gentleman from illinois, mr. foster. >> thank you, mr. chairman, mr. secretary. i would like to return to the actual subject of this hearing. the capital outflows in china are now in excess of a trillion dollars a year. the international -- institute of international finance estimated outflows in january alone of about $113 billion. now when you have a trillion dollars in capital flight and a $10 trillion economy, it seems to me that this effect alone is more that enough of explanation of the slowdown of growth in china. would you agree that it's a major contributor? >> i'm not sure how much of the slower growth or the slower growth to the capital flight. i think that there has been capital moving out of china. some to repay foreign debt, some of it is money leaving the country. it's a little bit hard to know exactly where the line is and there are stronger views than there are data on the subject in a lot of the analysis that i've

read. look. i think china has a serious economic challenge ahead of it. it has to go through this enormous transition from an industrial economy, an export driven economy, to a more consumer driven, more market oriented economy. the faster they establish confidence that that transition is under way and that they'll stick to it, i think the faster they'll see progress. on stemming some of the capital flight. >> okay. well, the other structural problem i think they have to have is that basically the pile-up of wealth at the very top, which is a universal problem, actually, in developed economies. in large part i believe this $1 trillion of capital flight consists of wealthy chinese pulling their money out of china, often to spend that money in economically unproductive assets like empty apartments in manhattan or vancouver or you name it. so it seems like when the wealthy in china break their social compact to reinvest in their own country and instead invest in less productive assets

offshore, that it lowers not only chinese economic growth but economic growth throughout the world when productive assets are replaced by, you know, investments of the rich. and that i'm more -- actually if we look in the mirror, this is a sort of universal behavior of the wealthy elites throughout the world. they tend to invest securely and that's a low return on investments. and i was wondering if you -- don't you agree that this behavior, universal behavior of the wealthy people to "a," move their money offshore and "b," invest in less productive as sets is a major contributor to the economic slowdown in the world? >> congressman, there's no question but that both wealthy individuals and firms have a lot of cash and there could be a lot more investment. and i think the question is why is there not more investment being done. i think a lot of it gets to a sense of concern that global

growth is weak and demand is weak. and that -- >> but the demand is weak because of the wealth distribution. there's no shortage of consumers that would buy stuff in china if they had to money to do so. >> look. i think in china there's no question but that the right policy is to give the consumer in china more resources. one of the things the consumer is china is going to need is confidence that there's a safety net. they don't have the kind of social safety net we have. savings in china is very high. through a combination of one child rule and no safety net, people feel the only way to take care of their future is saving. unfortunately, the people who do morris i can investment are some of the small savers so when china has a volatile stock market, oftentimes it's smaller investors who are highly leveraged chas very dangerous thing. they've got a lot of things they need to fix.

i think that the question of kind of the course, direction of the economy comes first. >> thaef got ey've got to make e transition to a more consumer te transition to a more consumer driven market oriented economy. that means is consumer is going to be central. they need the build a better safety net so the consumer feels free to spend and they do have wealth and income distribution issues and corruption issues that they need to attend to. i would say that we have some income distribution issues that we need to attend to, as well. >> that's right. when you say strengthening the safety net, you're talking about effectively taxing the wealthy elites in china to provide -- >> whether it's taxing the elites or -- >> effectively. >> -- corporations pay dividends to support them. there's a variety of ways that -- china's tax system is very detailed one. >> not like ours. right. okay. i guess that was the main thrust of my question. i think this is a major effect that's under appreciated. the cross talk between wealth distribution and offshore

capital flows i think has become a major macro economical factor that has to be factored in. thank you. my time is up. >> the share now recognizes the gentleman from new mexico, mr. pierce. >> how are you doing, mr. secretary? hi. >> we're all going back and forth. >> yeah, okay. so the president's in cuba this week and first president in 90 years to visit. have you been involved in the discussions about normalizing relations and trade with cuba? >> yeah. >> so the president stated in december that he'd like to go to cuba where there's progress in the liberty and freedom and the possibility of ordinary cubans. what progress did we make since december that now has changed the president so he should go? >> you know, congressman, the purpose of the president's -- >> i didn't ask that. the purpose. he made the comment, sir, and you're in the discussions.

i just would like to know what progress cuba has made since december in freedom, liberty and the possibilities for ordinary cubans. >> the purpose of the changes that we've made is to open -- >> okay. that's not my question. i apologize. i don't mean to cut you off. i've got five minutes. >> i do have an answer to your question if i can get beyond the first few words. i'm happy the answer at your pleasure. >> i'm waiting. i'm waiting breathlessly quiet. >> one of the things that we are going to be doing is opening communication lines, telecommunications, bringing computers in, people-to-people contact. that is going to contribute to an environment that's very different than what we've seen over the last 50 years that hasn't worked. i'm not suggesting that cuba is changing instantaneously. i don't think the president's suggesting -- >> the president suggested that they needed to change and they didn't change, sir.

