volatile if we take it away from the people, you know giving it to people that make more and are more intense. >> i think that one can overstate the tradition doing things in their economic interest and clearly having inventory has been real. and i also want to say that i think that if you look at what the definition of liquidity is it may not be reasonable that there should be no price fluctuation. >> the time of the gentleman has expired. we recognize the gentleman from missouri. >> thank you, mr. chairman. thank you we are moving towards the fifth anniversary of the passage of the dodd-frank bill and many of us are here during

those turbulent and troublesome times and days and we know that great care was taken in dealing with this creation of this act and we think that we have made a significant amount of progress and i think that you will agree with us as well that we have made tremendous progress. and regulators have moved to regulation and when you think about dodd-frank as a whole what do you think is the most significant thing left undone, what do you think and what would you want to see right now completed so that we can have

the full strength of them at work preventing these drafts. >> you know -com,-com ma that is a great question, there are pieces that need to be completed and that's really not what you're asking. you're asking what is the area. and i would have to say that the gse reform is something that we have to be a part of. i'm not optimistic that that is going to happen legislatively. but it's widely engage so much in bipartisan discussion to try to work through this. >> a member of the committee you know you mentioned the gse reform which is now part of the fha. and in doing a great job some of the work they have been doing has been helpful with some of the needs that we have with

money being put into the housing trust fund. but one of the things that you may be able to help me with. what do we do that enables us to move back in to the market. >> i think that there have been small steps taken but there needs to be an active effort to look at what can they do to have a more active private to securitization. most mortgages are backed by either fha that it's not a great place for that part of the market to be. which is why they have an active private marketplace.

the experiments have been useful like putting situations in place. we have seen that there are ideas there that you can insulate the public from this and start to bring private money back into the place. i can be through the capital market place and others. i think more thought has to be put into this further. >> you do believe that we do need a secondary thing? >> yes, i think a non-governmentally backed thing as well. >> i think that there is in this committee there's some sort of

suggestion from time to time that the gse's are not even needed. one of the things i wonder about whether or not this private market has an appetite to take over fully or reenter the market. >> i think right now the structure of the mortgage industry makes the continued operations quite necessary. the idea behind the warm is to be able to chart a path where there could be a different kind of marketplace in the future. so we live in a world with this and we have to try to make that world that are.

>> the time has expired. we recognize the gentleman from california chairman of the foreign affairs committee. >> thank you very much. for the record, one of my colleagues earlier asked if they have repaid the money they have borrowed from american taxpayers the simple answer that my colleague tried to elicit was that the payments that they have made to the government are now exceeding the rest of the funds they received. but i think that you agree here that this is not the real answer and the real question is have they repaid debts to the american tax payer. for that answer i think that we can go to the reserve bank of new york who is asked that western. and they said should these individuals be interpreted to mean that the treasury and the taxpayers have been repaid.

that the two firms should pay dividends to the regular shareholders again and the answer is no. they said that the taxpayers are entitled to a substantial risk premium government support has lower funding costs and boosted profits and that the government has never collected that they have owed from fannie and freddie. the false narrative that has and perpetuated is that taxpayers have been repaid, then it's time to end conservatorship, it's time to return the gse to the control of the shareholders. from your comment earlier, i assume that you disagree with this narrative and agree with conclusion of the fed. that failing to work to wind down the gse and give space with private capital come in then it would be a colossal missed

opportunity. >> you know i totally agree. >> we are risking this on an ongoing basis and the conservatorship is not over. i would only add one additional thing to what i said earlier is that the what this has done to our economy talks about the simple amount of money that was put into the gse and i think that americans are as will reeling from the pain of the financial crisis and i ain't that the right thing is to do the reform and to get onto a new restructured system. but it's not the right time to be talking about this in the conservatorship are paying dividends. >> i think that we can move together on that. >> you know, i publicly endorse the reforms that would increase

private sector participation in the secondary housing market and it would decrease exposure to future losses and limit disruption to the housing market and i think that if you look at the particulars, there is more risk sharing that can be done to create space. it has a common securitization platform that works for the gse and brings in private capital to use that. a common mortgage-backed security would be a good start for congress to pass this year if i could have your thought on that. >> these are the kinds of things that we have been talking about. and it's something that could be more available more broadly. and i think that the more that we are able to lay this foundation that a private securitization market can be built on, the better off we will be. >> i'm going to quickly talk

