the case with the republican-controlled house of representatives. they just don't know when to finish doing nothing on immigration reform. today marks the 365th day that the tea party-driven house of representatives has sat on their hands refusing to fix our broken immigration system. the senate was able to pass immigration reform 52 weeks ago because both democrats and republicans in the senate understood the urgent need to mend our nation's immigration laws. yet for 12 months, 52 weeks radical republicans in the house refused to address the real issues affecting the american immigration system instead of obsessing over the president's deportation policies, they should pass this legislation.

they've made it clear they won't act on immigration reform until they can trust the president, whatever that means. trust the president to enforce the law. mr. president, the bill that passed the senate 52 weeks ago has the most stringent border security measures in the history of the world. i mean, unbelievable what we have agreed to do on the border. so any complaints about border security is just not well taken. so, mr. president, it appears to me the republicans want more deportations, more families torn apart. but, mr. president, do they also want more debt? immigration reform will reduce the debt by $1 trillion. so is the immigration platform the extremists in the republican party deport first, find solutions lairtd or never?

-- solutions later or never? i guess that is what it is. recently a letter was circulated by darrell issa demanding the president start a program with long-standing plans to america to be deported. mr. president, there isn't anyone that believes this country can fiscally or physically deport 11 million people. the bill we passed, that congress passed those many years ago, 1985 i guess is when it was, didn't work. it allowed people to come here without proper documentation. we tried a program that simply hasn't worked. employer sanctions. so it doesn't matter how we got to where we are. we've got to change things. we must have comprehensive immigration reform. congressman issa offers no plan

to solve our nation's immigration quandary or to keep families together. just more deportations. and this is what he said yesterday and others said yesterday, mr. president. so they're really running out of excuses. i'm not quoting him right now. but the republicans have gone so far -- congressman issa has gone so far to turn a humanitarian crisis at our nation's southern border into a political game. we have these people coming from central america, which is a war-torn, poverty-ridden, they're coming to america trying to -- mr. president, yesterday the republicans reached a new low by accusing these kids, some of them are three years old, of lying about the reason they come to the united states. they are fleeing violence, extreme poverty, and they're coming because they are scared. they're afraid.

these children are vulnerable and need to be reunited with their parents. that's what we're trying to do. our nation cannot deport our way out of this problem. immigration reform is about families and we're not a nation -- we are not the republican-dominated house of representatives. we as a nation value families and see the family structure as a cornerstone of our communities. undocumented immigrants, mr. president, are our neighbors, our classmates. regardless of how they got here or why they lack the proper documentation, as i've just explained, there are 11 million people, and they play a crucial part in our economy and communities where they live. i don't know why the house republicans don't realize that. if they did, they would be working to fix our immigration

system. waiting 52 weeks, they've done nothing for 365 days. they claim to be working on jobs bills and legislation to reduce the debt. mr. president, if that's the case, why don't they do something about raising minimum wage? why don't they do something about extended unemployment benefits? why don't they do something about making it so that my daughter, my wife, and daughters, wives, and mothers all over america will get paid the same for doing the same work that men do. that would be good for the economy. how about student debt? why don't they do something about the debt that students have? $1.3 trillion. a company just went bankrupt. senator durbin spoke about it yesterday or the day before.

they have one school in nevada. it's a for-profit school that has been ripping off young men and women -- some not so young -- for years. senator durbin said that more than 90% of all the income that institution got came from federal loans, and the default rate is extremely high, mr. president. why don't we do something about student debt? the fact is that the senate-passed immigration bill reduces the deficit and spurs the economy more than all the house bills currently waiting senate action combined. so i urge my republican friends and the republican leadership in the house to stop doing nothing and bring immigration reform to a vote. as the comedian said, "doing nothing is very hard to do. you never know when you're finished." maybe that is the problem with them. perhaps now is the time for newly appointed majority leader

kevin mccarthy who comes from a state -- california -- he comes from an area -- bakers field -- where certainly comprehensive immigration reform is necessary. he should take a position on immigration foreman. will he bring the senate-passed bill to a vote? if not, what does he propose? republicans in the house have a choice. allow a vote on commonsense immigration reform in july or certainly be the ones to blame for not doing it. and there's a lot of blame to go around and it's all focused in one direction. the republicans in the house have wasted enough time already. bring this legislation before the house for a vote. it would pass overwhelmingly, mr. president. i would bet that we get a majority of the republican votes. and of course it would get 90% of the democratic vote over there. it has enough bipartisan support to pass, so let it come up for consideration. this is democracy.