i mean, i don't think so. if we pursue this normalization, do you think that treaty obligations between the two should take place, like the extradition of 70 fugitives? have been down there. one guy killed a new mexico cop in 1971, a guy named charlie hill, been living a life of freedom down there. would you hope that we see to see mr. hill back in mexico and see if he's guilty or not? >> congressman, i'm going to have to defer to my colleagues who have expertise on things like -- >> you don't have an opinion about conflicts and things like extradition and enforcement of rule of law? you don't have opinions -- >> no. i do have opinions on the rule of law and drk. we've seen in the last 50 years the policy of embargo and cutting cuba off did nothing to improve it. i certainly am hopeful that the policy change we put in place will lead to the changes we all want to see in cuba. >> yeah.

judging from the president castro's comments today it doesn't look like it's moving that way very fast. he said, you can't ask me this many question. it's a laugh really. do you know mr. cohen, david cohen? >> yes, i do. >> he was here in november 2014. we had a fairly energetic discussion about the funding of isis, and you eluded to that earlier in the conversation today. you said it's hard to get in there to blow up -- you're referring to blowing up the oil. what do you mean? what does that mean? it's hard to get in there. >> well, we've gotten pretty good at it, actually. we've targeted points of vulnerability, the tanker trucks this move -- >> you know what i just read? so when he was here he said they're getting a million dollars a day. >> yeah. i think that since then -- since then -- >> now that's $365 million a year. now in december, december of 2015, it's 500, and that report talks about trucks getting in

the line to get oil filled up and they wait months, months in the line to get one truck of oil and our airplanes are flying overhead. meanwhile they're sitting down here in a line that's 5 kilometers long. so what exactly does it mean that we're being successful at interrupting? because it doesn't -- if their revenue is going up, now, keep in mind the price of oil in 2014 was at 70 at the time he testified. so 70 down to 30 and they're doubling the revenues. it doesn't sound like we're being very effective with all respect. >> congressman, as i said earlier, it is very difficult work and we have to keep at it. they're going to keep changing what they do and we have to keep up with their changes. but blowing up hundreds -- >> i've got 25 second, sir. if i could comment. very difficult is not difficult to wait. you got -- >> this is an important issue. i would think you would want to know the answer. >> you've got uavs sitting up

there watching every tank, and when a tanker truck gets full you pop it with some incendiary round. >> no. that's not what we do. we identify getting the tanker trucks and not full of oil and not with people in them. >> they're waiting in lines 5 kilometers long. it's not hard to know where they're keeping them. i just -- >> the reality is this is going to be an ongoing challenge, not something that will be solved once and for all. but the fact that they've had to cut salaries to fighters because they're starved of cash means that we're making progress. we've got to keep at it. >> they made $2 billion last year, sir. they're not starved for cash. according to cnn -- they're a self-funded powerhouse. >> in a classified setting -- >> time of the gentleman has expired. chair now recognizes gentle lady from ohio, ms. beatty. >> thank you, mr. chairman. thank you, ranking member waters and thank you, mr. secretary. let me go back to the subject of international monetary financial

policies and start by thanking you and those in your ota office for working with my staff and office on somalian remittance. we have the second largest somalian population in the country. as you know, with the weak central banking, they've had great difficulties. so you've been response. you've sent a team of folks over to work on something difficult. let me spin off on this because sitting here through this entire hearing has been disappointing to me. and i want to apologize just in part to you but more to the people who are watching because they lump us all together and talk about the congress and what we're doing. i read an article in the american banker and i was hoping that we would have learned from this because last week we had another one of your colleagues

here, director cordre, with the cfpb. and this article talks about how ineffective it is when you're rude and disrespectful, and you don't allow people to answer the question. people who are well versed and seasoned. mr. chairman, i'd like to enter this into the records, if possible. >> all such exhibits are allowed under general leave and without objection. >> thank you. i also want to thank you for your answers to the questions about the subpoenas. now, while i am not a lawyer, practical law talks about in article after article when an individual or people like your staff receive subpoenas that it is very customary for them to contact the parties who's subpoenaed them and try to respectfully and informally work out the differences.

so i also applaud you for that. i think it's also important for the american audience that watch us to know who we're talking to beyond our titles. and so, when i think about your rich history, i think about you not only being the 76th secretary of treasury, a white house chief of staff, you mention in reference being an omb director and tons of other jobs. you've worked for a congress person. you've worked for a speaker of the house, tip o'neill. and most impressively, you married your childhood sweet heart and you're still married, the all-american dream with two children. but let's talk about you in your role. harvard graduate, georgetown law school graduate.

and your close friends say you are exceedingly meticulous. some would say that you are a brilliant scholar. i think it's important when we hear the question after question that clearly you understand the question. and from where i sit, you have clearly, not only answered the question but gone far beyond the call of duty, as one your position who is responsive for the international monetary financial policies of the trillions and trillions of dollars. you have shared with us the great growth in the economy. you have shared with us how we've reduced unemployment. and so, i say to you as this congresswoman, proud to sit here, that i say to you the two most important words that i was taught. and the two most powerful words

