quorum call:

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quorum call: quorum call:

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mr. barrasso: mr. president? the presiding officer: the senator from wyoming. mr. barrasso: thank you, mr. president. mr. president, i ask unanimous consent that the quorum call be vitiated. the presiding officer: is there objection? without objection. mr. barrasso: i ask unanimous consent that the senate recess until 2. a 15:00 p.m. with the time in recess counting postcloture. the presiding officer: is there objection? without objection. under the previous order, the senate stands in recess until 2:15.

>> it's -- we couldn't have foreshadowed a title based on recent events and grateful to have secretary lew to decipher it. previously he served as the white house chief of staff in the obama administration and held various positions in the obama and clinton administrations and with house speaker o'neil earlier in his career. all of you have been well aware of the committee's efforts for the last five years to try drive

reform to the congress and secretary lew is absolutely instrumental in helping push this long-overdue reform. and on matter of law of the committee, i would like to express sincere appreciation for your leadership, mr. secretary in that regard. [applause] >> i will leave it at that and invite secretary lew for opening remarks. [applause] >> good morning, and thank you randy for that kind introduction and for your leadership within this great organization. it's a pleasure to join all of you again. it's important and timely discussion. i would like to start with referendum of european's union.

we respect the decision of voters and work with partners to ensured continued economic stability, security and prosperity in europe and globally. in recent weeks i've been in regular contact with my counterparts and financial market participants in the ek, eu and around the world and we will continue to consult closely in the days, weeks and months ahead. the institutions were born more than 10 -- 70 years ago. they helped ushered in a period of unprecedented economic gains, lifting people out of poverty and creating conditions for a more peaceful world. we must all build upon the shared responsibility by recognizing that we have the capacity and political will to boost growth and overcome the challenges facing the global economy. we must also continue to reform

and improve the broader global economic system including the institutions to confront today's challenges. in policy makers must redouble efforts which can often seem removed from the day-to-day lives of citizens. as we move forward it's important to stress that uk and policy makers have the tools necessary to support not just financial stability but also to promote economic growth. it's incumbent upon major economies to use all tools available, physical -- fiscal, monetary and produce economic growth that has been lacking worldwide. as we work with our partners around the world to advance the critical work we are reminded again of the importance of u

leadership in the global economy. sustaining that leadership and adapting to the challenges of our time remains is dispensable to the well-being of american workers and families as well as the ability of the united states to project its values and achieve its larger foreign policy objectives. and to that end, we have worked tirelessly to build and strength our position while using it to promote policies that fluster economic growth and opportunity both at home and around the world. when i spoke to this group last year, promotion authority, the export-import bank lacked congressional authorization and the past for approval of imf quota reform remained unclear. since then, we made significant progress, congress passed tpa last summer and in the fall we finalized negotiations on the 12-nation historic transpacific

partnership. as a result of the concerted efforts of our team at treasury and many of you in the room, congress finally approved imf quota reform. we could also add including iran nuclear deal reached last summer and landmark agreement reached in december. these are meaningful accomplishments but as i noted recently in a foreign affairs essay the case for continued u.s. economic leadership faces a wide range of challenges. in order to confront those challenges and sustain our position that are rapidly changing world we must take influence and valued our citizens and the world. history has shown that u.s. economic leadership is vital to the well-being of american workers and families an essential tool for projecting values and achieving broader

foreign policy objectives. those benefits are the central motivation behind the transpacific partnership which will level global playing field for firms while getting other countries to meet a high bar on environmental, labor and intellectual property standards. it would open global markets by connecting u.s. businesses with consumers and many of the world's fastest growing economies. that's why the president remains committed to to resecuring congressional approval this year. we also continued to make progress on the transatlantic trade partnership. similar associations are under way in reaching agreement that would deepen integration and influence the development of the global services architecture with countries representing roughly 70% of international services output. going forward, we need to ensure that our global trading system continues to set high standards in terms of engagement and more robust protections.