about the deliverables for the upcoming dialogue for china. in one of the issues a few years back, ownership capital was raised from 43 to 49% and that this is largely symbolic because it doesn't really provide further benefit to firms operating in china, when the chinese institutions invest in the united states they raise no ownership capital or activity restrictions. this is just one of many impediments when operating there. i wanted to raise that issue with you with this technology restriction. we have china agreeing to delay this restriction on its draft on anti-terror laws that are going to require those to hand over encryption keys with the banks and financial services technology runs they cannot

operate under those conditions in china and it is still on this, the people's congress has adjourned until next year. so it still hangs out there and we need to have greater push back. >> i agree with you totally. i respect what they're most senior leaders and made sure that it is a very significant issue here, that both of them need to see movement on. >> the time of the gentleman has expired, we recognize the gentle lady from wisconsin. this includes the monetary policy and trade subcommittee. >> thank you for joining us today. i cannot resist asking questions about liquidity since that has come up several times but i want to take a different approach as opposed to the required capital

standards. i'm wondering in her testimony as you mentioned, that it's been a year since we have floated institutional investors and i'm wondering if there's your executive summary that was not very descriptive of how that has been working. i'm wondering if we have seen about the same use of the assets that are typically more liquid than other investments in the money market mutual funds. >> congresswoman the rules are not effective as of yet. they were put in final form for the future. but i think that we have seen a continued reduction on short-term and wholesale funding which is a good thing. but we still have very large amount of investment in money

market funds. and we have seen in the financial crisis that there were risks they are and the reasons that the rules were put in place were to create a safer path forward. and we are keeping an eye on that as it's implemented to make sure it works as designed. but we have to make clear that we keep attentive as to whether or not there are sufficient or whether there's any traditional policy. and it simply shut down the money market and presented them from liquidity. >> problem is that the connection between the money market funds and the rest of the

financial system and the risk is that institutional investors are leaving and it was creating the risk that the overnight funding is not to cause the entire implosion of major financial institutions and that includes the reliance on wholesale funding that we have rules in place try to make it safe. >> the threat of them servicing from banks to non-banks were recently announcing algorithmic learning that goldman sachs wants to do. and really it demonstrates a change in the market structure that appears that more risk-taking incentives have been part of that. i'm wondering in that context whether or not -- do you think

it's more important to focus on this industry and whether or not it gives this change in the market structure? >> i think that we have tried to be very careful and analytic not to overreach and go into places where we don't need to be in or belong in. it has crosscutting exposures were the determination was made and it's not that we are looking to regulate this with more firms. we are going to continue to go through the criteria and we are obviously getting smaller firms as we get down the line. >> thank you, i was stunned at some of your comments.

also that negative equity has declined but i think that homeowners are in a lurch after this recession. much housing deteriorating because you cannot plan for immediate improvements on basic things like plumbing and so on. so i guess i just want to get your insight about the homeowner in this environment. >> i don't have the time but i have a few instances to express concern that credit worthy borrowers should have access to the market. >> the time of the gentle lady has expired.

not a lot. >> thank you mr. chairman. >> and october 2013 the online publication submitted a freedom of information request for documents concerning the intergovernmental agreements with the united kingdom and switzerland and canada are part of this. the department acknowledged the request on october 24 and this includes the expedited treatment that has been approved. and however, since then there has been no response from the

department is. >> on january 27 of this year 15 months after the initial request, i sent you a letter asking for prompt action and to keep me informed from the response that would be forthcoming. the only answer that i have received is that we are working on it. it's now been 20 months. and since they have a simple initial request five months is part of this. >> it's better than that. i am not familiar with the specific matters but i'm happy to look into it.

