you said you were given assurances. is that what you relied on? >> we have a large number of executives i have great confidence in and when they tell me they are doing their best to produce all relevant assets -- >> you rely on those experts to tell you that, that is enough for you? i close by saying, mister chairman, the commissioner says he should meet the same standard as the taxpayer, if a taxpayer was sitting there i think you know he would be in a world of hurt. ..

you i know that has been discussed today. the question not whether you, commissioner have been a perfect administrator, i'm not saying you haven't. that is question for ways and means committee. they oversee the irs. and for the president who appointed you, not for this committee. the. the question we're called.whether there are high crimes or misdemeanors that warrant constitutional remedy of impeachment. that would be high crimes and misdemeanors you committed or not that people think your office or predecessors committed. we heard in the last hearing although high crimes and misdemeanors need not be limited to criminal acts the commissioner's critics need to show he acted with some deliberate bad faith. they have not done so. inspector general, department of

justice, finance committee reached same conclusion. it is regretful since you're here but since you're here, i want to you ask, has the internal revenue service been funded adequately to perform its job of catching tax cheats, by catching tax cheats or the threat thereof gotten the revenues that are necessary to provide the services that government should be rendering? >> no. >> how much is the irs budget been cut recently? >> the irs budget since 2010 been cut $900 million even though we have a 10 million more taxpayers and wide range of statutory mandates to implement. >> been cut $900 million? >> yes. our budget today is $900 million less than it was six years ago. >> has anybody taken that figure, when you cut the irs $900 million, how much ref you

knew is lost because of the lack of ability to audit? >> we estimate and provided that information to congress that we are leaving $5 billion a year on the table and that is not a guess we might find people. $5 billion in audits we can't undertake when we know there are difficulty. >> we cut $900 million. we haven't saved $900 million. we lost 4,100,000,000? >> correct. >> does that contribute to the deficit? >> yes. >> if you cut irs by that much money, and y'all are kind of the whipping boy of the my friends on the other side of the aisle who don't like, think that government services are so necessary, the government has to fund entitlements, quote, quote. so if you don't have the money and we lose $4,100,000,000 we're

hurting the person at the bottom, people that need government assistance not an entitlement, whether it be staff payments, or it's energy, liheap, folks not getting through the winters without freezing or not getting enough food for their children, our public schools or public health, the cdc and nih looking for curse and cancer for alzheimer's and diabetes and heart disease and stroke, every disease in each and everyone of us one day, those folks are getting hurt when they attack you, they are attacking nih, they are attacking cdc, they are attacking people who need staff payments for to ease hunger and their children and wick payments and public education and public health, is that not true? >> i'm not an expert where the

money would go but clearly there is less money to be provided or prep rated or cut the deficit. >> it is just incredulous to me, you have done nothing to warrant this hearing but your office is under attack because government is under attack and the government at that is under attack is the government takes care of the poorest and least of these. those that would be the most precious in the eyes of people who look at humanity as at a sight of seeing how we treat others. if we treat others as we should treat ourselves and can follow the golden rule. that is unfortunate. and with that i yield back. >> chair thanks the gentleman. recognizes gentleman from iowa, mr. king, for five minutes. >> thank you, mr. chairman. i thank you for coming here to testify. i think this is important discussion this country is having right now about reliability within our government agencies. the first question for me would be, did lois lerner have any

kind of a software package or any kind of electronic search that excluded or identified the conservative groups that far outweighed the non-conservative groups that asked for not-for-profit status. >> clearly all of this started with the i.g. report noting that, he called it improper criteria. there were totally improper criteria used to select organizations apply for c-4 designation for further review. those organizations predominantly were conservative organization. >> was there an electronic system that sorted out these applications? was there any database, any matrix of any kind, any paperwork of any kind other than a stack of applications? >> my understanding there were ultimately involved be on the lookout list for organizations with these names in their titles. some were progressive names but bulk of applications were conservative. it was that list, be on the look out list of any organization

with these names in their title. had nothing to do with political philosophies or views, if there name was in the title they were selected for that review. >> who generated that be on the look out. >> what? >> who generated the be on the look out memo? >> i'm not expert on what was going on before i got there but back and forth in lois lerner's office and front line trying to figure out how do we handle these and that list was developed and there was an attempt to stop using the list. then the list got used again. >> we know that the ig confirmed targeting that had taken place as well. i would ask you, have there any, firings, dismissals, have you identified anyone with the irs that had violated law or policy or protocol in such a way that it was worthy of termination? >> as i noted all of this happened well before i got there. why i'm here. as i stated starting with the acting commissioner down everyone in that chain of command is gone.

>> everybody in the chain of command gone? any remaining culprits in the irs today? >> none pointed out had leadership and responsibility are gone. >> if you identified them, that would be your duty going forward as well? >> yes. >> and then i would like to take to you martinsburg, having a little trouble understanding that and that is there were 424 tapes that were discovered in storage in martinsburg in a shipping center that i view as warehouse of about 1900 square feet. i know about how big that is. so that night shift decided they would scrub those tapes, 422 of the 424 success fully. can you explain to this committee how long it would take to process 422 tapes? >> i don't know. but i assume it is relatively prompt process. i would note the tapes were sent to martinsburg. they were originally in new carrollton, the bulk of

related tapes were erased couple years before that. these were remains tapes. they were in a closet. ig said they were identified as junk and they were sent -- >> do they process them one tape at a time or multiple tapes in batches? >> that i don't understand or i don't know. we can find out. >> i think that is important how long would it take you to put a tape in and scrub it, couple minutes and another and another and get 422 in eight hour night shift. do you know names of individuals that processed tapes? the. >> i do. >> they're still working for the irs? >> i can't talk about personnel but ig investigated them, clearly provided a report and i can't say anything more. >> i'm not asking for their names. are they still working for the irs? >> my understanding at least one of them is. ig noted it was honest mistake and we turned it over to our people to review. that personnel reyou view went on but the ig said they made an honest mistake. it was not anything intentional.

they certainly didn't mean to interfere with anything going on. >> ig in testimony before congress seemed a bit incredulous the string of coincidences could be put in that havings and voids and say cans sys and information that we have. i just reflect on this, commissioner. is that if i would take the timeline of the irs activities throughout this thing, there are many of them sitting around in this committee today and i overlay that over the timeline of things that went on with watergate, i ask you which one would sound more improbable? >> again that is judgment people could make. i think when there is 11 minute gap and no intervening information provided that is more significant than when there are tapes erased and 24,000 emails are provided from the same period. if we had some information about that conversation on the 17 minute gap they would be more comparable. there was no information there. it was all lost here.

the ig said 24,000 emails, but only 10,000 were from the gap period. in the gap period we produced 24,000, twice as many emails as lois lerner. >> i would submit the opposite conclusion myself but i thank you commissioner, and i yield back, mr. chairman. >> gentleman has expired. chair recognizes gentleman from georgia, mr. johnson, for five minutes. >> thank you, mr. chairman. this hearing has been noticed as a hearing on impeachment articles referred on john koskinen, part 3. there are no impeachment articles and this is not an impeachment hearing. this hearing is therefore simply a total sham. the impeachment process can not begin until the 435 members of the house of representatives adopt a resolution authorizing the house judiciary committee to

conduct an independent investigation. such a resolution has not been presented to or passed by the house, rendering today's hearing a misnamed farce. this committee does a grave injustice to the committee as hallowed institution being complicit in the perpetuation of this sham proceeding. there is a reason for a careful process when it comes to the most drastic action of impeachment. it is called due process. the effort to impeach irs commissioner john koskinen is without precedent in the history of the united states. the house has impeached executive branch officials only three times and it has never impeached a subcabinet official. the so-called impeachment

resolutions contain clear errors of fact, misleading statements and baseless conclusions. the commissioner has repeatedly asked for immediate access to the transcripts of all interviews conducted by the house oversight and government reform committee during its investigation. they are necessary to answer basic questions about the scope and depth of that committee's investigation such as what witnesses were interviewed, what questions were asked, what leads were followed, and whether all relevant information was disclosed but again i would tell you that this committee has conducted no such investigation. the house judiciary committee. this is a drastic departure from our previous process. it is depriving commissioner koskinen of his due process rights.

you know, there are many case i can reasons for there to be due process applicable to this particular proceeding with the errors that are an misleading states and baseless conclusions that riddle the so-called charging document. it's due process that requires commissioner koskinen to be allowed to make a objections to any evidence, to cross-examine each witness that the resolution's proponents put forward. to call his own witnesses, to expose what he believes to be blatant factual errors in the resolution. then after due process allows for the submission of the evidence against him and his ability to confront that evidence, present his own evidence, have that evidence

subject to confrontation by the accuser, it then would fall to the reasoned and sober intellect of this committee to determine whether or not impeachment was in fact warranted. which is a very drastic action. again only taking place three times in the history of this country. so what we're doing today, ladies and gentlemen, you know, i know, the american people know, is just playing politics. we've got other things that we shoulding dealing with. the zika virus, funding for it. funding for the flint fiasco that has been unremediated for the last year. so many things for this congress to do. passing a budget. keeping the government open. we're approaching another deadline, september 30th.