u.s. workers need to be able to compete in a level playing field on labor, environmental and ethical business practices. beyond quota reform, we continue to work to modernize the imf allowing for more candid and forceful review of issues like exchange rates, turn-account balances and short falls and global aggregate demand. and we need to ensure that the world bank and the regional development banks have to resources and expertise to address today's complex challenges and promote the kind of us taken development that benefits all people in all communities around the world. in the international financial regulatory system reforms have already resulted in more rigorous capital standards, greater transparency and stronger tool tools for struggling institutions but we must continue to focus on implementation and potential emerging threats. financial institutions in the u.s., uk and europe just last week demonstrated greater resilience because of the

progress we've made. as we remain vigilant we must also keep pace with advancements used by adversaries. the u.s. and partner countries have stepped up efforts to combat terrorist financing, corruption, money laundering and other financial crimes as they pertain to isil and other threats. finally, we must all commit to making each -- even greater market to address priorities such as open investment, improved implementation of tax, policies and greater financial inclusion. we know that a system built on cooperation and high standards of economic governance works. earlier this month i returned from the strategic economic dialogue in beijing where our discussions lead to commitments by china. united states and china are the two largest economies in the world and have been the primary engineers of global economic growth in recent years, which is

why it's so important to maintain close engagement with china as we continue to press them. and we challenged china's policies to disadvantage firms and workers including currency practices, trade barriers and excess capacity and industrial sectors. china committed to undertake further steps to resolve domestic deal capacity and outline the package of restructure form. all signs are promising, we know that more remains to be done to further open china's markets and encourage investment specifically with regard to removing discriminatory trade and investment barriers. importantly, we also received commitments from china that new organizations like the asia infrastructure, investment bank

would conform to the high standards sets by existing international financial institutions. for more than 70 years, the institutions have served our global economic askings by providing cooperation. this has contribute today both greater economic well-being and geo political stability. thank you all for coming to these meetings and for what you bring to these discussions and i look forward to taking randy's questions and your questions. thank you very much. [applause] >> thank you, mr. secretary.

>> well, let's start with brexit, the news of the weekend. i think it's fair to say that the only certainty of this state is uncertainty which implies plenty of market volatility to come and many would characterize brexit as a political black swan events certainly for the markets, that's created a political crisis in the uk, crisis for eu and certainly to be determined economic, financial, social, geopolitical trade repercussions to come. i want to ask both short-term and long-term, the u.s. financial system is in much better shape right now. we have banks much more capitalized and far less than

they were in 2008. the u.s. economy has been to be resilient as well. are you concerned at all about short-term risks to the financial system and how do you potentially see brexit affecting u.s. economic growth long-termer term? >> thanks so much for having me today. obviously we have been looking at the potential outcome of the vote for some time, working closely with our counterparts and finance ministries and central banks in europe and around the world and unlike natural disaster or a surprise, everyone knew the vote was happening on thursday and everyone knew that it was going to go one way or the other. i think that if you look at the preparations that were made, they reflected how much stronger our financial institutions are than they were in 2008 and how much better our system of communication and cooperation is

than it was in 2008. on friday, you know, there was certainly volatility. it's a big change. it will have implications in terms of short, medium and long-term developments particularly in europe and uk. but you didn't see markets operating in a disorderly way. you saw them operate in a orderly way. the fact that there are moves in asset values is a reflection of how change is absorbed by markets. i think we have to assume that we are entering a period of change and regardless of the timetable that the uk and the eu work out in terms of next steps, that period of change will take some time. when i think about the u.s. economy, you know, i think that it is source of strength in a

weak global economy, our economy is 85% roughly domestic economy and the bulk of that is consumer driven. so we have resilience built into our economy but we are not cut off of the world. our economy has been growing notwithstanding from the global economy and this is another head win. what we need to do in united states stay focus to keep the u.s. economy growing and what can we do to address anxieties of growth that are present in the united states and have been for some time and what can we do to work with colleagues around the world to use policy tools that they have to promote growth in an environment which is now influenced by the change of last week's vote. i think policy makers here and around the world continue to have tools. the challenge is for us to use those tools effectively and from

the -- the events that will unfold -- to unfold in an orderly way. >> very good. well, let me shift a little bit more towards our program theme, the spirit of multilateralism and i wanted to have you give us a litmus test of current level of interest, the current levels of u.s. interest and commitment and multilateralism. there are some who might string together this rejection of -- of the eu for british citizens as a rejection of globalization in some degree, widely populist movements growing throughout the west. and you can even consider potentially a merging actors whose middle class has benefited greatly over the last several decades, looking to try to gain influence by establishing