that one can say and that's thank you. and my mother taught me that a long time ago. she said sometimes it's better to listen than to talk louder than the person. because you were asked the question, what would happen if a person in a regular job were sitting there and answered. well, let's change that around, mr. chairman, and ask, what if a regular person talked to us in that loud voice pointing their finger and pencil and not letting you answer the question. you don't have to answer that, mr. secretary or mr. chairman. we know what that answer would be. and lastly, my father who knew me best said remember to always say i'm sorry. i'm sorry for what you've had to go through. >> time of the gentle lady has expired. the chair now recognizes the gentleman from north carolina, mr. pittenger. >> thank you. mr. lew, good afternoon to you. mr. lew, on your last visit when

you were here and i had occasion to talk with you, we discussed at some some length information sharing between homeland securities and trade based -- trade transparency units and the roll and sharing together and how important that was. and to the extent that they're sharing, in terms related to the trade base money laundering that we would be successful. when i asked this question to you about the sharing between homeland security and fcen, your response to me at this time was, quote, i start out with a strong bias that we ought to work as one government and that we need to cooperate and collaborate. i start out sympathetic to this initiative. so that was your statement then. and then in response to my questions to you, we got a response back from your staff for the record that stated the following. treasury and dhs are in regular

contact regarding ways our two agencies can better perform or respective efforts to combat terrorist financing with. we're confident that we can achieve the important goal through the ongoing strategic oo relationship while at the same time maintaining our respective database autonomy. mr. lew, there seems to be a conflict in terms of perspective and philosophy of how they would work together in information sharing that really is so vital if we have -- if homeland security has certain data we're not accesses apt fcen, that certainly restricts your ability to be able to intercept the information that we need. could you kindly respond to this different viewpoint between your staff and yourself? >> i'm not sure it's a different viewpoint. our activities and tracking down terrorist financing depend on the constant flow of information from the intelligence agencies

and other partner agencies like dhs. and likewise, we provide enormous amounts of information on an appropriate basis back to them. the question of whether or not i get into the -- >> let me ask you, are you willing to enter into an agreement with dhs in terms of information sharing -- >> i'm not aware of a problem right now in terms of information sharing. what i do know is that full access to all of the database would put a lot of information that's not necessary into a place that it probably shouldn't be. and i think the question is how do we make sure the right information is fully shared and we each protect the systems where personal privacy is at issue for the other information, as well. i'm happy to follow up. after you and i talked at the meeting, we talked in north carolina as well about it. i have followed up with my staff and urged them to keep working on this. it has not been brought to my attention that there is a problem in terms of the flow of the information but if there's

something you're concerned about -- >> i think the word to me was there should be a sense of autonomy coming from your staff, that's a directly opposite in terms of what i heard. and i just want to make sure that there's an ongoing effort to share this data. you have incredible access to data. i'm familiar with the work that you have and what you contribute. and frankly, i think we have a greater need for access with the private sector in their efforts to try to work along our side. but this access to data is a very critical component among agencies, private sector and frankly with our allies around the world. >> i really do believe our practices at treasury lead the world in how to get the right information into the right hands. we provide an enormous number of leads to the appropriate agencies. >> yes, sir. >> you're asking about a querying of databases on a kind of real-time basis. >> i need some follow-up on that if you could. two other questions quickly.

there's been an important role in bringing the countries into the regulatory compliance. but they're not an enforcer. what's your response what we do with countries like turkey, kuwait, qatar, who have been complicit in transferring financing and being accessible on that? >> look. we raise these issues strongly and bilaterally -- >> what tools do we really have? i've raised the issues too. i've been to those countries. they dodge every day they can. >> i think we're making progress. >> it's a nice word. i'm not really trying to cut you off but i don't have much time. the reality is they're very aggressive and we haven't seen much cooperation from them in terms of not being complicit with the financing component. my last question deals with iran and the banks that come under swift authority. do you believe these banks are

going to be able to access -- i didn't get a clear answer from you -- that they can have access and work with american financial institutions? >> brief answer, please. >> i think what i said in the earlier response is we're comply with the joint comprehensive plan of action and lift the nuclear sanctions. we'll keep other sanctions in place. part of the agreement was to give iran access to money that it has a right to. we will work on making that happen. it is not going to be our goal to block transactions that are legitimate under the joint comprehensive plan of action but we'll enforce on other areas like terrorism. and the like. >> time of the gentleman has recognized. the chair now recognizes the gentleman from washington, mr. heck. >> i ask to enter into the record cord dated march 18th from the secretary of legislative affairs -- >> again these are allowed under general leave but without objection. >> thank you for being here, mr. secretary.

earlier you had indicated verbally, i want to confirm that, that, in fact, on the dates december 17th, january 21st and march 18th you had extended an offer to sit down and work through the issue of the supply of certain materials in response to requests. that being an addition by my best count more than 5,000 pages of documents you'd already submitted. is that correct, sir? >> that's correct. >> i would like to associate myself with the remarks from the gentle lady of ohio. i was first elected to the state house of representatives 40 years ago this year. and my muscle memory as a fairly young man was formed by strict rules prohibiting the impugning of another person's motives. and i've been somewhat surprised in my now 39 months here that that is allowed on too often an occasion.