>> it is just hard to believe that there is some reason that the department is a part of. >> on another matter i would like to bring attention. the fiscal year 2012 financial services appropriation bill included language directing the secretary of the treasury to submit a report regarding a potential risk to u.s. financial market and an economy posed by financial terrorism or economic warfare. and that includes the treasury would work on that end it also included in fiscal year 13 appropriations bills. and in july we sent for a status

update. and in fiscal year 2015 that became public law. and the secretary of the treasury in confrontation with the appropriate agencies departments, bureaus and commissions that have this [inaudible] not later than 90 days after the economic warfare and financial terrorism. and obviously they felt it was so important that it has included language in appropriation dating back as far as fiscal year 2012 and even giving this the same attention and i was hoping you could provide us with some information about the progress on the report. as the secretary provided this report to relevant committees giving the department this issue

for over three years and i would've thought that the department would have been prepared to meet that 90 day threshold set by congress. so ultimately when can we expect this report? >> in the area of economic warfare and terrorism, there is no agency in any government in the world that it has a more effective job and i'm happy to defend the record that you have here with the global leaders in making progress in this area and it's an area of great bipartisan consensus. >> doing this report is well required, it would be a great way to kind of toast or toast what you are doing. >> i will check on the report and i'm quite familiar with what we are doing, taking a great deal of my attention and i will have to check on it. >> will you have someone get to be a part of this next week

reign. >> you have to let me know the stats. >> i will get back to you. >> we will get back to you promptly. >> okay. >> the time of the gentleman has expired. we recognize now the gentleman from texas and the ranking member of the oversight committee. >> thank you, mr. chairman. i think the ranking member and the witness today. and you're in no report, you cite concerns about cybersecurity. and ironically yesterday the subcommittee had oversight investigations that held a hearing on cybersecurity with a

global perspective of cyberthreats. and one of the things that we took away. it appears to be clear and convincing evidence. and they have a clear and present danger to our financial system. we need additional assistance [inaudible] >> i think that the record should reflect the thoughts on why this is important.

>> this issue of cybersecurity is obviously a relatively new issue but it has gone right to the priority list that we have and as i talked to the ceo is and top issues with many of them the challenges are many. it is hard to protect the system and hard to have individual assistance and i think the financial factor is actually we have a lot of work to do in the financial sectors than the sum of this overlaps than they are hard to run this modern financial institution. i think that it's very much in the minds of both regulators and the industry and the more tools that we have to work together, the more tools that we can work

clapboard of we went and to share information and best practice is, more likely we are to be successful. and we are making progress. we have worked much better sharing of information. and i think the passage of legislation would be very helpful. >> i want to concur with you the witnesses that appear yesterday all indicated this, that you are at the top of the game. >> i don't take a bunch of comfort in that. and we have absolute security in my concerns have to do with the need for authority.

what would you have us do immediately to give you this authority and i know that it has been a long-term here and other specifics that you can call to our attention. >> cybersecurity legislation would take down some of the barriers for sharing of information as well as collaboration in the private sector. i think about would be quite helpful. we are doing things now on a voluntary is where there's risks that firms have to balance if this legislation passes. i would be happy to follow this up and it could be helpful. >> finally, we have indicated that we believe that you should be allowed to be accorded a national plan as it were in order to deal with the responses

to cyberthreats. but you'd like to coordinate this with law enforcement as well as regulators and how far along are we to coordinate this plan. >> obviously we are within the federal government and we collaborate a lot. and we are looking at we can do to be more prepared. and honestly that gives him the ability to develop a plan. >> thank you for your service. >> the time of the diamond has expired. we recognize the gentleman from south carolina. >> please go ahead. >> we are at the senate finance committee and at the time the

system is our automated and that it wouldn't be easy. in the end of may of 2014 they gave this terminal at her saying that if if the debt limit were not raised and the treasury had sufficient cash on hand they will be technologically capable while the treasury was not making other payments and i asked when did you come to learn that they were capable of making these payments in may 2014. >> in a statement to this committee, we are entirely consistent. what i said is that we make tens

of millions of payments and we don't have the capacity to pick and choose among ourselves, i did not address is there a technical capacity to pay this. i did indicate that we do have the technical capacity but it would be a terrible thing to do because you will be defaulting on something else. >> i was a very good answer the first few times i asked you. i asked you that question in may of 2014 and you told me that you would have to check. when you came back in march 2015, you said that you had checked that you had forgotten and he didn't remember it on that day but you would look into it again.

i sent you a set of written questions and ask you the same question and i got two pages with no answer and it. some knock when ask anymore questions. i feel like i've given you enough chances to answer that. the question is when did you know. if you don't know, you should go back and be able to look it up. you did tell me that you looked it up and you knew that you had forgotten before you got here. >> the gentleman asked you a question today about whether or not you felt like your answers to this committee were disdainful. and you felt that they were reverent. and i've asked these serious questions. the other questions i asked her not the first time. this is not an empty question. this is not a question that we are designed to dodge to try to make it look bad.

and then in the event that we reach the debt limit, we have had extraordinary laments. so yes or no you did not answer that. >> we had to wait six months into that question. >> i also asked to if you can commit that in the event that this does not raise the debt limit and we will continue to make principal and interest payments. and what are we to imply with a refusal for a year and a half. >> that the answers -- >> you had your chance. i could let you go until you had a minute and a half left. ..