institutions such as the aib and the brick's bank. the underpinnings of the story of multilateralism to be had? >> i think as i wrote recently in a foreign affairs article. if you look at the history of u.s. views toward multilateral endeavors, it has always been, you know, an up-hill battle, you know, from woodrow wilson and the league of nations to the formation of the brenton wood organization. i think what we have learned in the last 70 years, how important the commitment of multilateralism has been to promoting a stable growing economy that has lifted people out of poverty and created opportunities for countries to work together in a peaceful way. if you look at the areas of the world where growth has created stability and imagine a different picture a world that

didn't have that, it's not a better world, it's not a safer world, it's not a world where american values have a better chance of prevailing. u.s. values are seen in all of these international financial institutions. we helped build them and leading role in them and when we promote things like fair trade, when we promote things like high standards on financial labor and environmental practices, that reflects american values. when we work with our colleagues around the world, other nations around the world to try and do things like bring pressure to a country like iran and north korea, our ability to do that is in part related to the centrality that the u.s. plays in the economy both by being the world's reserve currency and by being a moral leaders in these institutions, you know, which are not just financial institutions. i think the american people benefit greatly from that. where i think we have fallen short and i say all of who

believe in multilateralism is translating to day-to-day lives of people who are not thinking about the global economic stage, they're thinking about their job and paychecks and what the future means for them and their family. i believe that these commitments to multilateralism have made a more secure future. but we have succeeded in translating that and part of the problem is that we have an underlying division which are not just since the financial crisis. it's been developing over decades where distribution of opportunity and economic benefit has groan increasingly desperate people at the top and people at the middle and people at the bottom. i think that we need to focus on translating translating the economic benefit from better global growth to day-to-day lives of working people. the answer isn't to shrink the pie. the answer is we have to make sure that all have an access to the skills they need to compete, to the infrastructure they need to have a better future and to

-- to have the rising tide truly lift all boats. >> makes sense. i want to ask one more question before we open it up to the audience and that's on china. you mentioned in your remarks you were recently there for the strategic and economic dialogue. how do you view the progress being made in china's economic rebalance and there's a lot of risks out there, what areas really concern you about pillovers within china's financial system? are you concerned about the overall levels of debt floating around in the system? ..

i believe they have the tools to manage the transition. it is clearly one of the two largest economies in the world. it has a lot to do with the global macroeconomic position. if you look at china's interconnection with the world,

as american or u.k. financial institutions. the principal spillover in the macro economic spillover is not through financial channels. it's not to say they don't have a challenge in managing the overhang of credit. they have to make some tough, tough decisions about what institutions have to be restructured or eliminated and what institutions they work through to protect. they do have some systemic internal issues they need to distinguish. that doesn't spillover globally unless it means that the economy of china is going to have a hard landing. i think the big financial can learn, the big political concern is china have a soft landing. i don't believe china leveling off to a sustainable level of growth in the single digits if they surprised bad thing.

every new double-digit growth rate could go on forever. the question is how they get from where they were to where they are going. at the beginning of the year there was undue pessimism about china, which was largely driven by a lack of confidence that they would navigate the path. you look at the tools china has. they have an enormous fiscal capacity. they have enormous foreign reserves. they have a political decision making process where they ought to be able to execute hard choices. that is something that if they can get from here to there i believe they can manage a soft landing. i think the world will be better off with a stable growing china because as i said in my remarks, the united states and china have the key to global growth in the last decade. >> i think we have an opportunity to open it up for a couple questions. we have questions in the audience here.

we will go to committee members here. one year and one bear in an ian talley of "the wall street journal." up front here. >> maybe we can ask both of these questions one after the other and let secretary of the respond. >> thank you. george mason university. my question concerns china. i am just wondering what fiscal headroom you believe china has too stimulate this transition to domestic spending economy considering that their revenues as a percentage gdp 22% is rather low. so what tools would they have -- what fiscal tools today have to put more money in the hands of consumers and at the same time, managed to supplement the fiscal revenue side, which is actually

week for an economy of it dies. >> mr. secretary, you mentioned the paris climate agreement. i wanted to ask you what opportunities to seek for u.s. leadership at the grade climate and's pledged 3 billion. we actually spent 500 million, but i understand things are stagnant in terms of operations. what do you think we can do to get that going? >> on the china peace, while the private level of indebtedness in china is quite high, government indebtedness is quite low. just in its most recent decisions that were announced at the national people's conference a few weeks ago, china decided to pursue an expansive fiscal policy by increasing its short-term borrowing.