but i took the time to actually look up the house rules, and the house rules do indicate that committee meetings shall be in strict conformity with and observance of the acceptable standard of dignity, propriety, courtesy and decorum traditionally observed. so the specific words i want to associate myself with with respect to the gentle lady of ohio is i am sorry. you didn't deserve that and i found it to be an egregious brief of our own rules. now on to the substance, last fall i think it was fall i think it was fall i think it was fall i think it was

rundersecretary sheets that was here. i queried him as to whether or not we had actually reached out to if normally formed asian structure investment bank to see about ways we might collaborate with the new deep pool of funds available. he seemed to indicate that it was important that they engage in best practices. there have been a couple of intervening events that might affect the degree to which we're reaching out, president xi's visit, the imf quoted reform. have we reached out to them? is this an area where we might collaborate or cooperate more to invest in infrastructure? >> congressman, i appreciate your comments and with regard to the asian infrastructure bank, we have made clear from the start that we think it's a good thing for there to be more investment in infrastructure. and we didn't have an objection in principle to a new institution adhere to high standards. i'm really quite pleased sitting here today that our pressure for

high standards has been heard by other countries participating and by china itself. and as they approach making their first commitments, they are certainly saying all of the right things about adhering to high standards. in terms of collaboration with them, the way that we have talked to them about collaborating is through the existing -- the older international financial institutions where if they can collaborate on projects, the new institution piggybacks on the safeguards and the standards of the older institutions. there's work under way looking at co-financing, for example. we've also offered on an bilateral basis to provide any technical advice that we can. because, frankly, a lot has been learned in the last 70 years and those lessons don't all need to be relearned. they say that it's going to be open for fair contracting practices and i trust that american firms will want to participate in that. but we have not explored joining any more formally.

>> thank you. on the subject of infrastructure, it seems to me that what we consider to be infrastructure has evolved very considerably over the centuries, from 18th century roads, bridges, aqueducts, 19th century railroads and sewers, 20th century, phones, water treatment and water lines, and in the 21st century broadband. all physical. but it occurs to me when it comes to economic development, we might want to consider some soft quote infrastructure investments, namely standing up a financial regulatory framework especially in underdeveloped nations for whom not having a developed financial regulatory framework is a great impediment to economic development. thank you, mr. chairman. >> time of the gentleman has expired. the chair now recognizes the

gentle lady of missouri, ms. wagner. >> thank you, mr. chairman. thank you, secretary lew, for coming and staying the duration here. following up on my colleague's discussion with you, i want to bring up the ongoing tpp discussions that have been occurring with our counterparts in the eu. next month i know the president will be strafling to germany to discuss efforts to advance negotiations on this trade deal. however, as we all know, financial services continues to be an issue that is not on the table. as you said last year, sir, you support increasing market access but view talks on regulation with, i believe the word was skepticism. different regulatory regimes, especially when they aren't equivalent, would seem to affect market access significantly. isn't it difficult to draw a line between market access and regulation, sir? >> no, congresswoman, actually it is standard practice for market access to be something

that's negotiated in a trade agreement. it would be very unusual for prudential regulatory issues to be covered in a trade agreement. we don't think it's appropriate for prudential regulatory issues to be handled there. there are a lot of places where we collaborate around the world, including with our european friends, to try and reach agreement on goals that we all share in terms of high standards. we have the high standards we're trying to pull everyone up to. i don't think that a trade agreement that could end up chipping away at some of our protections would be the place for prudential regulation to be reopened. >> with all due respect, many participants have said that previous mechanisms, so to speak, to engage in the regulatory coherence have fallen short, such as the financial markets regulatory dialogue. the fmrd. doesn't this trade agreement represent a unique opportunity, sir, to get communications and coordination between the u.s. and the eu right?

>> well, in my conversations with the european commission, i've actually heard a recognition that opening the prudential issues in tpp would not be acceptable to us. and i've heard a renewed interest in using the financial markets regulatory dialogue as a place to try to drive those discussions which we think is a rating ray to do it and we're happy to go that way. >> i heard quite differently. that it's feckless and noneffective. as a former united states ambassador and diplomat, to a hub in luxembourg, i find your response concerning. on the subject moving on of comparing eu and u.s. in terms of financial service regulations, i would like to bring up the eu's call for evidence that is currently ongoing and looking at a necessary regulatory burdens and other unintended consequences. in fact, just last week european commissioner for financial stability jonathan hill said, i

quoetd, you can't expect to get everything right or to predict exactly how rules are going to interact. secretary lew, do you disagree with lord hill's statement? >> you know, i think that lord hill's statement reflects the fact that we always need to keep asking, is what we're doing right and appropriate and we certainly take that view in terms of our analysis of everything that we do. >> it doesn't seem fsoc ever taken up such a comprehensive review such as what the eu is currently doing. do you support a dialogue here in the u.s. -- let me finish my question, sir, please. here in the u.s. similar to the eu doing with the call for evidence to look at the impacts that all, all of our post-financial crisis regulations have had on financial growth and stability. >> our regulators are in the middle now of regular process, every five years of reviewing the regulations to look back and see which regulations require

reconsideration. i think that's the right way for it to happen. they each have the authority over their own organic statutes. it's not an fsoc responsibility. when i did a look back of the agencies that report directly, i was struck it was not in my per view to go into the independent agencies. the other process is the right way to do it. >> it calls for real analysis of the cumulative impact of regulations including that have yet to be implemented. how have you all looked at future regulations, such as basil 4.0 and the fundamental review of the trading book and how these fit in with our current structure? >> you know, our view is that we always need to be looking at the risks of the future, not the past. we have to make sure that our financial regulatory system doesn't become out of date. and we do that domestically. we do that internationally, as we participate in various multilateral body's i i think i have run out of time.