>> if you have any information there was a bill we passed last year that was called the improvement act. all well supervising the money services business should have a license that

is recognized. i want to know what you know. if you don't know anything i understand. if you do no i would be happy to report. >> as we have discussed many times this issue is an important one. we are concerned about the problems. we're working on implementation of the -- of the legislation and am happy to get back with you. more broadly working this issue how to deal with remittances. we are involved with the world bank to develop solutions to the problem which means building up capacity. right now there is not a real financial system to engage with. we have had meetings at a senior level of the

political level the central bank level. traveling to your district. have some meetings on this issue. >> i appreciate that. >> so i would like to talk with you more about the implementation. i know your doing some technical assistance.

my best perspective and how they can improve the system. could you talk a little bit about the work you doing on the technical assistance area? what sort of message would you like them to receive in order to develop that banking system that i think there going to need? >> there is not an easy answer to that question. it's hard to exaggerate how little they are starting with in terms of building a functioning financial system. you know, the tragedy is that there are legitimate transactions that should be able to move forward, but it is hard to know the money is not going to go in the hands that would do real harm's. trying to figure out how to build a system is why we are working with the world bank. the security conditions. we

have people come out of somalia and other countries for training. is not the most efficient way. great when they can go in and work with people side-by-side. we're trying to do it off site to help them build the skills. it it is a process. it is not something that you can just hand over and have a functioning system. they are trying. we will work with them and we have to be creative to find a way to start that. >> i just want to urge you on behalf of the people who live in the congressional district of minnesota and other parts of the country we are going to start our somali caucus because we have constituents who live in both districts. we want to see them see that country is stable and strong and not be a haven are an attractive nuisance from that people. we try to do our part.

we hope you will continue to push with that technical assistance. >> we will do so and continue to work with you to find a solution. >> the time of the dillman has expired. the chernow recognizes the german from tennessee. >> thank you mr. chairman. i'm going to go back to a shoe issue you and i talked about the liquidity. recent comments he recently warned regulatory authorities made a mistake when they looked at each institution and said he will be safer if you withdraw from the markets and then forgot that if all institutions with job for the markets a bit they will be less liquid. that will hurt all the institutions. should be in the making sure we have liquidity.

what is your reaction to his comments? >> i want said in response to several questions, the liquidity issue requires are issue -- attention. the economic cycle of the volatility that is natural at that.to the emergence of new market mechanisms that are different and present different risks to the volume corporate bond issuance. i have also said that we -- we have an eye on whether or not they are regulatory issue. it's one of the things we need to look at. i'm not approaching this from the.of view that we no exactly what it is. i don't think anyone knows exactly what the answer is. >> a possibility that it could be. >> the fact is that i

describe i no are at work. the question is much more speculative. people jump prematurely to a conclusion about regulation which would take our eye off of whether there are risks. >> would you say we need more regulation? >> we have come a long way. safer and sounder. we have the ability for institutions to withstand a bump in the role that the did not half. that does not mean we should stop. >> more is needed? >> i did not say more or less. you can't take 50 years between 50 years between looking at these questions. we need to keep our eye on the future and we must be open to the possibility that there are multiple different factors at the core of an issue. something like liquidity of fundamental importance that we have a deep and liquid market. corporate markets my wrist markets, they are not all

the same. liquidity issues are not the same. >> let me follow up. echoed by everyone. i will catch them. the commissioners and many overseas regulators at the bank of england. we talked about you issuing a data-driven analysis. coming out. >> this summer and we will share it when it is complete >> it seems likely -- every time we have a hearing we talked about the problems we face. face. more regulation. i will differ with you. it sounds like that you are inclined to be for more. >> for less. >> there you go. >> more or less. what seems to be happening