in the long-term, they clearly made a revenue place that can support sustainable levels of spending. in terms of short-term actions they take to trigger economic growth, particularly growth in a transition where you will need a cushion as they go through some pretty disruptive change. i believe i'll have ample capacity. i actually think the issue is not so much do they have the headroom, but do they use that capacity to drive forward transitions are you more consumer oriented economy. the risk of using that had room to reinforce investment in old industry and all factors is actually more of a risk than do they have the headroom to pursue more stimulative fiscal policies. we have encouraged china to do things that put money in the hands of consumers as they make

moves. they have two do structural reforms and fiscal stimulus. it is not either/or. they need to change much about the organization that their economy in terms of services versus industrial capacity. they need to allow for market portions to play an increasingly dominant role in the allocation of resources. but they also need to create more consumer spending capacity and cushioned some of the transition. we have engaged for some time on these issues. i believe they are moving in that direction. frankly i think they could move a little bit more in that direction. with regard to the green climate fund, we have obviously been in earnest supporters out there. it was very important to us to get the u.s. contribution in place as quickly as possible. we achieved that with last

year's budget agreement. we have the resources to do so. and now we are at the point of unveiling the institution and moving into the government space. i can tell you that we are committed to getting it off the ground quickly. we are committed to having it have high standards and to promote both alternative energy and resilience. the fact that we were in a position to make the contribion is key to ongoing u.s. leadership. having this conversation at the imf, i am deeply aware that when the u.s. makes a commitment and it takes a long time to keep it calm and makes it much harder to maintain maximum pressure to achieve our policy goals. we've done pretty well with an attenuated. of the world waiting. in the case of the green climate fund, critically important with the new program for us to be on

the ground with the financial commitment so we can help drive the organization of it and have it reflect what we think the right course ahead is. i'm pleased we were able to make the contribution that we are going to roll up our sleeves of partners around the world to get it into action. >> "wall street journal." mr. secretary, forgive me for hitting brexit again, but it seems to be a continuing to unfold event. firstly, what are you advising your colleagues or counterparts in the u.k. and europe? it seems there might have a new prime minister willing to declare article l before october. chancellor merkel is saying this is going to be a slow process. what is your advice there? secondly, are you aware of the liquidity provided by central

banks. are you aware of any specific liquidity operations or is this just to swap lives open? finally, nope, it is gone. >> initially i would have been able to remember. look, i have been in very close touch with my counterparts as i've mentioned, both finance ministers and central bank governors, not just theirs tonight, but for the weeks preceding and we remain in touch going forward. i think that we are in a period which will now be defined as the period of change. it is not going to be a day or a week. it is going to be a period of change. i think that the question of the pace at which the formal discussions will take place, the united kingdom and the e.u. have to work out on a mutually

acceptable basis and while we all need to do is keep focusing on what we can do as policymakers to continue to promote growth, shared stake in economic growth and economic activity and we have to do that within our own borders and we have to do it internationally. we will be meeting at the gh 18 in a few weeks in china. i had a good conversation with the premier of china yesterday. it is not just a question of what do people say the morning after. it is how do we as policymakers show the political will, to use the tools we have too continued to drive economic growth during a period of change. you only have to, but i forgot the second question already. i'm liquidity, it was very important that the united kingdom prepared in it there and

institutions had a great deal of liquidity if they needed to to step in with the additional liquidity and the central banks around the world have worked with the bank of england to make sure that there be of liquidity is needed in all currencies. we have seen quarterly market conditions were liquidity needs have been provided for. i think it is not to say that there haven't been -- hasn't been substantial volatility and market, but it has been volatility and well functioning markets, which is actually very important when you think not just about the days bosses him about the questions of ongoing financial stability. i think we can't be -- none of us can predict with certainty how the day will end, the weak will and or the month will end. i think what we have seen from

last friday through the early market hours today reflects what i'm describing. >> a couple other audience questions. >> nanci jacklin. >> martin appel from the council of scientific society presidents. the world is making rapid change. the united states is changing what caused you to use the word work, what the workforce is throughout the digital instrumentation in the economy and so forth. are we using the right measures to talk about that productivity, talking about growth when in fact it may be 40% of our people are free agent working at home and creating economic value, but not following the models and the policy we've been using for so long?