>> time of the gentle lady expired. the chair recognizes the gentleman from kentucky, mr. barr. >> thank you. mr. secretary, thank you for your testimony today. i wanted to follow up, the questions from my colleague mr. pitten jer. as a member of the terrorism financing task force, as you know the work of treasury is important, particularly technical assistance. we know from the hearings, revealed significant gaps in the anti-money laundering and counter terrorist financing capacity of many developing countries. and my question to you is, given the role of office of technical assistance and agency for international development at the state department within the u.s. government, which of these agencies takes the lead in providing that assistance to our allies and other countries? >> well, obviously, the office of technical assistance has the subject matter knowledge to be cape nbl this area.

us i.a.d. with resources in some places we don't. we collaborate together to try to work in partnership. one of the reasons we've proposed over the next several years to double ota it is, i think, one of the most important ways to build capacity in other countries, not just in terrorist financing, one of the things you need to do is have transparency and openness in the business environment to get those countries where they need to be. that give you the ability to deal with terrorist financing so you get multiple improvements by building the kind of infrastructure in this area. i have seen tremendous progress where our ota advisers are in there. >> obviously, given today's news, the tragedy in brussels, we are we continue to be reminded to confront radical islamic terrorism. >> yes. >> be proactive. disengagement is not an option. and so, i would hope that we

certainly coordinate within our own government of who lake it is lead to take that technical assistance because we know from the work and oversight the countries have gaps, law enforcement -- >> totally agree. >> judicial systems. >> i don't think a problem is coordination. we asked for more resources because we don't have enough people out there and i think we could do more good work with more people. >> let's talk about the financial action task force. obviously, that task force peer reviews countries, makes recommendations. should we work to have recommendations on coordinating technical assistance to technical country? >> we work with tfaf between ours, and imf. that's where most of the technical assistance is coming from and we work very closely together constantly. >> i think we do have a good model there and we do need to have recommendations on better coordination.

under secretary kimmet in our hearing indicated that, you know, while we have plenty of commerce department and usaid attaches over our embassies, there's only a couple dozen in our embassies deployed worldwide, that seems to me to be an insufficient number given the threat environment. it wouldn't seem to me that we can sufficiently project our economic or counterterrorism financing objectives without more treasury a thttaches. would you agree with that? >> i would not address any inadequacies. they do a tremendous job. >> i'm not suggesting that but a couple dozen. wouldn't you agree having treasury attaches deployed in more places would be at least as important as agriculture -- >> i think -- i'm not going to

question the value of other attaches. i can tell you the value of treasure attaches is really high. >> we need to continue to work on that. quickly in my remaining time, let me ask you about capital standards and sequencing, i'm concerned that the ias standard setting process might front run and prejudice the federal reserve process for insurance capital standards rule making. obviously congress weighed in by requiring the fed to implement nonbank centric standards, more insurance based capital standards. what we don't want is for the international community to make an end run on that. do you share those concerns? and what is treasury doing to ensure the timeline of the work of the fed going first? >> so we discussed earlier how important to make progress on the covered agreement. if we get a covered agreement that would make clear what the line between prudential and capital issues is that would be the -- a lot of protection to our firms.

we don't think other countries should set capital requirements for our --. >> that's good to hear because domestic regulators have adopted fsb rules for banking, so we would hope that treasury would work with fed -- >> i'm not sure if i agree with that characterization. the fsb rules for banking, but i'm happy we agree on insurance. >> time of the gentleman has expired. the chair now recognizes the gentleman from pennsylvania, mr. rothfus. >> thank you, mr. chairman. if we could stay on this international insurance issue for a minute. i'm concerned that foreign negotiators will use this process as a vehicle to impose rules that put u.s. firms at a disadvantage by unfairly targeting products they offer. as you know, the iais has approved higher capital charges for some u.s. insurance products by labeling them as nontraditional. however, there are similar insurance products offered by foreign firms that have not been subjected to a higher capital charge. i see this as a clear example of foreign negotiators using

international rules to hurt u.s.-based firms. why does this imbalance exist? and what is treasury doing to address it? >> i've tried to respond, congressman, that the eu is implementing insurance regulatory reform that they call solvency 2 that will subject an issuer to disadvantageous treatment if the insurer's country of domicile is not recognized as equivalent by the eu. one reason to have this is to have a frame to prevent that from happening. we're very much engaged and very much focused on this. >> chair yellen testified before this committee recently and lamented the headwinds facing the economy. i would argue that many of the headwinds we face are manmade and self-imposed. i consider the affordable care act where we had the congressional budget office say that's going to cost 2 million jobs not -- >> i was with you on the first half of the sentence.