no continuing resolution, no omnibus, no appropriations bills passed, nothing. and here we are three or four-days before we adjourn so that these members who talk so badly about the institution of government can go home to get reelected so they can come back next year and do nothing. with that, i will yield back the balance of my time. >> the chair recognizes gentleman from arizona, mr. franks, for five minutes. >> well, thank you, mr. chairman. mr. chairman, sometimes the track record of a particular witness to obfuscate is so strong that it visciates the purpose of additional questions and all that one can do is to state the facts and hope that they will be enough to serve the cause of justice. commissioner john koskinen took

over the internal revenue service in the wake of the irs conservative group targeting scandal ostensibly for the precise purpose of reforming that agency internally. instead he pointedly continued his predecessors legacy of deliberating stonewalling justice. after lois lerner, director of the irs tax-exempt organizations unit invoked the fifth amendment when she appeared before congress, the committee on oversight and government reform issued a subpoena for irs documents including all of lois lerner's emails. the irs chief technology officer specifically issued a preservation order instructing employees not to destroy any emails, back up tapes, or anything relevant to the investigation. mr. chairman, despite a congressional subpoena, and a do not destroy order, the irs inspector general found that the agency erased 422 backup tapes

containing as many as 24,000 emails. i know that has been stated here but all the while commissioner koskinen knowingly kept congress in the dark. commissioner koskinen was clearly aware the emails had been lost but knowingly and deliberately withheld that information from congress for four months and stonewalled the entire investigation. mr. koskinen testified under oath four different times before congress during that four-month period saying he would turn over all of learner's emails making no mention of the fact that the bulk of them had already been, quote, lost. mr. koskinen, provided false testimony and swore under oath that the information on the bulk of the backup tapes was unrecoverable. inspector general found that approximately 700 of those emails had not been in fact erased and were in fact recoverable. commissioner koskinen failed to protect citizens against the

same type of future discrimination. general accounting office report found no significant measures had been implemented under mr. koskinen's watch to assure self-serve sanities at irs don't continue in the future to unlawfully target americans based on political or religious views. mr. chairman, this entire matter was absolutely counter to everything a republic like ours was meant to be. constitutional republic like the united states of america we are fundamentally predicated on the rule of law. and there are very few things that more sham fully break faith with america and or american people or undermind their trust in their government witnessing those given the sacred responsibility to enforce taxation equally and according to the law, using the federal government's power of taxation and its attending power to unlawfully and economically destroy. for them to then deliberately open press american citizens

based on their religious or political views with these powers is an unconscionable act. and such a tyrannical abuse of power and betrayal of their sworn oath to the united states constitution, by mr. koskinen and mr. obama will be at large in their legacy because it is something that goes to the very heart of rule of law in this republic and so many lying out in arlington national cemetery died to preserve. mr. koskinen would never have allowed an american taxpayer to treat an irs audit the way he and other irs officials have treated this congressional investigation. the congress owes it to the american people and future generations and to our sworn oath to the constitution to hold the perpetrators of this tyrannical abuse of power accountable and to make sure it never happens again. mr. chairman, with that i yield back. >> chair thanks the gentleman

and recognizes the jent plan from florida, mr. deutch, for five minutes. >> thank you, mr. chairman. commissioner koskinen, since you are the commissioner of the irs i have some tax questions for you. since 1976, commissioner, every democratic and republican candidate for president, everyone, has released his personal tax returns. releasing tax returns provides voters with important background information on the candidate's contributions to his community, how he may operate his business, and i just would like to confirm a few things that we might know if we had access to the candidate's tax returns. releasing a tax return demonstrates how much a person pays in taxes, is that correct? >> you would know anytime anybody files what they pay in taxes, yes. >> does it tell how much a person gives to charity? >> to the extent they took the charitable deduction it would, vary fuss reasons sometimes people don't. >> would it give us some indication of a person's assets?

>> all you report is income and expenses. so, it would not necessarily tell you a lot about assets other than that they produced a lot of income. >> if they rouse ad lot of income we can draw conclusions about amount of assets? >> but there would be no way to know what the asset is worth. >> would it confirm how the person chosen to try to reduce his tax liability? >> yeah. you would be able to see in any taxpayer return what the deductions were. when benefit they took advantage of. >> if we had the tax return would it provide information how a person receives his income, right? >> you would see, source of income, yes. >> we may, if we had access to the tax returns have some indication how the person finances his real estate transactions? >> some. wouldn't have a full picture because you wouldn't have picture of all assets. >> some as opposed to none. is it, and is it correct a lot of this information we would be able to glean right from the

first couple of pages of person's 1040 and schedule a? >> you would have some but very high level of abstraction because would not be any of the exhibits. >> right. let me go on. as you're aware the current republican nominee for president, donald trump has repeatedly said he is unable to release tax returns because he is under audi by irs. he said audit will be released by my returns, he doesn't have problem. it doesn't matter. i have a few questions about that under current law the irs is prohibited disclosing person's tax returns, right? >> correct. >> but current law doesn't prevent person from releasing his own tax returns? >> that's correct. >> and how long can an audit go on? >> audits can go on depending on complexity for years. >> a person is not prohibited releasing tax returns while they're underaudit, are they? >> no. they may be advised not to but not prohibited. >> advised by irs not to. >> might be advised by their advisors but not by the irs. >> in fact richard nixon

released his tax returns being audited by the irs. is there anything in the law that prohibits a person from releasing his tax returns during an audit. >> no. >> does the irs, let me ask another question. would releasing the person's tax returns during the audit in any way impact that pending audit of the return? >> the release itself wouldn't. the concern sometimes by taxpayers, when the information is public there may be more information that will be discovered or provided but release itself. >> i understand. i understand. we understand, that is the concern. does the irs send a letter to a person informing him that he is being audited by the irs? >> yes. in other words, in fact as i tell people with the phone scams, if you're surprised to be hearing from us, we do not hear from us. we send you a letter. >> mr. koskinen, is there any law or regulation a person publicly disclosing the letter from the irs tells them they're being audited.

>> there is no restriction by the irs. >> releasing tax returns as we've been discussing provides transparency. it is being reported also on the front page of today's "washington post" that the trump foundation spent more than a quarter of a million dollars to settle lawsuits filed against his business. just few remaining questions there. illegal head of nonprofit to use money from charity to benefit himself or business? >> as a general matter are not allowed to. even knewment use benefits of tax-exempt organization for their own purpose. >> is it also illegal for northern profit group to make political gifts such as $25 million to the campaign -- >> can't talk about any individual activities. 501(c)(3) organizations can not be involved in politics. >> right. >> we never talk about any individual's tax returns or their policies. >> commissioner koskinen we shouldn't have to ask you to talk about donald trump's tax returns. we should be free to talk about the tax returns because as you

told us there is simply no reason he has not shared them with us, he has not been prohibited from sharing them with us. in fact there is no rule that says that he can't at least provide audit notice so that we can have some small piece of information that might help us. you're right. we can't learn everything there is to learn about his finances from his tax return but it sure would be an important start for the american people and i appreciate your being here to help clear some of that up. i yield back balance of my time. >> chair recognizes the jent plan from ohio, mr. jordan for five minutes. >> thank you, mr. chairman. mr. koskinen is the irs still targeting conservative groups? >> absolutely. that is not what the united states court of appeals for the district of columbia said. they just issued a decision on august 5th, 2016. last month. i just want to read from that decision. they said, cessation has never occurred. the irs has admitted to the

inspector general, to the district court, and to this court that applications for exemption by some plaintiffs have never to this day been processed. that sounds like still going on to me, mr. koskinen. let me read further. >> okay. >> they say it is absurd to suggest that the effect of the irs's unlawful conduct which delayed processing of plaintiffs applications has been eradicated when two of the plaintiff's applications remain pending. sounds like targeting still going on to me. let me just paraphrase that. it is absurd to say targeting stops when the unlawful conduct continues. again this is not jim jordan saying this. this is not donald trump saying this. this is not the freedom caucus saying this. this is the united states court of appeals for the district of columbia decided just six weeks ago. so you guys are still up to it, aren't you? >> as i wrote to letter to all oversight committees including yours there are three cases out of the 145 that have not been processed because they are in

litigation and our policy for years if you're in a process and then you sue we stop the process. but those are three from four or five years ago. they are not new cases. there is no new case -- >> these guys have been waiting four, five, some cases six years. you know i figured you would say and so, doesn't carry much weight with me and frankly didn't carry any weight with the court. because here is what the court said to that very argument. they said the irs is telling applicants in these cases, quote, we've been violates your rights, not processing your applications, you're entitled to have your applications processed but if you ask for that processing by way of lawsuit, then you can't have it. so the court wasn't buying your argument. they don't care what your internal policy is. they're more concerned about people's fundamental liberties and you guys continue to violate them. they go on to say this. we would advise the irs if you haven't ceased to violate the rights of taxpayers, then there is no cessation.