>> there is clearly been a lot of change not just technology, but as you say modes of business organization. whether or not that is all measured accurately is a question that probably won't be resolved quickly. in the 1990s we haven't seen at the time the full benefit from technology, even though we knew it had to be there. except with the lag. i think that whatever the measure is, we know that the things we can do as policymakers to promote more innovation, to promote research and development, to promote more training to build infrastructure, does all contribute to better economic

activity in the future regardless of the form of business organization or the particular technology that is deployed. i don't think we as policymakers should wait until until macroeconomists come up with a new theory of gdp measurements. i think we need to stick to the things that we know, which are then economy of the future is going to need to have roads and ports of work. work or training with the skills for a modern economy and it is going to need to have a sense of fairness, where there isn't a growing sense that the benefits of economic growth just sit with investors at the very top and don't make their way to paychecks. those are things we deal with regardless of our macroeconomists come out over what both the amount.

but thinking about this. >> nanci jacklin, former u.s. executive director at the imf. you talked about countries needing to use all of their tools to promote growth. i think we all know of the world continues to rely exclusively on monetary policy, the story is that going to have a happy ending. so now we have another crisis that we've got headwinds for the u.s. and the global economy. the question is whether this crisis is sufficient to be able to deal with the political paralysis in the major industrialized countries in dealing with fiscal issues than trying to create some kind of fiscal policy complement to monetary policy. do you see anything in terms of the upcoming meetings to give you enter on economic and political environment to see any hope at all and in fact dealing with headwinds as opposed to

letting them down. >> earlier this year we had a g20 finance ministers meeting in shanghai and just a few weeks ago we had a g seven meeting in japan. we discuss these issues at considerable length in the communiqué out of shanghai reflect to a new consensus. it reflected a commitment to using a policy tools to promote growth. it didn't reflect the kind of debate over austerity versus growth that was characterizing past discussions. the situation in this each country will be different. there's different amounts of fiscal space, different names for different structural reforms in different extents to which he monetary tools have been used and where economies are in terms of the appropriateness of changes in monetary policy. i don't believe there is a one-size-fits-all answer to using all the lovers.

what i do know is to have the best economic performance and each of us needs to use the tools we have. overreliance on anyone is going to lead to a sub optimal outcome. in the aftermath of the gh one a commitment to use all tools, you actually saw movement in a number of key economies. just weeks afterwards and committed to using greater fiscal stimulus. canada has embarked on a new set of fiscal policies and structural policies. china has also embarked on new structural reforms. in europe, while there hasn't been any formal announcement to relax fiscal tightness, you have seen two things happen. one, relaxation of the target in countries that are heavily burdened by the refugee crisis and a willingness in countries with fiscal space to spend additional resources to address the refugee crisis.

europe has begun to use some of its fiscal space for a very specific reason. nonetheless, the macroeconomic consequences. so going into shanghai, there were some people who thought we could have some kind of concerted decision. this isn't a moment for every economy to move in exactly the same way at the same time. it is the time for each economy to look at what we can do to use their political systems and out of our economic levers to create both the latest hundred greatest policy of domestic growth and contribute to the global economy. supply an affair mana demand in the economy and we need to have other economies doing more. there is increasing focus and using all the tools. i will not back away from making the case that the time.

it was true before the vote and after the vote. what we can do is be in a period of uncertainty and great defense policy makers are going to stand back. not what we should do and what we have been doing. this deep engagement to help for either outcome last week. i'm going todd saltation. we will meet again in a few weeks. i don't think the spirit of change will remark by one moment when everything gets turned around. it's a question of just continuing to move things in the right direction and if we do that, i believe we can help create more growth globally. >> one more question.