>> but then you look at epa regulations throwing middle class workers in my district out of work. and then you look at dodd-frank which was sold as a way to end too big to fail and product consumers what ends up enshrining too big to fail law and former treasury secretary geithner acknowledged it didn't end too big to fail. and it was sold as protecting consumers. and i see consumers losing products like free checking. 2015 report by the office of financial research pointed out that market liquidity had become more fragile, that broker dealer inventories had shrunk and those inventories had concentrated in high quality liquid assets, the office of financial research highlights several factors fragility namely bank capital standards and the volcker rule, do you agree with ofr that these regulations are a factor leading to reduced fixed income liquidity? >> congressman, as i've testified to this committee before, we're open to looking at

any of the contributing factors. market liquidity is an important element in any well functioning financial system. and by most measures of market liquidity, particularly the treasury markets, we're now within historical ranges. that said, there's things going on in the markets that require more attention. that's one of the reasons we've put out a request for information to try and understand how some of the transformation and the structure of our markets is affecting the way the markets perform and potentially liquidity. i think we're in a world now of electronic trading, high frequency trading, algorithmic trading, where many, many -- really most of the transactions taking place are not what many people think of as traditional individuals making decisions. that's having potentially an affect as well so we're -- >> i guess i'm trying -- i think your view in part with some of the conclusions? >> well, i don't attribute great weight to the notion that

regulatory changes are the key driver. i think if you look at the stability of our financial system, the health of our economy and the health of our markets -- you know, in the beginning of the year we had substantial -- >> regulatory -- i'm sorry, you said regulatory actions are not a key driver? >> i said i'm not convinced that they are a key driver. yeah, that's what i said. >> okay. i would like to touch on something that former treasury secretary larry summers recently mentioned. he penned an op-ed in "the washington post" saying it's time to kill the hundred dollar bill. he discusses a recent paper and advocates for stopping the issuance of high denomination notes like the 500 euro note or the hundred dollar bill even withdrawing them from circulation. has apparently supported this idea since the late '90s, removing such currency would reduce corruption around the world while having little

down side for legitimate. steve forbes recently wrote in "the wall street journal" that he's concerned this idea would actually harm average americans. and i'm wondering if you would have an opinion on this. would you support the plan? >> look, i think there's a big difference between the hundred dollar bill or the 500 euro note. i think the very large bills like the 500 euro bills are problematic. >> i i think the $100 bill -- >> they are problematic because? >> because the ease with which you can move large amounts of money is fivefold. from what 100 euro bill would be. >> i yield back. >> time of the gentleman has expired. the chair now recognizes the gentleman from colorado, mr. tipton. >> thank you, mr. chairman. thank you, mr. secretary, for taking the time to be here. want to be able to visit with you. actually, i will go off of my colleague's comment where you just made the comment that you are not convinced that regulatory changes are a key driver in terms of some of the challenges that we're having. i'd like to go back to when we visited last year.

we were talking about small banks and the impacts that they are feeling because of the regulatory burdens are being placed on them. i'm sure you're well aware that we've had more consolidation of banks, fewer applications for new banks starting up into our communities providing the access that you were talking about just a little earlier in regards to liquidity to be able to grow the economy. because we have frankly a tale of two economies in this country. given your opening statement that was rather glowing on the american economy, as you travel through the third district of colorado we're continuing to see in many cases what the real unemployment level, double digit unemployment. more businesses shutting down than new business start-ups. and many of those businesses have expressed to me that their challenge is being able to get capital from their local banks. the banks are telling us they're having an inability to be able to make those loans because of expanded regulations. when you're making the comment that regulatory changes are not a key driver, we had testimony come in from chair yellen, vice chair hoenick acknowledging

there is a problem. with rules and regulations and the impact on our financial markets. do you dispute their comments? >> well, i would like to see the specific comments to respond to rather than just -- >> well, they were talking about -- >> i think we're talking about different things when we use the word liquidity. typically liquidity is used to talk about matching buyers and sellers in markets for stocks and bonds. i think what you're asking about is a slightly different question. it's not something we typically refer to as liquidity, but it is what's the availability of lending to small businesses and maybe individuals. we believe that the credit box has gotten narrower in some ways than it needs to be. that's why, for example, fha last week moved to try and make clear that the credit box for mortgages should be eased some. i think on the small business

side a lot of small businesses before the financial crisis got access to capital by having individuals really tap into their home equity. so it's a different question than what happens in the stock and bonds -- >> yes, my point is the regulations we're seeing on a lot of our community banks. last year, when we sat down and visited, you'd expressed that you hadn't really talked about this in terms of the fsoc. in fact, when we reviewed the minutes from 2010 to 2014, it had not been raised once. what is the threshold that has to be passed? what metrics have to be in place for to have those conversations take place at your level? >> look, i have had conversations with all of the prudential regulators about the need to use the flexibility that they have to not have a one size fits all approach. and i don't believe they have a one size fits all approach. they need to keep looking at

what can they do to provide the kind of proper accommodation to small institutions that don't present the kinds of risks that some of the larger ones do. when we talk about small institutions, we're not always talking about the same thing. i mean, the real community banks are quite small. you know, even the $50 billion threshold that's now in place for, you know, sifi, is way bigger than your typical community bank. when the people raise questions of institutions of hundreds of billions of dollars, we're not talking about community banks anymore. >> but, unfortunately, as chair yellen, again, we are seeing that trickle down effect of regulations that are impacting those. is that an important thing for you to be able to address? >> look, i think we have to do two things at the same time. we have to make sure that our system is safe and sound and that we're not exposed to the kind of financial crisis that