let them have a vote. americans want us to fix this nation's broken immigration system, so let's do that and do it now. mr. mcconnell: mr. president? the presiding officer: the republican leader. mr. mcconnell: yesterday i talked about how supposedly moderate senate democrats have proven incapable of advancing important policies they claim to support, policies like approving the keystone pipeline. these senate democrats just can't stop talking about how much they love -- how much they love keystone. and yet, they won't stop enabling their own democratic leadership to block approval of this shovel-ready job-creation

project. they have been doing so for years now. so it's hard to take what they say very seriously. that's true when it comes to the obama administration's war on coal jobs too. some of our friends on the other side want their constituents to think they'll stand up to this elitist war on middle-class jobs. these senators want everyone to believe they're opposed to the administration's waves of job-killing energy regulations. but the truth is it's just the opposite. these democratic senators say they're ready to stand and fight, but when push comes to shove, we can't find them anywhere. instead, we continually see them supporting the majority leader and the democratic senate leadership that dutifully does the bidding of president obama and the far left. and on this issue, the democratic leadership has gotten evermore extreme in its defense of the war on coal jobs.

multiple times i've tried to offer legislation that would ease the pain for kentucky's coal families, hardworking americans who just want to work, and put food on the table. i pushed for senate approval of commonsense billings like the saving coal jobs act and the coal country protection act. but the majority leader blocks those efforts at every turn. and none of the so-called moderate senate democrats ever comes to the floor to assist me in my efforts. every time they choose to follow the party line instead, the party line of the majority leader they support. the most troubling thing is, the majority leader these democrats support is so determined to stamp out opposition to the president's job-killing regulations, he's taken to shutting dodgshutting down the e process altogether. his efforts have even begun to affect our committee work.

case in point: just last week the senate democratic leadership pulled the energy and water appropriations bill from committee consideration because it feared a pro--coa pro-coal js amendment i wanted to offer that might actually pass. we saw yet another example of that this week when senate democrats pulled the financial services appropriations bill from committee consideration for the same reason. the senate democratic leadership apparently doesn't want members of the senate, even in committee -- even in committee, to have any real say on the contours of the president's energy regulations. regulations that will affect millions of our constituents in profound ways. look, appropriations bills are exactly the kinds of things the senate should be voting on. our constituents sent us here to debate big issues, to amend an improve policies that work, and repeal the ones that don't.

that's our job description, but the democratic majority won't allow us to fulfill it. the extremism here is really worrying, but the majority leader couldn't get away with it if the democrats in his kfns wh- his conference who claim to be moderate would actually stand up to him for once. the so-called moderates could stand up to him when he tries to shut down the legislative process, but they don't. the so-called moderates could stand up to him when he blocks every reform to the president's job-killing regulations or when he blocks every effort to approve the keystone pipeline, but they won't. they won't even stand up to president obama when he jets off to speak to partisan groups and friendly audiences that rarely have the best interests of coal country at heart. i know the president will also be trying out a new p.r. campaign today to see what life is really like for the middle

class. for those beyond the white house gates. but he won't see the consequences of his e.p.a. regulations at a political rally. he won't see what his i.r.s. has done to grass-roots organizations. he won't hear from the families of veterans who died while waiting for a bureaucrat to hand out a doctor appointment. and he won't see the damage obamacare has caused for working families. well, if he's actually serious about this initiative, then he'll come to kentucky to see the tragic effects of his policies firsthand. i invite him to visit with local coal families in my state and hear the other story he won't hear from california billionaires. i invite him to meet with families like the whitehead family who write to me about the damage that obamacare has already done to them. i doubt he will and i doubt the

so-called moderate senators will push him to do so anyway. so perhaps it is time these senators stop refugee to themselves as moderate at all. if they're not willing to stand up to the majority leader or the president when it counts, then they'vthey're just another parte democrat, and it is really too bad, because we republicans on this side of the aisle, we want to come to bipartisan solutions on the issues affecting so many of our constituents. we want to pass commonsense energy regulation -- energy legislation that can create well-paying jobs, increase north american energy independence, and lower utility prices for struggling middle-class families, and we want to give congress a say on extreme policies from the administration that take aim at the middle-class jobs in each of our states. but we can't do any of that without dance partners on the democratic side. and there's hardly a true moderate in sight anymore.

i can remember when we used to have moderates over on the democratic side. we can't find them today. it is a shame for our country. and i and my party, we're going to keep fighting for the middle class anyway, even if we have to keep carrying on the battle for sensible, scwn commonsense solus all by ourselves. mr. president, i yield the floor. the presiding officer: under the previous order, the leadership time is reserved. under the previous order, the senate will be in a period of morning business until 11:45 a.m. with the time equally divided and controlled between the two leaders or their designees, and with senators permitted to speak therein for up to ten minutes each. mr. sanders: mr. president? the presiding officer: the senator from vermont. mr. sanders: mr. president, we are coming to the july 4th weekend. in my state and throughout this country, many people are going to be getting into their

automobiles. they're going to be traveling. and, in general, people who live in rural states like vermont don't have the option of getting on a sub-way, don't have the option of getting on a bus to get to work. they use their automobile. and in vermont and all across this country, people who are driving have noticed that the price of gasoline at the pump has soared and is today much higher than it used to be. according to the energy information administration, the nationalage of retail price for regular -- national average price for regular gas is at its highest since 2008. drivers in three states have paid over $4.