so if you're still doing it, if you haven't stopped doing it, then you're still doing what the court said. you can't sit there you're not still targeting. here what we got to keep in mind -- >> targeting a present tense verb. those organizations were improperly selected four years ago. >> these organizations still don't have the tax-exempt status. >> as i noted once the court made that issue, we for 50 years stopped processes we're processing those application. >> mr. koskinen, this is not me making argument, not all, heard from the other side conservatives want to impeach the irs commissioner, this is the court saying you guys are still doing it. never forget what happened here? never forget the underlying offense. the irs targeted people for exercising their most fundamental liberties, their right to speak against the policies of their government and they got harassed for doing that we heard a lot about due process from other side. you should get every bit of due process you're entitled to. how about the due process all

these people -- who got harassed for years and three groups getting harassed today. here is what happened. irs targets folks. they got caught. miss learner at first, she lies bit. it wasn't us, those folks in cincinnati. then she takes the fifth. put as premium on all the documents and communications making sure we get those. that's why we had two subpoenas and three preservation orders to get the information. you come in clean up the mess, under your watch, documents are destroyed, false statements are made, 422 backup tapes are erased and now the clincher, now the clincher, it is still going on. and so the other side can say this, we shouldn't be here today, you shouldn't have to sit through this. i'm saying why haven't we done this a long time ago? you should have been gone a long time ago. this is the record, losing emails, backup tapes, destroyed, targeting still continues to this day, not jim jordan's words, not freedom caucus words, words from the court of appeals for goodness sakes that is why

this hearing is important and move forward with the articles that mr. chaffetz submitted 15 months ago, to make sure you no longer hold office. mr. chairman i yield back. >> chair thanks the gentleman. recognizes the gentlewoman from california, miss chu for five minutes. >> thank you, mr. speaker. mr. chair. commissioner koskinen, today how many investigations have you been involved with regarding the events referenced in this impeachment resolution? could you explain your personal involvement in each of these investigations? >> when i started and again all of this happened before me, when i started there were six investigations ongoing. the house oversight committee, ways and means committee, senate finance committee, senate permanent meant subcommittee on investigations, department of justice and inspector general all had investigations going on. >> what were the results of these investigations? >> the results, earlier noted results were ig noted in its

investigation that no one had done anything purposefully to impede the congressional investigations. nobody had instructed anybody to do that. the justice department said, while totally agree mistakes made, it was not a perfect process by any means, no one had done anything that in fact raised to the level of activity subject, they basically said nobody did anything impeded investigation. bipartisan report from the senate finance committee had all the information they needed of the disagreed. there was majority report and minority report whether it was political motivation or whether it in fact was bad management and poor management in their judgment. the bipartisan report had a series of recommendations. we accepted all of those recommendations. we actually accepted all recommendations of the majority report and the minority report. permanent subcommittee on investigations closed its report. it was the first one and basically maintained that there was nothing done that was

intentional and in terms of any material presentation. everybody has agreed that it was a manment mistake a terrible mistake, shouldn't happen again. no one should be selected for any adverse activities either denial of an application or wait for time, simply because of the name of the organization. this was not political philosophy. this was in fact selecting people only by the name of the organization and everybody agreed and i totally agreed with when i started. i apologize to anyone who was stuck in the process more than a year waiting for an answer. the ways and means committee has not issued a report. oversight, house oversight committee did not issue a committee report, there was a staff report issued at end of 2014? >> in fact let's talk about the treasury inspector general. could you just describe what the working relationship is like between the staff at the irs and the treasury inspector general. are there results of the investigation by them generally

considered non-biased and reliable? >> yes. i, for three years when i was in omb i chaired intergovernmental organization of inspectors general. i've been supporter of igs in private sector. i was supporter of internal auditors. i meet with our staff, with the senior staff of ig every month. as i tell our employees, the igs around g. ao don't create problems. they raise issues before we might not otherwise know and respond postively. we responded to ig recommendation and ig reviewed it actually basically implemented all of their recommendations. they had some additional recommendations. we implemented those as well. but the ig has done a good job. i knew him, worked on the hill for the republicans but i don't think he has been political. i think he has done a straightforward job and we have a good relationship. >> one major problem here stems from the decision of two irs employees in a west virginia facility to erase the backup tapes that contained some

lois lerner emails. the inspector general found in its june 2015 report that no evidence was uncovered that any irs employees had been directed to destroy or hide information from congress, the doj, or the treasury inspector general. let me ask this. did you make affirmative order that those tapes be preserved? and did you ever make efforts to keep this information from congress? >> i know i never kept any information from the congress. i say my counsel in february of 2014 within a few weeks of my arrival sent a reminder to the i.t. department making sure that they understood that all media should be preserved. agains i said when i discovered in 2015 from the ig that those tapes had been erased i said that was mistake, it shouldn't have happened. as has been noted i run the organization. honest mistake is made on my watch, my mistake. i tell employees that. >> so you made several statements saying that those

tapes should be preserved then. >> i did not make several. it had gone through the system. there was standing order in 2013. there was reminder went out from my counsel to the i.t. department to preserve those reports. we were making a massive effort to production so you would have thought everybody would have known that we're producing documents as fast as we could and therefore we should protect them. >> thank you, i yield book. >> chair changes the gentlewoman. recognizes the gentleman from georgia, mr. collins for five minutes. >> thank you, mr. chairman. mr. koskinen, thanks for being here. interesting we have the commissioner of the irs to give tax advice. i am glad you worked with my office to help my constituents actually get tax advice one person with 700 plus thousand people having to take golden tickets at front door at 3:30 in the morning. we added another one. like to see another added there. we still have on going correspondence we have breakdown on letters i share with you. >> i'm delighted to that. >> i will continue.

you and i had several conversations. this thing as rounded over several years and we had conversations when i was member of the oversight committee. do you believe, just from your law to settle the thing, is subpoena is valid form of gettingings in from someone who is being asked, if the committee actually subpoenas the treasury or irs to produce documents that is valid form of getting documents? >> it certainly is. >> it is, should be followed, correct? >> yes. >> in september 2014 i asked you, this is not required transcript, i'm going to give you your answer back, i asked if the irs had produced all emails from holly paths. as required by subpoena, the subpoena currently right here. oversight committee i asked you the same question 56 days earlier and answer then was no and then when i asked you the question september of 2014 the answer again was no. my question to you today, have those documents been produced to the oversight committee? >> i don't know.

we've been working from the start with the committee staff to prioritize. we had a long hearing as you will recall in march of 2014 the order we would supply to the subpoena. i made it clear we were prepared to respond to the entire subpoena. that is how we ended up with committee saying first priority would be all of remaining lois lerner emails. i said we would proslide those. since then we've been working with the committee and working our way through the s&p in terms of whatever information they would want -- subpoena. >> number two on the subpoena such is the schedule supposed to produce on august 13th, 2016, it was my birthday, didn't get the gift of being produced but holly paths was first on the list to be required. holly paths is not a crass situation. her hard drive is never in doubt. why the delay here? are you blaming the committee? >> no. as i say, the committee has a vast subpoena they're asking for. some information from 90,000 irs employees.

at that hearing in march of 2014 we agreed that we would get lois lerner emails and then we would respond to committee staff as we went forward. we provided holly path's emails. all the ones from holly paths anything from this issue have been he provided. have we provided other emails she may have sent i don't know the answer to that. >> in your opinion as commissioner do you think you're in compliance with the subpoena? >> i think we're in compliance with that subpoena in terms of our discussion with the staff. we have not complete, one of the questions emails from 90,000 employees outside. i explained in 2014 that would take a long time. in our discussions with the committee staff we are not pursuing that. >> we understood that, some of these were specifically named. the four people specifically named were not vast amounts out here. holly paths has no constructive problem with computer t was hard drive. get it off of it. i know, frankly, you're a very good witness you parse your words very well. that is compliment but also the very frustrating part of this

whole thing. sounds very much like you're blaming committee staff on priorities here of the if you just, i think at this point this is the frustration that we all have with this. >> i don't mean to do that and i apologize if there is any indication i'm trying to blame the staff. all i'm saying we've been working with staff in terms of response to the subpoena, to the extent, as i say we provided all of holly paz and all pages 2,300,000 emails came out, i forget how many thousands of emails there. to the extent committee feels there is citiesal information we haven't provided we sent a note to everybody, we're done with document production in january 2015 f we haven't provided all of the holly paths other emails have nothing to do with this, committee likes those we will do that. >> as i said before again and i say now, why the american people do not understand, the selective ability to work with a subpoena or not. with that, mr. chairman.