did so much damage to this country in 2007 and 2008, and i think we have to constantly be asking ourselves are there things that we can do to make it easier for small financial institutions. we're doing both of those. >> i guess the point, mr. secretary, that our banks are asking, the community banks, which did not cause the financial crisis is, when can we expect to be able to see some action rather than talk? >> well, you know, the kinds of things that we've discussed in this hearing room and other hearing rooms there are areas like the regularity of reviews for small banks, we're open to having conversations. but when we see a piece of legislation that would really repeal major parts of financial reform, that's a place we're not going. so it's a question of can you have a conversation about the reasonable things. >> time of the gentleman has expired. the chair now recognizes the gentleman from arkansas, mr. hill. >> thanks, mr. chairman. thank you, mr. secretary, for being here. let me add my comments on previous questions submitted. as a former treasury employee you're making me look bad. i submitted questions to you on june 17th, 2015, like

representative guinta and i hope you'll assure me you'll get prompt answers to my questions. >> i will certainly go back -- >> they're all softballs. they're easy. i promise. on the subject of ttip, i know my colleague from missouri touched on that, but i want to have a nuanced question on that with you. i know you've been involved and certainly osaia has been involved in the negotiating team on the development of ttip. are you pleased with ttip as it relates to financial services from your briefings and review of it? >> look, i think that we've had challenging discussions but we're making some progress now. i believe that financial market access should be part of the ttip negotiation. i don't believe that prudential regulations should be. i think we've made some progress with the europeans. and to shift the discussion of prudential regulation to the existing international bodies that are set up to appropriately deal with it.

>> there's a real important, i think, derivative issue on the subject of data management and data centers, that was a big part of ttip, financial services are not included -- >> i think you mean tpp. >> i'm sorry. tpp. and i've heard concerns that that data center issue is problematic. the financial services, our international financial services companies are not being treated like nonfinancial services -- >> so the data localization was issued was a difficult one. we generally oppose data localization requirements. i put a considerable amount of effort in to making sure that data localization was not required in parts of the financial services industry like electronic payments where it was really no more than an un-tariff barrier. in the area of financial constitutions the issue is that our own prudential regulators feel that they need to be guaranteed access to timely and appropriate financial information. and there has been experience during the financial crisis where that was cut off.

so we're trying to reconcile legitimate interests of the financial institutions not to have nontariff barriers and costs imposed on them, but also, the needs of our prudential access to information. we're trying to work our way through that as i've said before to see if we can thread the needle. tpp is closed, so we can't reopen tpp. perhaps there could be some mention in some side piece that's helpful. but really the question is going forward what are -- what will be the framework for a ttip or for a future b.i.t. negotiation. >> i think the financial services players can certainly provide regulators data they need in order to do their job looking forward and meeting expectations. but it is concerning that financial services companies, some of the biggest and best in the world that are headquartered hereare not getting the same accordance on data localization that nonfinancial services are. so i respect your view on it, but i think it deserves more

discussion. >> and the reality is the problem did exist during the 2008 financial crisis, so it's not ancient history. >> no, i understand. but also people have changed a lot of things in their operating style since then. >> that's why we're trying to work our way through it. >> yeah. t.a.r.p., it's hard to believe we're talking about t.a.r.p. this many years later. large banks have been facilitated through the treasury to exit t.a.r.p. with -- on pretty favorable terms and close down that part of the program. but a lot of small banks have not had that favorable treatment from the treasury, particularly those that are in the community development program. i'm wondering if i could have your commitment that if people bring you a market-oriented offer to exit their t.a.r.p. position that they could be done by the end of the obama administration? >> well, look, it would be my finest hope for us to be able to say t.a.r.p. was completely done. >> i would think so. i would think it would be one of the feathers in your cap. but there are a lot of small institutions that are not getting, i think, the attention when they're bringing

opportunities to exit t.a.r.p. i really urge you to look into it. >> we will continue to put every effort into it. it's been challenging to get proposals of the quality you're describing. and that's why it's been slim. >> the other thing that saw my mind recently i introduced a bill that was marked and moved forward on commercial mortgage backed securities. and the feds got rule making that i think will put conduit loans and some other kinds of commercial mortgage backed securities really in jeopardy from refinance risk over the next couple of years. and i think treasury should be very interested in the bill we've put forward in this committee. >> i'm happy to take a look at it. >> thank you. >> gentleman yields back. the chair now recognizes the gentleman from maine. >> thank you, mr. lew, very much for being here. i appreciate it. i would like to follow-up a little bit on the discussion a short time ago mr. ginter from new hampshire, one of the new regulators as a result of the administration's new financial regulations is a cfpb.