>> neil rowland, and why business news. how does brexit change u.s. regulators approach to try and harmonize regulations transatlantic link and soon you will face not just one entity with the e.u., the two entities and more immediately you have lost jonathan hale as your point then over there. >> you know, we have worked hard over the last three and a half years that i've been at treasury. for the number of years before that, to work with the fsb, to promote high standards and financial regulatory approaches around the world, we have worked bilaterally with the bank of england, with european institutions, with institutions in other parts of the world.

we will continue to engage with our counterparts. we should all walk away from this last week with a heightened understanding the benefits of having high standards. high standards of capital, resolution. there's nothing we declare a job done. and they won't say exactly as the days. they will continue to evolve. this increase in discussion amongst financial authorities and the challenges of the future both in terms these conversations have been going on and will continue to go on. we have had robust mechanisms to continue to work internationally to have high standards. >> i want to wrap it up with one final question and bring it back to the spirit of multilateralism because here we are coming up

next we've got david lit den common in front of us. the traditional institution as mutually reinforcing nations and we would like to hope that they regularly cooperating we all know that there is room for improvement across them. now we have a new one across the pond, to in the infrastructure bank and specifically what can the u.s. do to help the bretton woods institutions promote a harmonious development approach? what specifically can we do from the u.s. leadership? >> we are doing quite a lot from the u.s. leadership standpoint both in terms of the leadership role within the institutions, what we do bilaterally to complement what the institutions do and be than when we are not

part of an institution by providing counsel guidance in a public context. we were talking earlier about the green planet sun. the u.s. has been a leader in driving towards countries coming together, using the existing resources, but supplementing them with new resources and working as a global community to balance overdue multilaterally and bilaterally can do with one of the great challenges of our day. but the new institution like the age infrastructure bank, we were deeply engaged in discussions with potential participate in about how to make sure that institution, which is geared towards dealing with a very real problem, a lack of a shortage of resources and infrastructure around the world. but how to do it in a way that complements the high standards of the imf in the world bank. i think as a result of our interaction with the designers and china and the other countries who have joined the

institution, the commitment that have come out, partner with the existing, old international financial institutions and seek to meet standards on the same order, that is very important because getting more resources and at high standards is a good team. we set back from the beginning. the united states has a unique role in the international financial architecture is one of the principal designers of the system 70 years ago. we also have a key role in recognizing that as the world changes, we need to have inclusive role for emerging economies, which is one of the reasons the reform is so important. it wasn't just about money. it was important to have adequate resources to be able to deal decisively with whatever comes up in the global economy. it is about money and economics. it is also about the investment

the countries around the world have in the international architecture and sending the message that you need to be part of the system with high values. you are respected and you are at the table. the response i've gotten around the world to the approval eyes reflect the importance of that. we have a sink made clear that our actions back up our words and terms of our commitment to ongoing u.s. leadership in these important institutions. that's one of the reason i am here with you in the committee because this is a group that worries about it day in, day out and just one of the challenges to make that case so that it is some thing to people who don't deal with institutions public of what it means in their day-to-day lives and translating it into that language is something all of us have to take

seriously. >> we've been fortunate to have your investment two years in a row, and especially this year in light of circumstances, we are very pleased you could join us. if we have a round of applause for the secretary. [applause] >> thank you very much, mr. secretary. [inaudible conversations]

[inaudible conversations] >> i got it. i got it. we are just a couple minutes away from the senate coming back in at 2:00. we are hearing that defense secretary ashton carter and joint chiefs of staff chairman joseph dunford will have an all senators briefing on isis at 4:00 of the senate could recess at that time. earlier today, british prime minister david cameron addressed the house of commons about yesterday's meeting with european ministers. that is the first meeting since the u.k. spoke last week to leave the european union. the prime minister also criticized labor party leader jeremy corbin. >> government figures released yesterday showed the number of children living in poverty has

jumped by 200,000 in a year to a total of now, a disgraceful total of 3.9 million children in this country living in poverty. does he not think he should at the very least apologize to them and the parents failed by his government and do something about it so that we reduce the levels of child poverty in this country. he asked about fewer people in 2010, fewer people in absolute poverty is in 2010. it is looking for excuses about why he and i were on about the referendum. he should look somewhere else. i have to say he talks about job insecurity and might be in my

party's interest to sit there. for heaven's sake, go. [shouting] >> the bbc reports a challenge to the leadership is expected following a no-confidence vote by mps. the labor leader says quitting would betray all the members that backend. you can feel the prime minister's questions on c-span.org. the senate in recess until 215. until then, some of the debate that occurred before members voted on the puerto rico debt bill. >> on this debate, we are about to ask unanimous consent that 10 minutes -- nine minutes be given to eight minutes to the supporters of this legislation. senator en