that's hawaii, california, and alaska. in my home state of vermont, the current average for a gallon of gas is about $3.73 a gallon. now, when the price of gasoline goes up, a lot of people get hurt, the economy gets impacted, but mostly it affects working people who have no other option but traveling by car. and many of these workers are making $10, $12, $15 an hour. many of these workers have seen declines in their wages in recent years. and yet in order to get to work to make a living, they have to get in the car and they have to choice but to pay -- and they have no choice but to pay soaring gas prices. while gas prices are soaring, people should not be shocked -- already will not be shocked to -- or will not be shocked to no he that the big oil companies that have racked up $1.2

trillion of profits since 2001, now they're telling us the reason gas prices are going up is because of the volatile situation in iraq. that's why suddenly gas prices have gone up, because of the conflict in iraq. well, you know, mr. president, the american people are sick and tired of hearing from the big oil companies using every excuse they possibly can -- if it's snowing, the price of gas goes up; conflict in the middle east, the price of gas goes up; fits a rainy -- if it's rainy, sunny, it's somebody's birthday, the price of gas goes up. we don't see the same logic when the price of gas should be going down. but it always seems to be going up. meanwhile, the five biggest oil companies in america -- not too sprigsly -surprisingly -- contie

huge profits. during the first quarter of this year, exon mobile made a profit of $9.1 billion the first quarter. shell made $7.3 billion. chevron made $4.5 billion. and conocophillips made $2.1 billion. the price of gas at the pump soars. the major oil companies make huge profits. last year these five major oil companies -- exxon mobile, shell, chevron, conocophillips made $93 billion in profits. exon mobile alone made nearly $33 billion in profits in 2013. so in the state of vermont, all over this country, working people are seeing in many cases declines in their wages. they have to get to work. the price of oil -- the price of gas soars and the oil companies make billions.

mr. president -- and here's the interesting point -- when i was in high school -- and i suspect kids all over the country are still being taught this -- there is a theory called "sly and -- d demand. "when there is a lot of supply and limited demand, prices go down. when there's limited supply and a lot the demand, prices go up. well, guess what? to nobody's surprise, that is not the way it works in the oil industry. today there is more supply and less demand for gasoline than there was five years ago when the average price of a gallon of gas was just $2.69 a gallon. so let me repeat that. more supply, less demand and today the price of a gallon of gas is $3.70 a gallon.

two years ago it was $2.69 a gallon. where iaccording to the e.i.a., there has been a 9 million barrel increase in the supply of gasoline over the past five years. 9 million barrel increase. since 2009, the u.s. has increased gasoline supplies by 4.3%. supply has gone up. what about demand? according to the e.i.a., the u.s. is consuming 96,000 fewer barrels of gasoline than it did in 2009, a 1% drop in demand compared to five years ago. if the supply-and-demand theory were true, gasoline prices should be a bit lower -- a bit

lower -- than they were five years ago, somewhere perhaps in the neighborhood of $2.69 a gallon. instead, despite the increase in supply, despite the lowering of demand, the average price for a gallon of gas in the united states has gone up by nearly 38% over the last five years. from $2.69 a gallon to $3.70 a gallon. let me repeat, since 2009, the supply of gasoline has gone up by more than 4%. demand for gasoline that is gone down by 1%. yet prices at the pump are up nearly 38%. people talking about we need more oil, we need more gas. it doesn't matter. supply up, demand down, prices at the pump soaring. mr. president, the truth of the matter is, the high gasoline

prices have less to do with supply and demand and more to do with wall street speculators driving pricese price up in they futures market. over a decade ago, speculators only controlled about 30% to 40% of the oil futures market. today wall street speculators control about 80% of this market. let me repeat, wall street speculators control about 80% of the oil futures market, even though many of them will never use a drop of the oil. people kind of think that when people own oil on the oil futures market, they actually own it because they're going to use it. maybe it is the airline industry. maybe it is the trucking industry. maybe it is oil fuel dealers. wrong. the oil futures market is controlled by speculators who never use the end product, whose only goal in life is to drive prices up to major a huge

profit, and that is exactly what they do. mr. president, we, as the elected officials of this country who are presumably representing working families around america, have a responsibility to do everything that we can to make sure that the price of gasoline at the pump is based on the fundamentals of supply and demand and not wall street greed. and that is why i am introducing legislation today to the require the commodities futures trading commission to use all of its authority, including its emergency powers, to eliminate excessive oil speculation. this bill is being cosponsored by senators levin, nelson, blumenthal, mccaskill, franken, brown, cardin, whitehouse, markey, klobuchar, merkley and hirono, congresswoman delauro is

introducing the congres companil in the house. this act is virtually identical to bipartisan legislation that overwhelmingly passed the house of representatives by a vote of 402-19 during a similar crisis in june of 2008. specifically, our bill directs the cftc to do the following within 14 days of enactment. one, immediately curb the role of excessive speculation in any contract market within the jurisdiction and control of the commodity futures trading commission on or through which energy futures or swaps are traded. two, eliminate excessive speculation, price distortion or unwarranted changes in price or other unlawful activity that is causing major market disturbances that prevent gasoline and oil prices