i yield back. >> chair thanks the gentleman ands recognizes gentleman from illinois, mr. gutierrez for five minutes. >> thank you, mr. chair. i'm going to finish up the skittle. i really love skittles because, as you see they come orange and yellow, red and purple. all the difficult colors. and they come all together in a bag, together, right. all different colors and kind of like a rainbow. a lot of people on this side of the aisle, we like that. and every now and then, sorry, i'll get a bad skit i will but i don't ban them all because i get one. most of the skittles are pretty delicious. i like them. they might not be nutritious but they're delicious. like we shouldn't ban little girls fleeing murder, rape, bondage, human torture, we

shouldn't ban them all. like we ban all the skittles because there might be one bad skittle. this is nation of freedom of religion, yes, even freedom to pay your taxes to the united states. commissioner, i have a few extra bags of skittles, and i'm going to share them with you and your staff. so that after this reckless and bitter hearing you can get a small amount of sweet candy to improve the rest of your day. now i have a question. is it fair to say that you're an expert on tax law at this point? >> i know i have never claimed i was an expert on tax law. >> okay. i know you can't answer questions about specific tax returns, you made that abundantly clear to my friend mr. deutch and others as we had the hearing. even those tax returns everybody in america would love to see them, you can't share them. so we can't do a poll and send

it to you commissioner and you can abide by the poll. there's laws. or to answer specific questions about any individual's tax activity. so i want to offer a hypothetical and see if we can't get your reaction. let's say someone set up a charitable foundation. let's say someone solicits millions of dollars for that foundation, and let's say that individual who set up the foundation used the money from that foundation, which is tax-exempt by you at irs, this is tax-exempt tax foundation, and he uses it to pay out debts incurred by his for profit companies. tax-exempt, charitable, use that money to pay out debts incurred. in fact, not only does he do that, he uses to pay off legal judgment against his for-profit company, that is the company i'm making money from and hopefully paying you taxes. and i'm using other money that i don't pay taxes because it is tax-exempt.

say for the sake of argument the individual says he would pay someone a million dollars if they hit a hole-in-one during a tournament at his golf course. after someone hits the hole-in-one the individual refused to pay. then after a court rules that he has to pay, $100,000 would be paid mutually agreed by al charity, as part of that settlement, the individual takes the $100,000 of other people's money, not his money, the court said you have to pay the money individual. but he uses it from the foundation to pay that debt. my question to you is, given that scenario, is that strictly speaking what is the term, legal to do something like that? i want to know, would that be legal for an individual to use money from a tax-exempt account, foundation, a charitable account, of other people's money to pay out legal obligations incurred by his for-profit enterprises?

before you answer, let me just follow up again, strictly hypothetical. let's say there were $10,000 portrait of the individual and he used the foundation's money to buy it, put it in one of his for-profit businesses, writing a check out of the charity auction drawn on the charity using other people's charitable tax-free donations, but using the portrait in his for-profit business? i get a bunch of money, i put it in my foundation. we don't pay taxes on it. i go and bid on portrait of me and put it in my business, would that in your opinion be legal within the law and consistent with someone who declares themself a law and order individual? >> congressman, i said at the start i came here to answer questions truthfully and straightforward but i can't, we don't talk about individual cases and hypotheticals begin to look like individual cases i'm not at liberty to give opinion or judgments about them. >> but, commissioner, commissioner, you do know

whether something is legal or not? here is the question. can someone take money from a not-for-profit foundation an pay off a legal settlement, court settlement to pay that debt off? >> what i can say -- >> can you use tax-exempt money to pay for business purposes? >> as i said before, the law is clear. any tax-exempt organization can not use its money to benefit anyone's closely associated with that organization. but i can't give you every case is different. every case has background and information surrounding it. >> commissioner, you know who i am talking about. everybody in this room knows who i am talking about. we want a straight answer, right? i know, can you get a haircut? >> the time of the gentleman has expired. >> buy suits. what can he do with the tax-exempt charitable money. >> the time of the gentleman has expired. the commissioner will be allowed to answer the question if he choose. >> stress it is important for

all taxpayers understand, if you deal with us, your information we go to great lengths to protect. our employees understand every taxpayers's information is sacrosanct. we do not reveal it to anybody. important for them to understand that we do not discuss anything about their tax situation with the public. and so while i understand the interest in this issue, even in hypothetical sense, it would be inappropriate for the commissioner or anybody else at the irs to respond other than to say the law is clear as to what 501(c)(3)s can do and can not do. >> the chair recognizes gentleman from south carolina, mr. gowdy, for five minutes. >> thank you, mr. chairman. commissioner i want you to do something that those of us who serve in government do with more regularity, put ourselves in the shoes of people that we purport to work for. i want you to imagine waking up, and you learn that agents of an age -- agency you already fear, one of the most feared agencies

of all of government, with a lot of control and power, either real or perceived, over your life. some agents of that agency are targeting people based on their political ideology. those folks in positions of leadership, i don't know if you have read lois lerner's emails or not, but there is a palpable animus, a hostility towards conservatives it comes through in her work her work emails. this is not her musing about an op-ed in "the washington post." these are work emails demonstrating tremendous emminutety towards conservatives. some of these groups wanted to do nothing more than just educate their fellow citizens about the constitution so i am sure you can appreciate the

irony of lois lerner punishing people who want to educate their fellow citizens about the constitution and she comes and hides behind it to avoid answering questions about her conduct. that is why people are upset. then you add to that the president of the united states, the person who campaigned as the great uniter, that the same rules should apply to everyone, really didn't mean it after all, and he prejudges an investigation while the investigation is pending. so against this backdrop, congress, i'm sure you will agree, has not only the right but frankly an obligation to provide oversight over an agency where that is the prima facia evidence at bar. we have an obligation to do it. but the efficacy of our investigations depends upon the

fullness of the information we're provided, and the honesty of the witnesses that come before us. we are of no use if we have incomplete information or those that we seek information from, are not truthful. so there is a piece of your testimony that has troubled me and i want us to go through it. this is what you said. since the start of this investigation every email has been preserved. nothing has been lost. nothing has been destroyed. so i want us to go through it. what did you mean by since the start of this investigation? >> i meant since the response as you note, appropriate congressional response to the i.g. report in may of 2013 when the six investigations started. the investigations there as i said were four congressional, the ig and doj. >> you and i are in agreement, you meant from the very

inception of the investigation? >> correct. >> and you next, this is under oath, i think you will agree it is material, it is important, we're not asking you about something unrelated to the investigation. it is under oath, you say every email has been preserved. what did you mean by every email? >> i meant by every email that the irs had that i knew of had been preserved. that is what i thought. >> then why didn't you say that? >> why didn't you say that. >> >> if i knew then what i know now i would have testified differently. at time i testified honestly what i knew i had been told. nobody regrets more than i do, this is the case that keeps on giving with new information coming out. i wish the information had been all out to the begin with. >> commissioner it is always an option to say i don't know. loretta lynch made a living answering questions with i don't know. it is always an option to say,

based on what i was told. but you were incredibly definitive. you said every email has been preserved. and then for those of us who may not have been paying attention. you said nothing has been lost. what did you mean by nothing? >> what i meant at that time was i had been advised nothing. you're exactly right. in retrospect i would have been better advised to say best of my knowledge or on basis what i have been told which was in fact the basis of my testimony. >> i'm out of time. this is what i would like you to do. this is an important matter. i was one of the folks who wanted this hearing. i think this is really important, and you should be able to provide us information but congress should have all of that information. >> exactly. >> so what i would like for to you do, for me, is you used the word mistake. that is the lowest level of scienter. there is mistake.

there is reckless disregard for the truth. there is deliberate indifference and then there is intent. i would be curious what you think the proper punishment is for that each level of scienter. the other thing i need you to do, to the extent you relied upon other people's counsel or what they told you, i need to know who they are. this committee and i would think you would want us, to interview every single witness that has access to information that would be relevant. >> i think you have interviewed all of them already. >> so you can not think of a single person that this committee should interview that we have not already interviewed? >> best of my knowledge at this time you have interviewed, i don't know the names of all the 50 but the people who advised me throughout this case you have interviewed. >> would you do me the courtesy making sure with your lawyer that the record is complete? because whenever the record is complete, that's when we have to make the decision. i am giving you the opportunity under the heading of due

process, to make sure that every bit of information you think should be considered is in fact in the hands of this committee. >> well, i would just note, without going into detail about it, there is a lot of information and misinformation and misinterpretation of it that is in the hands of the committee and if were going to be a full hearing i would have the opportunity to explore at that, we would be able to cross-examine witnesses. we would be able to actually provide you not just allegations being made but the facts on both sides. each side would have the opportunity but impact of the facts. you should hear from the inspector general directly. who did he talk to? is he as he said in his letter confident it was honest mistake by two employees, it was not purposeful. >> that is what i'm asking, give me a witness list because i can't cross-exam inhim until we have examined them. >> i would be happy to provide you the witnesses and information that this committee would need to be able to actually proceed accordingly.