is the more liquid that is tied up in the markets, is not the bigger institutions the pay the price. it's the guys it's the guys back in states like tennessee and arkansas that end up paying the folks at the bottom command we need to make sure when something does happen is enough liquidity available. thank you and i yield back. >> the german from colorado. >> thank you. seeing cool under the withering cross examiner it -- cross-examination. i have a different view than the chairman mr. duffy as to what is going on in the economy. might as well start with all the records being said by dow jones up from 6500 from 6500 at the end of george

bush to 18,000. s&p. the nasdaq three times what it was. foreclosures are down. a tremendous improvement across all sectors. so when they are talking about calling the market and you are causing them to royal i want to thank you for rebuilding the markets. from the recession that we were in at the end of george bush, and i don't know if you have your report in front of you but there are very important graphs that i would like you to take a look at if you have your report in front of you. so let's take a look. easy ones starting with 4.1.4. that is just under the obama administration we see oil imports drop in oil production increase but we have not seen in decades. it's how about 4.1.6 billion unemployment rate dropping like a rock.

this is on page -- >> what it. >> twenty of report. after the 2,072,008 recession. but now let's talk about caps on. if you would turn forward to page 62 and 63 someone to look at graphs 5.3.16 and 5.3.19. well, can you 16 and 5.3.19. well can you tell us what graph 5.3.16 is? >> i have read i have read the words and i'm looking at some of these graphs. >> let me tell you what it is and then you can expand on it if you like. as the recession took place starting in 2008, 2007 2008 we saw loan-loss reserves fall. banks could not withstand

more and more losses. since the creation in 2010 what do you see? they have almost tripled. >> performing loans doing better than seeing a foreclosure issues settled down. >> let's look at the one that is really quite telling 5.3 .19. fdic insured failed institutions. my friend institutions. my friend the chairman was talking about this recovery and why isn't it bigger other than the fact we have 13 million new jobs. pensions at all-time highs. but under republican administrations -- and between 1980 and 1990 we had the reagan administration and the 1st george bush administration look at the number of failed institutions. then it falls off to virtually zero. no bank failures. then under the 2nd george bush we see a tremendous spike.

so now it is falling off precipitously. here to talk about the f soccer and dodd frank and putting some structure back in the market so that we don't have a failed banking system. would you like to comment? >> you talked about the improvement in the economy. the graph illustrated. so does the number of people working every day. i think that the -- there is no doubt that the steps we have taken through wall street reform have made our system safer and we have the economic recovery underway which is why everything is getting better. better. but i don't think we can do is rest comfortably that there is no problem out there to worry about. what will what we will happen is we will get to the down.of a business cycle.

we owe it to the american people to make sure we are in a position times get tough that we don't go back. that's exactly what we're doing. >> i doing. >> i completely agree command that's why you need the loan-loss reserve so you can withstand the downturn. we take in the consideration of precautions. if i were my republican friends or would be grasping at this liquidity strong. i want to thank you and the president for putting this economy back on track. >> the time of the gentleman has expired. >> thank you mr. chairman. a pleasure to have you here again. i want to talk about the ultimate goal. reduce risk in the market. >> make sure we have financial stability on my mind.

>> financial stability can be accomplished to the elimination of risk. >> focus on instability. >> and let's talk about stability. we need to make sure our institutions have a proper roadmap. right now we have a designation of the city that leads to an institution trying to find out how they get out. i give you credit for what happened in february and an opportunity to try to get a decertification. my concern is why don't we have in place a roadmap from a roadmap to a precautionary measure to prevent them from being designated as city. >> you know the process is not one where we assume everyone could be. to go through to go through the funds that present themselves because of their size complexity command structure. >> are we not focusing on more of a treatment for the

chore instead of the prevention? >> the reality is no two firms present themselves an identical place. the way we go through the analysis looks at each farm. >> and the proactive way to mother being looked at. we would not have to have the designation. >> let me move into something more quickly. asset managers are pretty important and i have concerns about them being declared. for example in dodd frank some of the criteria to include our leverage, the extent and nature of the off-balance-sheet exposure to the degree of reliance on short-term funding. what is a what is a leverage ratio you would consider to be worrisome? >> i don't want to give you a single number. >> the smaller the better.