they have a new office building for their 1,500 employees, it was a cost to the taxpayers about $200 million. the taxpayers and the cfpb doesn't own the building, they spend that amount of money to rehab it. and we think -- i think that's a huge waste of taxpayer money, sir. there was -- the director of the cfpb was here in march. and he testified in front of this committee when ms. wagner questioned him, and i quote, it was the treasury who was in charge of all bureau operations at the time the decision was made. so my question to you, sir, is there have been follow-up letters that date back now 288 days asking you specifically and treasury, the folks that work for you, who in fact at the cfpb or treasury that they said it was you folks in charge, made the decision to waste that kind of money. do you know who that was? >> you know, congressman, i

responded earlier that we did follow-up on this and provide the inspector general findings. i'm happy to go back and -- >> well, with due respect, sir, i have the letter right here you responded back dated june 16 of 2015. says the treasury's working to respond to requests. i repeat, the treasury's working to respond to requests. that was 288 days ago. i'm asking for a commitment now, mr. lew, if you don't mind, can you give me a specific day when you will get back to us who is responsible for wasting that kind of money? >> congressman, without agreeing to your characterization, i'm happy to follow-up. >> okay. when will you follow-up and specifically give us the date when you get back to us who is responsible for making that decision? >> congressman, after this meeting, we will get back and work -- >> okay. it's been 288 days, mr. lew, i don't want to be rude but that seems to be an awful lot of time. >> you know, on august 25th we

did -- treasury informed the committee that a report by the inspector general the federal reserve board found that the work authorizations related to the renovation were finalized after cfpb -- >> mr. lew -- >> we have responded. but i'm happy to go back and see -- >> i appreciate. here's what i'm concerned about, mr. lew. these are very simple questions i'm asking. they're not complicated. you are the secretary of the treasury of the united states of america, if you are unable to answer a simple question, i i had think it puts -- >> so we've provided 200 pages of information to the committee on the condition of the building when it was transferred -- >> okay. i'm looking for who's responsible for that money. >> i'm happy to look and see what you're looking for. >> great. >> see if we can be helpful. >> thank you. and you won't give me a specific commitment when. let's move on. mr. lew, you're familiar, i'm sure, with the budget presented by president obama a short time ago that never balances, ever,

you're familiar with that budget? you're also familiar, i assume, mr. lew, with the fact that it increases spending by $2.5 trillion and increases taxes? are you familiar with this budget? >> there's a variety of policies in the budget but it would restore balances to roughly where we were -- >> i'm sure you also know this budget that never balances increasing the debt from current $19 trillion to $27 trillion, it triples from the time when the president arrived. you're familiar with this budget? >> i'm also familiar with the percentage of the gdp and the debt as a percent of gdp. >> thank you, sir. do do you think short-term interest rates will remain at zero forever? >> no. >> okay. i also assume you're familiar with the omb projections that in three years the annual interest payments on the debt at that time will be above $440 billion in one year, which will equal

what we spend on medicaid, and i'm sure you're also familiar with the fact that in seven years the omb projects that the interest on the debt will exceed what we spent on national defense. so my question to you, sir, given the fact that this administration continues to submit budgets to us that increase spending, increase taxes, increase debt, never balance, at what point, at what point, mr. lew, do you think those interest payments, not the percent of the gdp represented by the deficit but when do those interest payments become a concern of yours? >> look, congressman, as gdp grows nominal dollars grow and having cut the deficit by three quarters from 10 to 2.5% of gdp has put us on a stable path. we have more work to do, but we're not in a moment of crisis like we were when the president took office. we are in a stable sustainable place. >> i would debate you on that with all due respect.

i'm a former state treasurer of maine. there were 49 states that have to balance their budgets, the government here does not. they spend what they want, borrow what they need. do you think a balanced budget amendment to the constitution is something we need? >> no, i do not. >> tell me why not? >> i think you're out of time but i'm happy to respond if the chairman would like me to. >> appreciate that, mr. chairman, if the secretary would respond to that. >> quick response, please. >> i think the responsibility for making policy rests with the congress and the president that a mechanical approach that would make it difficult if not impossible to respond to crises or economic -- >> well, those are not -- >> would be very, very bad and happy at another time to explore discussion. >> there are bills submitted i've cosponsored along with others that give plenty of flexibility in that budgetary process. the american people have seen that congress anded administration cannot live within its means. don't you think it's time to help the american people -- >> time, time of the gentleman has expired. i'd like to thank the witness for his testimony today. without objection all members will have five legislative days within which to submit

additional written questions for the witness to the chair which will be forwarded to the witness for his response. i would remind the witness we have over a dozen questions that are still pending by both democrats and republicans from the june hearing. so i would ask our witness to please take this seriously and have treasury respond promptly. without objection all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. this hearing stands adjourned. tonight on c-span3, it's

american history in prime time with our series american artifacts. a look at some of the items left at the vietnam veteran s memoril in washington, d.c. then inside philadelphia's congress hall which served as the capitol in the late 18th century. after that, a tour of the whitney plantation slavery museum in louisiana. and later, a look at what's on display at the national museum of american jewish history. each week, american history tv's american artifacts visits museums and historic places. the vietnam veterans memorial collection includes 400,000 items left at the memorial since it apriled in 1982. the collections are stored in the blue boxes. next, we visited the national park service to see a selection of items left at the wall. >> hi. i'm the