but as noted, that would be if the committee decided it would be to go to full-scale impeachment process which i understand this is not. >> thank you, mr. chairman. >> gentleman time expired. i allowed additional time because that is good exchange of what needs to happen. the chair recognizes gentleman from california, miss bass, for five minutes. >> thank you, mr. chair. mr. commissioner, let me begin by joining in with my colleague on the other side of the aisle in thanking you and your staff being great assistance to my constituents in los angeles. i had several members of the community that had difficult situations and your staff has been very responsive. >> thank you. >> i know when you took over the irs, one of the reasons why you were asked to fulfill this assignment because of your history of addressing organizations that were having big challenges. i wanted to know if you could describe what specific challenges the irs faced at time

you took over the organization. >> when i took over the organization, first we needed to make sure that the situation that led to the improper selection of people just by their names never happened again. we pursued and, as people have made recommendations over which we have control, we adopted those. we had substantial challenge when i started with the underfunding of the agency which still continues, in terms of implementing not only the normal tax seasons but foreign account tax compliance act. the affordable care act. the able act. private debt collection requirements all of which have been basically unfunded mandates that the irs had to -- we are under constant attack by organized criminals around the world trying to get access to our information. so our cybersecurity issues and our antiquated i.t. systems are major concern and major attack for us. >> go ahead. >> the last thing we provide tax

credits pursuant to statute, particularly earned income tax credit. i've been concerned from the start we need to do everything we can to get level of improper payments down. maybe sure everybody eligible participates but make surety right amounts go out. it has been a very complicated challenge. >> with all of those challenges, it is my understanding that the irs has spent about $20 million and devoted over 160 hours, 160,000 hours to collect, review and produce over 1.3 million pages of documents to congress. with all of that effort, all of that time, and all of those pages, were these primarily related to the 501(c)3 issue? >> these were all related to the six investigations. >> so how, and are those numbers accurate? >> pardon? >> are those numbers accurate in terms of the amount of time and pages? >> $20 million. we had 250 people at various times working either full time or part time doing our best to

respond quickly as we could to congressional request. >> how did all of that time and money assist the irs in addressing the number of challenges that he laid out? >> the best it was going to do, and i hoped it would do some ways better than it has, to try to assure people that we understood the nature of the problem, which the ig had reported on six months before i started, and then we would have a basis for trying to solve that problem and i think we've done, taken all the recommendations anybody's had. i think it is critical, going back to issue about confidence in the irs and government for people, as i said to believe they will get treated fairly. we don't care whether they belong to one party or another. whether they go to church, don't go to church, who they voted for, what their political beliefs are, they should be treated same way as anyone else. all of that background is not relevant to us at all. >> you know when the whole controversy was taking place i found it interesting the concern over conservative organizations because i'm very familiar with

the number of liberal organizations that felt they received extra scrutiny beyond what was appropriate by the irs. one of the root problems here in general is the time it takes for the agency to process applications for tax-exempt status. i know in recent years, especially after citizens united the agency was overwhelmed by applications for c-3 and c-4 status. i want to know you how you addressed the problem and is there currently a backlog? >> presently there is no backlog. c-4 application takes average of 83 days to go through. c-3s we had backlog of 65,000 applications we streamlined the process for small charity applications and allowed them to get through in a matter of weeks rather than nine to 12 months. there is no backlog. our goal is for the complicated c-3s to get them out within 20 days. we meet that.

for c-4s, most of them get handled very quickly under expedited processing. there are no backlogs. >> are you getting flood of applications? can give an example you how things were streamlined? >> at this point, you know, we get, we have about a million 1/2 chapter, subchapter-s, i'm sorry, c organizations, tax-exempt organizations. 75% are c-3. only 25% are the c-4s. majority of c-4s are garden clubs, other groups. we get a couple thousand applications and the average time for processing now is 83 days. >> thank you, my time is up. >> the chair thanks the gentlewoman. recognizes the gentleman from utah, mr. chaffetz for five minutes. >> thank you, mr. chairman. mr. koskinen in your opening statement you instructed people in writing to preserve their records. could you please provide this committee and oversight and government reform committee a copy of emails? >> copy of emails? i would be delighted.

we instructed those. i did not personally send an email. >> you didn't? we'll go back and look at record. if there are any emails asking people to preserve those documents we would like to see those because we don't think we have them. >> would be happy to provide those. do you assistant bid all your previous congressional testimony? >> i knew then what i knew now i would testify -- >> what in your previous congressional testimony needs to be clarified or altered or update? >> i tried to make that clear? >> clearly at time i was in fact all evidence was being pursued pursuant to the orders that went out. since then it has been clear that obviously we, some tapes were erased which was a mistake. i said that at the time. if i were testifying again i would say -- >> part of the problem that we have you never declaredfy your testimony. this is the first time we ever heard you say mistake. this is the first time you said

you provided essentially false testimony. that is the way i read it. when you said on june 20th, of 2014, quote, since the start of this investigation every email has been preserved, nothing has been lost, nothing has been destroyed, was that true or false. >> it was honest statement as i knew. as congressman gowdy said would be better advised based on what i was told. >> you told us in a hearing on july 23rd, you told mr. jordan you learned in april that these emails were missing. >> you have to understand, there are two sets of emails. the emails i knew were missing in april of 2014 were from the lois lerner hard drive crash. no one knew until 2015 about the erasure of tapes in martinsburg. when i testified in june, our whole focus, none of us or committee -- >> why are you testifying since the start of the investigation nothing has been lost, nothing last been destroyed?

>> at the time i testified that hearing was about the lois lerner hard drive crash. it was clear lois lerner's hard drive had crashed. >> you but testified a couple weeks later in you knew in april there was a problem? in fact kate duvall, your senior person knew in february. you said you personally knew in april. you came before congress and gave definitive statement.

true or false, we confirm the backup tapes from 2011 no longer existed because they had been recycled pursuant to the irs normal policy. on july 23, confirmed mean somebody went back and looked and made sure that in fact, any backup tapes that had been existed had been recycled. true or false? >> that was true at the time dash. >> who went back and looked. >> i was told by the it department. >> by who? >> i was told by the it department. >> who are these people? >> it was the deputy chief information officer that you interviewed that looked and were confident that, i asked, i said was there any way to get tapes and he said they were recycled. >> nobody went back to look and mr. kamen who was the deputy there said the best we can

determine through this investigation, they just simply didn't look for those e-mails. so for over 1000 emails that we found on the backup tape, we found them because we looked at them. >> how is it that you never looked for them according to the inspector general and you testify that you went back in fact and confirmed. that is false. >> that is what i was told at the time, that was my understanding. if i knew then what i know now -- >> when did you inform congress that this was your view now. when did you tell congress that you are wrong on this? >> when the ig reported in 2015 i subsequently had a hearing with the senate finance can a committee and i testified and publicly stated that it was a mistake for those tapes to be erased and i testified --

>> we know it was a mistake but it was erased after a duly issued subpoena. that is where we have a fundamental problem. you issued 66000 summons an e-mail and subpoenas each year. you know how to dish it out but you don't how to take it. we issue a subpoena and we expect you to comply with it and when you destroy documents that are under subpoena, somebody has has to be held accountable for that. >> the ig -- >> that starts with you. you provided false testimony to this committee and the oversight and government reform committee and you should be held accountable for that. >> i have about 30 minutes more question but i will yield back. >> thank you, we recognize mr. richman from louisiana for five minutes. >> i will just pick up where my good friend from utah left off and that's a conversation about being held accountable.