five to one may even be a little bit of a concern. >> it depends on the investment. >> a combination. >> asset managers won't have a greater than one after one risk. then god has 1.04 to one which is almost miniscule. that should be a consideration that would prevent them from being considered. >> it certainly a factor you would have to consider. we have made our focus looking at the activities that contain the most risk. >> they don't the activities that contain the most risk. >> they don't contain risk. they don't even have any collateral. >> asset managers have different business models. >> the leverage is miniscule. you become reliable. if one fails and they bear

the brunt. >> i'm not sure what you mean. >> they will bail out. >> i'm not sure what you are referring to. >> let me move on to the impact. if an asset manager were to be deemed. you realize this and cost compliance but asset managers deal in mutual funds, 4 o 1 kays, investment. american action forum capitol requirements necessary to raise the cost is much as 25 percent. over the life of that program over hundred thousand dollars. taken into consideration? >> obviously they have an interest in making sure they have access to their savings when they need them. >> a significant impact.

>> i don't set out with the presumption that they should or should not be designated. complete the analysis and come to a conclusion of what risk factors we're looking at. >> i agree. permitted measures in conjunction so that they can prevent that risk of being taken and ultimately continue. >> my sense is the asset management industry is offering its view as we go through the process. >> very strongly. my time is up and i yield back. >> the chair now recognizes the german from maryland. >> thank you for being here. i want to associate myself with the comments that were just made. i thought i i thought i

heard my colleague asking you about the prioritization of my debt. i want to make a comment. it seems to me that is a misguided idea. the best credits in the world never prioritize debt. berkshire hathaway exxon mobil, terrific credits they, they are treated the same with great flexibility as a result. forced by the market to prioritize debt so that people no exactly what they have and when they get it. it strikes me as a misguided idea to force the government into a position where was signaling to the world that we are weak credit. >> i cannot agree more. the technical question i could you pay principal and interest is the. if you pick and choose you will default on something. >> and present very differently. >> if you reach the conclusion that you had to

because it would be disastrous not too is to is a terrible place to be because you are still in default. >> the 2nd question is about the liquidity crisis.

>> october 15 the fact of any kind of regulatory environment. >> the people running these environments. >> sometimes perception becomes reality. >> i have heard i have heard them say that voelker is the reason. >> treasuries. >> in treasuries you have to question that something in the leverage rules.

>> it used to be no matter how many treasuries you had. now you kind of do. >> i think that it is important for us to maintain the deep treasury market has something that is part of what makes our dollars part of the world reserve currency. i do not see a weakness but i can assure you, a day does not go by where i don't ask questions. >> xm bank. i talked about ideas were institutions are required to sell off portfolio so that there is better transparency do you support do you support that approach? >> am not familiar. i be happy to look at it. the bank does enormously important work. >> and i agree with the position.

additional transparency. >> i be happy to look at it. >> the time for the gentleman has expired. the chair wishes to alert members to accommodate the secretary schedule. we we anticipate clearing three more members of the cube presently. mr. stivers, passenger, and bar depending upon whether or not someone else walks in the german from ohio is now recognized. >> thank you. >> i'm well. >> you already answered questions for mr. duffy and mr. ross and mr. fincher. i want to ask a couple things. you don't think there is a problem. the world is rainbows and unicorns and everything is good. >> i think that's i think that's what i said. >> he said there was no problem liquidity. >> asset i think i think we have not seen problems in the treasury market.

there are issues about liquidity that require attention and i went through and some length the kind of issues we need to pay attention to. >> great. let's talk about that. you believe we need to give it attention. as your role have you director the office of financial research study this problem and how the policies that are completed and proposed might come together because a problem more have you ask them anything about? salus would love to see them do a study. i'm curious if you ask them to do study. >> they are doing work in this area. they have issued other work that is ongoing. it is a question we have to ask for domestic finance, security.

i think there's a serious conversation in this area. i have tried to make clear what the relationship between the safer sound the world. we must be open but not assume. >> i do not disagree. that's why i asked if you would have been do study. when can we expect to see a study? >> i would have to get back to you. >> please do. that is the job. it is called the office of financial research. they are the most logical place. >> they have done a lot of analysis to understand what happened on the day. they are very much in the space of helping to make it possible to look bet