you don't know that a criminal defense mind for a while. in louisiana i watched many people get indicted and go to jail for the use of nonprofit funds. you say one of the important things is for people to feel that they will be treated fairly and that it doesn't make any difference who they are, what organization or political party they belong to. let me tell you, you, there are a bunch of people, including me that think that the justice system is rigged for those who are privileged and those were rich. for those i have seen to go to jail for misappropriating 2000, 3000, 5000, 8 million we have an indictment pending right now,

the question becomes how can someone take money that belongs to a nonprofit to satisfy a personal judgment and that not be a misappropriation of the nonprofit funds? >> i don't know the details. all i know is the law is clear and an organization cannot use its assets to benefit anyone who is closely associated with the organization. >> to pay off a personal judgment would be a benefit to a person, not an organization. >> whatever you used to not pursue charitable purposes but to benefit anyone associated with it, the law said that is not allowed. >> let me just say this, i wasn't even going to bring this up because i think today is a very unfortunate day, but it signals what this congress has been about and why our approval

rating is so low and our reputation as the do-nothing congress. we do do something. , we grin stand and show vote on a regular basis. this committee in this room and after two individuals were killed by law enforcement, i begged for a public hearing on the issue because i think the public deserves that and if we don't do it we will have blood on our hands. unfortunately police officers were killed. this week we have two more incidents were two people were killed in an incident with law enforcement. two people lost their lives with law enforcement but were not talking about it. we are talking about a fragile country and fragile people and we are ignoring a humongous issue.

we are talking about impeaching you. in louisiana, we just had 7 trillion gallons of water dumped on baton rouge. we lost deputy cars, police cars, law enforcement that is dismantled but we are not having a hearing to watch how we watch them get back up because there's a pending out in sterling that has to come out and how do we protect citizens and keep them safe because we know it's coming but again were talking about impeaching you with a hundred days left in our term. we keep grandstanding while america is burning. there's someone who would rather talk about the 49ers not

standing for the national anthem them people losing their lives by the hands of law-enforcement. this is the judiciary committee. we don't even acknowledge, were not even talking about the fact that we are losing law-enforcement officers, we don't even have enough bulletproof vest for the sheriffs in the united states of america were talking about impeaching you. we just had police officers in sheriffs gun down in dallas and baton rouge but they don't have please fasten were talking about impeaching you. somewhere, somehow you have to say what are these guys thinking one of these guys and women doing. do they not realize that we have a crisis in america were talking about impeaching you. that's laughable at its best if it wasn't so sad that all of the sudden this becomes the biggest priority that we have.

mr. chairman, i would just again urge, and i want to be on the record every time we talk that we need a public hearing so that people understand how serious we are taking the policing in america issue, because again, if people don't understand were taking it serious, they will continue to take it in their own hands, people who are mentally disturbed will do unimaginable things if we don't get together and talk about it. with that, i yield back. >> we recognize the gentleman from texas, mr. gomer. >> i just ask unanimous consent for the record that the gao report from 2015, internal control for exempt organization should be strengthened. the irs has not fixed the targeting problem.

>> without objection that will will be part of the record. >> i appreciate my friend from louisiana pointing out the grandstanding. that is what i felt about the sit in on the house floor and my friends across the aisle refusing to recognize that radical islam is at war with us and instead they talk about guns i'm looking for the grandstanding about pressure cookers and the need to make them illegal. this hearing is about whether or not you committed such acts as should cause you to be removed from office. it's already been mentioned that you were made aware of problems associated with this learners e-mails the same month that missed the ball discovered the gap and that you had withheld -- didn't disclose that information

until june 2014 and during that time you testified before congress four times. i want to ask you, during those four times he testified, after you learned about the problems with ms. learners e-mails, did it cross your mind at all that perhaps you should disclose that , that there were problems with her e-mails. >> if i could correct the record, i have testified honestly. i learned about the e-mail crash in april. between april and the time we provide of report to the congress i did not have a hearing. the hearings in june were about the hard drive crash. i have also stated, in the reason i did not immediately report that crash was because i instructed people to see how many e-mails from the crash we

could recover and we recovered 24,000. as i said, in retrospect, because in retrospect, because it did create a certain amount of aggravation on the part that i understand of some congressmen. in april, when i was advised, i would advise the congress that we had a hard drive crash. >> is it your opinion that once you testified before congress, if you learn information that makes your prior statement not completely true that you have no obligation to come forward, send a letter, send an e-mail, send a message that you have now learned things or in your opinion she just wait until you are asked and if you not ever asked you have no need to disclose. >> i didn't wait until i was asked. we produced a full report to all of the investigative committees about the process. as i have said, when i learned of it in april, life would've

been easier if i had simply advised the congress. since that time we have advise the congress -- >> when you found out there were problems, did you know lois lerner had a blackberry, a handheld device. >> i did not did not. that was in the hand of the ig from 2000 -- >> did it cross your mind that she may have had a portable device that she was using to send or receive email. >> no i was not analyzing her activity, i was working on instructing -- >> you knew there was request for her e-mails and it never crossed your mind she might have them on a personal device that she carried, that never crossed your mind? to the cross your mind that there was this facility in martinsburg west virginia where storage was capped, did that cross your mind? >> no, i was i was focused as the agency was, on reviewing all the e-mails we could, get e-mails and pull each hard drive out of the computer -- >> when you are asked under oath about the existence of e-mails,

there really is an obligation to learn about the emails and where they are and where they exist. let me just read for you, i hope your familiar with internal revenue manual, i hope you are, hopefully. >> yes. >> this was added january 2013, fraud is deception by misrepresentation of material facts or silence when good faith requires expression and i would submit to you, you have had ample opportunities over the last two years to disclose things or maybe to make inquiry, but it certainly appears you have. >> we are going to leave this hearing to go live to the treasury department. a quick reminder, you can see this in any c-span program online anytime at cspan.org. the treasury department is holding a form to discuss

strategy to improve jobs and economic opportunity. >> i'm the acting secretary and it is my honor to help host and organize this event this morning. i want to start by thinking everyone for coming and relaying just how proud we are to host this event, to host it in honor of the friedman bank and to honor the legacy of african-american history and culture which is getting such national recognition on the mall. it gives us proud backdrop to talk about how that history and that legacy connects to today's agenda of real solutions and how we think about jobs, growth and empowerment in low income communities and community of color across this country.

we are also deeply honored to be joined today by a large number of notable guests, richard and maria, rodney slater, members of congress, representative karin brown, it's a real testament to our speakers and to the power of this event and the history to have such a tremendous plate of speakers and an audience that will join in this conversation. let me start first by introducing our first conversation. i want to introduce the 76 secretary of this treasury. secretary lou has worked tirelessly to build a growing insecure economic system that works for all americans. under his leadership, treasury has expanded to serve more

individuals small businesses and communities. we hosted a financial inclusion form last year and brought together hundreds of leaders from across the globe to promote access to safe and affordable financial products. we launched our simple, safe for millions of americans whose needs were not being met by their employer or by the market. we are also glad to be joined by derek, the the editor-in-chief of black enterprise magazine, a national correspondent, a leading editor and award-winning writer and a voice that i think is really important about how entrepreneurship and enterprise can provide jobs and growth and opportunity and so with that, let me me think them both for being here and hopefully you will join me in a round of applause. [applause] >> thank you secretary lou for

agreeing to be a part of this interview and also, i would like to commend you and your staff for holding this event, especially since such an important weekend. also, i would would be remiss if i didn't take an opportunity to thank john of operation hope who served as one of the catalysts to get this conference together. think this is a prime opportunity to talk about where we stand in terms of financial inclusion. before we delve into what this means for our african-american people of color, i want you to define financial inclusion, what

what does it mean, and when financial inclusion is effectively working, what does that look like? >> thank you derek. let me start by thanking you and the tremendous group that we have gathered here today for being part of this. we are very proud to be able to be part of this weekends events and to do it in a way that is a continuation of things we have been working on for a very long time. it ties together our real-time policy and our reflection on our history in a way that gives us the ability to look forward. i think financial inclusion is really about looking to the future, and how do you make sure that every person has an opportunity to be part of our economy and grow and develop their own capabilities. if you are not part of the financial system, the likelihood of your being able to buy your own home, being able to get a small business loan, having a credit history where the financial system knows you are there, if you are not part of the system, the odds of all that working go way down.

what does that mean? it means that your ability to grow as an individual is reduced and it also means your ability to contribute to the economy is reduced. this is not something we do because it's the right thing to do, it's what we need to do to have a healthy economy. we we are focused on it just in the united states, because it's a global challenge. we have worked with our partners to be part of a conversation around the world about how do we get more people connected to the financial system because that's the way to get more global growth and stability. here at home, we are proud, just a few months ago in this room to be able to host an event where we named the freedman bank building. it's the bank that was started by president lincoln, to do exactly what i'm describing today, to give african-americans

their first opportunity to be part of the system. it also taught us the lesson that you need to pay attention always to strong financial standards because people can put their money away and it doesn't necessarily build a sound nest egg. we tried to encourage that at an institutional level. we are trying to give individuals a chance to get connected. there's a host of things from young people getting their first bank account to working people having institutional presence of capital in the neighborhood and it's all part of something we need to do even more of. so, to unpack that and to look at this moment, and one i wanted you to further address the significance of the naming of the buildings as well as naming

this conference, but also in that tradition and in terms of the spirit of freedman's bank, how can we ensure that african-americans and people of color can gain that financial inclusion that you talked about that can be part of that wealth building process? >> i think there are many parts to the answer. let me start with the history and go to the present. i think the history of the freedman bank underscores that is not a new idea or a novel idea that do have a strong economic future you have to be part of the economic system. the history has been mixed. it has provided access to some but not enough. what we are doing with our financial inclusion agenda and by looking back is saying that work isn't done and we still

have things that we have to do and there are things we can do here in the treasury department and working with our colleagues across government and the private sector to make a real difference. i think the challenge of getting people connected to the financial system is starting at a very personal level. let me give you an example. i see some of our friends who have worked with us on financial inclusion and financial education in the audience. we have tried, when kids get their first summer job, to help them open a bank account so that without first paycheck comes a connection to the financial system. the alternative is the money sits in the pocket or a shoebox and it is one thing to have the ability to have a financial history, the other thing is that it's likely to lead to spending the money or losing the money one way or another. we all know if you put the money in the bank, it's different than if you are treating it as something more casual than that. when people get their first job, they don't usually start thinking about saving for

retirement, but they should. it's very hard to catch up if you wait 10, 20, 30 years 30 years and you don't start saving early. what is one of the challenges that people have? there aren't a lot of banks are money managers who want 10, 20, $30 in accounts that don't have balances. it's not a very economically attractive market because of the cost of managing accounts. if you don't get a lot of advertising, they had had to put money into a safe investment. we created my ra which is built in the assembly seat stage and becoming established to give people an opportunity to have a simple way to start saving for the retirement. it does all of those things. you are investing in u.s. treasury bills, you can put in any amount, no matter how small a minimum balance and all you have to do is go online and fill out a simple form or if your employer is giving you the

option. why are people not signing up in greater numbers? that's something we are working on. part of it is they need to get the message and that is where we have reached out to many of our friends in the community and the financial institutions and amongst employers to get the word out. part of it is that the people need to come to understand that putting $5.10 away makes a difference. it accumulates over time into having savings. it accumulates into having more freedom to control your own financial future. that is something we are still pushing and we will continue pushing. it also goes to the viability of institutions and talking about the freedman bank, historically it has been anchors of their community, they been responsible for home loans and mortgages, starting businesses and what have you. in the 60s, we saw 60 african-american banks from the

national bankers association. that number has declined and it continues to decline. in fact black enterprise has an annual list of banks. at one time we had a list of the 25 top banks and now we have ten. what is being done to strengthen african-american banks and community banks that are going to be essential for doing what you are talking about? >> i think it's been a hard 30 years for financial institutions, the pressure to reduce costs has led to consolidation, the economic turmoil of financial crisis puts stress on institutions, we have worked to try to help make the pathway toward becoming a cds i easier to manage, we have worked to deal with the legacy of the

financial crisis and help institutions work their way out and get back to controlling their own futures, i think that we have to look at the challenge of having community financial institutions remain strong but the larger regional and national banks be open as well. i think it's a mistake to think of it as the only pathway through the community. it's an important one and in many communities it's the strongest one but we also have to make sure that our values are reflected in a way that national and regional institutions make their services available, open their doors and bring business in. that can be a two-edged sword. you open the door for opportunity and competition and it makes it perhaps more challenging for the community

financial institution but i think we need strength at both levels. i don't think it would be a good outcome if the only place in the african-american community you could bank would be at the community bank. on the other hand you need to have the community bank and need to have access to the regional and national. >> cannot be done through partnership? i looked at liberty bank and trust, they had partnered with chase bank to create rehab loans in detroit to open opportunities for homeownership. is that the model? >> i think for a national bank to partner with community banks is an excellent way to provide strength and to make the broader financial platform available, even while preserving the strength of the community organization. when i go through communities

and our country and i see a strong local financial institution and signs that there is a project being funded by a large national institution, i think that is the way you get the maximum amount of economic access and capital into a community. it's a challenge because you can think of these as truly competitive institutions where you can think of it as partnership or working in harmony where there is room for both. >> when you think about retirement and building and retirement, has treasury looked at enlisting partnerships with african-american asset managers? we have a number of asset managers that are part of our businesses, one of the major thoughts would be that managers are to manage pension funds, government funds, as well as to

be part of the slate of financial services for major corporations. i would like you to touch on that and address that because i know that treasury has looked at working with african-american and minority financial services firms, how do you bring them to be part of the equation for retirement and management. >> i beastly there's limited places where the federal government is actively investing, but where we invest, we have to make some choices. when you break the policies down , you realize that some things unintentionally have an in fact of driving things toward large entities. if you are managing a portfolio, you look purely at what the history of return is or you could look at what the most cost-effective way to manage your money.

having one contract is cheaper to manage than having ten contracts but if you only go to one contract, you're only going to go to the largest firm. if you do your investment by looking at. return, you get more diversity, active management advisors into the mix. we've pushed to have a more flexible standard so as not rigidly driven toward consolidation. obviously it has to be based on performance history. you can't choose to invest funds with any fund that has a history of poor performance. as we peeled the onion and looked at what was going on, performance histories were not that different. >> actually. >> we found it was better performance than the larger active managers that more of the

management on government and private institution. and somebody who has worked on trying to manage our government efficiently for a big chunk of my career, i understand the the desire to reduce the administrative cost that the administrator of a set of funds would have. you can see how that would drive you to just going to large asset manager and having one staff to oversee one relationship. we have tried to break that apart. we tried to say, look at performance and make sure the doors open and more competition. i think there's more work to do, i think there there is a deep sense that history has not led to a broad opportunity, but i think there has been an inflection point on how we think about it that is, going to overtime, build support.

>> we were talking about things i have been instrumental in getting many african-americans on the path to wealth building. our philosophy is wealth for life. however, the great recession wiped out a great deal of african-american wealth. one thing it did reveal is that african-americans who had wealth, it was tied up property you didn't have financial assets. right now when you look at african-american wealth versus white wealth, the average net worth is 141,004 white families, 11000 for african-american families. depending on the measures and poles, it's even worse than that. >> from your standpoint, what can be done to close this racial wealth gap? it's persistent and it has grown and become worse in the last 25 years.

how can we reverse the trend? >> i think your analysis of the impact of the financial crisis and where we stand today and levels of wealth are very much on our mind. it's a challenge we have to deal with it. there's no question that a lot of african-american families where that wealth disappeared there's also a disproportionate number of communities who have not found faxon terms of value were a lot of those properties can be found. investment practices would help but it also starts with how much you have to invest in the first place. if you only have a downbeat gem payment for house, there's nothing left if you want to have diversified holdings.

starting small ends up leaving you in a place we are more exposed. how do you accumulate more assets in the first place? i think it's what we're talking about at the start, people understanding the need to begin saving early. you wait until you are 50 to start saving for retirement. a lot of that hundred and 11 versus 11 is retirement savings. that's why we focus on my ira. that's not the only thing. there are a lot of things to get people over the hurdle to get started. it's critically important. a lot of people say they can't afford to save and i understand living on a paycheck to paycheck income is really challenging. i experienced it at the beginning of my career and i know how hard it is. by the same token, most people buy a cup of coffee without thinking about it.

most people by next or magazine or a video without thinking about it. >> hopefully black enterprise. >> if you take the accumulated decision that people make, for one of those occasions if they say there to put money away from retirement, people will accumulate ten or $15000 in five and $10 contributions if if you start to let it build up. i think the financial education, financial literacy is about understanding that for some people, buying a home may not be the right decision. the might be better off getting started with an ira or have diversified savings. if you invested in treasuries, you would still have your $10000 because treasuries are solid. this gives you a way to get your first $10000 into something you

can't lose. people have to make decisions about where they are in life. i remember when i bought my first home i didn't have a lot of savings. i took every nickel i had to get my home and i'm not sorry i did. it was at a time where i knew my income was something that permitted me to do that. i wasn't making a decision not knowing where i was next month and i made a plan pretty quickly to get back to my ira savings. some people don't have any retirement left after they buy home. it's a question of getting the pieces together and making the choices. you have to start out with enough to work with, make decisions along the way and i think we do a pretty inadequate job in this country of teaching people about managing their own financial life. >> it's interesting that you say that.

i have a couple questions, but how do you incorporate that as part of the education system because you have students all that graduate and the one area that isn't a mandatory focus, it is money management. >> we have worked to reach into the schools to develop curriculum materials that are friendly and not offputting, sometimes they look more like a video app or cartoon than they do an economic textbook. you have to get people that takes the subject matter and makes it accessible. you have to have opportunities like having your first paycheck go to a bank account will make a difference. if your first job goes into a

bank you now have a big cookout. having someone come to a job and make the decision to put that first five or $10 into retirement, once you, once you start, we know people tend to continue. were not going to solve this problem with one simple step. it's going to take concerted effort and using partnership in schools and government and the private sector working together. that's something we put a lot of energy to and were gonna do our best to make sure something continue. >> it has to extend beyond that in terms of lifelong learning and lifelong financial education because we are finding, and naturally i had a view with one of the individuals at tiaa-cref that put together a survey on retirement matter and we are finding out that many people, especially against age and gender are running out of money at retirement. how'd do you and the treasury

work with organizations to make sure that doesn't happen? >> i know we are running out of time and this is a long topic. i think that the number of years people have after they retire is more than it used to be. with longevity people have to plan on not having a year or two but a couple decades. you need a better nest egg to go in and work a little longer. you need to make sure you have liquidity at the point that you retire and that is a complicated puzzle for people to together. it is something that our schools can help and community organizations can help. it can make all the difference in the world in terms of people having those golden years. were doing a lot of work but we need to do more. >> one must question, going back to history and this moment, the

treasury department has been extremely active in building the freedman bank, what was the significant of putting him on the 20-dollar bill? >> i think all the complicated things we work on in this building, probably more people are aware of the decision to put him on the $20 bill than everything else we have done combined. that's that's a good thing and why we have taken it so seriously. we sent out years ago asking the question, how do we make our currency reflect our history more accurately. we had no women on our currency. the focus as we had to have the other half of our population see themselves when they look at our money. the men need to see our women in our history as we look at our

money. we look at hundreds of possible candidates and i went through the process of listening to hundreds of comments that came in, the the forms we had, the private conversations we had, i increasingly came to see the story of harriet being a single story at one level but ultimately the american story at another level. independence encourage in making a difference in one system that made it almost impossible to achieve the things she cheap. it's a reminder that each of us has a part to play and that can help change the whole system. isthe story of america and something i will always be proud to have been part of in making that decision and i look forward to finding the first 20-dollar

bill with her on it as i take it out of the bank. >> it has been a pleasure to talk to about financial inclusion what we can do to move financial education and wealth building forward. >> thank you very much. [applause] >> thank you, this has been terrific. it is my pleasure to introduce robert. his career accomplishments peak for themselves. he served as vice chairman of the board of governors of the federal reserve system until 2006. during this administration he served again on the president's economic recovery board and on the council of jobs and competitiveness. he is currently the president and ceo of tia graph and it

gives him knowledge on wealth building. his contributions have been recognized many times and please recognize one more time. [applause] >> thank you very much for the kind introduction. it is so nice to be here and see so many friends. i commend the secretary in the department for hosting this form and for paying tribute to freeman's bank. all of you know that the bank was founded to create opportunities for african-americans and build financial security. today, we discussed, communities of communities of color continue to face the range of challenges that hinder their ability to achieve this lofty and important

goal. tia a has been focused on helping people focus on building retirements for nearly a century we believe it is achievable for all americans. it can also be harder than ever to reach. i will outline some of the face in achieving secure retirements and highlight some of the unique challenges and difficulties experienced by community of color. i will also discuss why financial literacy is so important. we will also what we have learned about the best way to get to and through our security tire meant. let's take a look at the retirement landscape and the challenges we face.

it's driven mainly by three factors. i'll talk about a lack of savings by all individuals and i'll come back to talk about the community of color specifically andas already was touched on, the aging of the american population. in the u.s. alone the federal reserve has estimated that one third of american workers have literally nothing at all saved for retirement. that's concerning when the average life expectancy in the u.s. has hit an all-time high. as lifespans have risen, the birth birth rate has fallen and together these two trends have produced an aging population. it's predicted that the elderly will make up 22% of the

population by 2040. the resulting strains on social security are well documented and i won't repeat all of them. there was 16 and half workers for each retiree drawing social security benefits today there are only 2.8 workers so just short of three. it's going to drop in the coming decades. individuals bear much more individual responsibility than ever before then insuring their own financial security in the future. many once were able to rely on company pensions also known as defined-benefit plans. it has fallen from 62% down to 17% so under one fifth. today the 4o1k and contribution

plans dominate in the private sector with more than two thirds of workers relying on them for their or retirement savings vehicle. frankly there's ample evidence that the current retirement model is not getting the job done for security tire meant. a couple statistics and i'll move to communities of color. over 67 million americans lack access to retirement plan at work. many choose to not participate and even when employees do participate, they and their employers also don't contribute enough to their investment accounts and many don't implement appropriate allocation strategy and many don't consider the size without income flow once they get to her retirement. then another thing we will touch on is that many failed to preserve when they borrow against their account.

that's the overall landscape for america. given the topic of the day, let's focus on communities of color. there are number challenges that communities of color face in planning for secure financial future. one is that the unemployment rate for black americans double that of whites and the in media income lacks by 24000. the median white family as you heard, had ten or 1212 times the wealth as the median african-american family and ten times the wealth of a hispanic family. given those challenges and starting points, it's not surprising that there are

serious doubts in the financial security and financial preparedness for african-americans and hispanic workers. a key issue starts with the access to workplace retirement plans. in the private sector, blacks are less likely than whites to have access to such a plan and hispanics are to 2% as likely. some statistics, there are are 62% of blacks and 69% of hispanics have no asset in a retirement account. among those, the amount saved is far lower in households of color they have less than $10,000 in retirement savings. you can understand, and i'll come back to it just one out of

to have savings below that $10000 threshold. african-american workers are less likely to result in stocks. stocks have historically been the highest over the long-term. obviously there is volatility in stock investment. we also know people are more likely to take a loan from their 4o1k account and more than twice as likely to take a hardship withdrawal. hispanic also withdrawal at a higher rate than whites. all of these factors together leave african-americans ended hispanic workers less prepared for financially secure future. another area of significant challenges financial literacy. you are ready heard that was

touched on a little bit. far too many americans lack knowledge they need to make saving decisions they need to get them safely to enter retirement. we know it makes a huge difference, researchers know that those with a high degree of literacy are more likely to plan for retirement, for example in return planning for retirement is a powerful predictor of wealth accumulators. to put some statistics there, people plan for retirement have more than doubled those who do not plan. conversely, people with a lower degree of financial literacy borrow more, accumulate less wealth's and less higher fees. it's sort of a downward spiral and spiral.

they're less likely to invest in stocks and more likely to have debt and less likely to know the terms of their mortgages and other loans. a study has consistently shown that financial rates are among americans are low, generally, but those with the lowest rates are african-americans and hispanics. the studies latest results show that a has declined slightly over the past six years which is clearly a very disturbing development when americans have more responsibilities to work with their own financial security. at the pretty sobering assessment of where we are today let's see what we can do to make this a better story. we believe it's possible to prepare people at all income levels to achieve financially

secure retirements. why do we believe that? our conviction is rooted in the simple fact, we have been helping people of all incomes get to sleep is secure retirement since 1918. that was seven years before social security was defined. we provide plans in a range of other services and institutions in the non- private sector and across all asset classes in income classes. in fact, we estimate on average participants in our plan are on track to replace 90% of their income at retirement and that is across all income classes. that figure covers a range of differences. people of all races and income levels, from custodial's and doctors and teachers and lawyers. what are some of the elements of

the system at work across income strata? there are a number. employee participation is mandatory. you must give everyone participating in everyone saving. you heard the secretary talk about automatic enrollment. employ yours and employees contribute to the plan. they have a mix of diversified options. diversification is an important tool here. employees typically have access to a source of lifetime income. this is really important. it's defined benefit plan or an annuity that provides a level of guaranteed income in retirement so the risk of longevity is spread to the insurance company. finally, tia provides access to a robust program so it's really important and that's come up a few times which is education and

advice to help support our clients in this comp located set of financial decisions that they make in this advice is available to everybody, no no matter how much or how little they make. we think this offers a strong model for the nation as we look at how to strengthen our retirement system in the 21st-century. it is especially relevant as we consider how to address one the key challenges of the day which is lifetime income. we must ensure that as americans live longer they can retire with peace of mind that comes from not wearing about whether or not they will run out of money in their old age. you already heard a comment from the black enterprise leader about that. in terms of specific challenges that communities of color face, i continue to to believe that education really is the key. certainly, you must strengthen the systems of communities of color have the same economic opportunities as their peers. beyond that, we must strengthen financial education and enhance financial literacy among

communities of color, in particular. we must ensure that they understand how to manage their financial lives in a way that the purveyors can secure retirement as much as anyone else. we must clearly also broaden access. we believe everyone should have an opportunity to save for retirement at their workplace. these have a profound impact for our economic progress as a nation and for the long-term well-being of all americans. we clearly have a long way to go we firmly believe we can overcome the challenges we face. we must actually make it a national priority, and toward that end, we have been heartened to see the administration take a number of actions to enhance retirement security. :