front of judges, that probably strikes you and i as being unusual that the governing attorney will not be there. have you heard that? was it a practice or is it a practice? >> that is an issue that i'm sure would come to my attention that were in any way systemic. has one missed a hearing here or there, i wouldn't be apprised of that. but i assure you that i have met so many of these attorneys, i can't imagine that being a practice and a report that's really valid. i'm not familiar with the report you're talking about, but our lawyers wouldn't just ignore a court setting. >> that's why i ask and i make no presumptions as to the validity of that report. but if you could have someone, not yourself, but just somebody check to see whether or not that is currently an issue or was an issue in the past, it is hard

for me to understand how the government can be represented if the attorney doesn't show up, but you would have that same feeling because you had the same job, so. >> last two issues, sanctuary cities, when i go back home, when i suppose it's true for johnny in texas, it is really hard for the people we represent to understand, particularly in light of what they perceive to be a federal government that is willing to get involved in certain state and local issues jurisdictions that consider themselves sanctuary city. i heard you say you're working on it. other than the power of persuasion, which may or may not work. but what tools do you need to be able to get local jurisdictions to cooperate. >> well, i know that. >> talk about success, though,

with respect to the 17 of the 25 that i targeted. the 25 that have the most impact on our declined detainers. we have 17 working in a very robust manner with us. so the secretary did something right in his communications with local law enforcement in different places that he went to as the deputy and myself personally did. but i believe our message is getting through, i think that's an indication getting through. officers who are going out there. we continue in our work i'm not sure we're going to get to the point we're going to get to. all of us. i have had specific instruction from the secretary.

>> last question, there are not that many things on capitol hill that are bipartisan, but dealing with the decision would be one of them. i have had a number of my friends on the other side of the aisle having constituents impacted by supreme court decision, what can we do or what can you and i and you and congress do together, it is impossible to explain the constituents why in some instance, this country who benefit from foreign aid from us will not accept their foreign nationals back. it is just hard to explain that, so what do we need to do to get the state department more fully engaged so it's not you and me answering the question, because it's really up to them. so what can congress do about it? okay. well, i see two different issues

here, one is the work with the countries that are not taking their people back and the other one is the decision that compels us to release people. sir, i've read that decision. i don't know if you have. it is very legal in nature, but the bottom line there is the constitutional concerns of holding somebody indefinitely when there was little chance that we're going to be able to return them to their countries. you're right, none of our people like doing that and it hurts us in our heart of hearts that that is the deal. i'm happy to consider and work with you, any options that you have with respect to those countries. i am working diligently with michelle bond, the chief of counselor affairs. she has really taken a personal interest and made a commitment to me that we're going to take a look at each one of these

countries and do what we can. the world is a complicated place, as you know. and i would not put myself in the shoes of the department of state to know all of the ramifications of a sanctions decision, for example, against a country with whom our relationship is complex, to say the least. and i don't know all of those ramifications. all i know is i have a difficult problem to deal with and she is working with me at the department of state to try to get to a better place than we are today. >> well, with my friend from california. this is a bipartisan issue, congresswoman and i have discussed it. congress courtney has an issue. congressman welch on the other side of the aisle. what is the dominant explanation given from countries who will not accept their nationals. what is their excuse for not doing so. >> quite frankly, in many instances, there is no explanation. some of the factors are

instability of a country. i mean, what are we doing with syrians, you know, returning them to the country. that country is in the throws of a terrible turmoil. so often it's instability. it's a claim that our proof of citizenship is not sufficient, even though we believe it is. it's the lack of records and the lack of records kept by certain governments that they just don't value recordkeeping the way we do and so establishing citizenship becomes a problem. it's a very picture of things that are brought up to us as why they will -- as to why they will not accept their people back. >> all right. i will ask my friend from california if he had any concluding remarks. we'll want, on behalf of all of us thank you for your service and for your testimony today and, members will have five

legislative days to submit questions to the record. with that, we thank you for your time. >> thank you.

once more, we will have a government of by and for the people. >> we are stronger together. and no matter what, remember

this, love trumps hate. >> c span's campaign, 2016 continues on the road to the white house with the first presidential debate monday night live from hofstra university in new york. then at 8:30. the predebate briefing for the audience. at 9:00 p.m. live coverage of the debate followed by viewer reaction. the 2016 presidential debate on cspan, watch any time on demand at cspan.org or listen live on the free cspan radio app.

committee members also question secretary about $1.7 billion payment the u.s. made to iran. it commits with committee chair.

committee will come to order. authorized to declare recess of the committee at any time. this hearing is for the purpose for receiving the annual testimony of the chairperson of the financial stability oversight council. i recognize myself for three minutes to give an opening statements. with today being the official start of fall, it's disappointing that the financial stability oversight council has delivered the equivalent of a summer rerun, it's 2016 annual report is basically identical is 2015 breaking little ground and adding new value. it's charged with identifying risk to financial stability continues to mention only in passing the need for fundamental housing reform, that fannie mae and freddie mac, institutions at

the ep center of the last financial crisis pose for precipitating the next. since the advent of dodd frank, we're losing on average one community institution a day in america as they are crushed by a federal regulatory burden. the big banks have grown bigger. banking system consolidation can clearly contribute to heightened financial system risk, yet there's no mention of the report, a federal regulatory risk brought on by dodd frank, a glaring emission. yet, the most scandalist remains conspiracy of silence regarding the expo ne-- posed by the nati debt and are staggering unfunded obligations. since president obama came to office, the national debt has increased by mind boggling 84%. the congressional budget office noted in a recent report, that the president's 2017 bundget wil

add $7.5 trillion to publicly held debt equivalent to 59,000, $609 for every american household. cbo recently warned that such high-rising amounts of debt have "serious negative long term consequences for the economy and would constrain future budget policy." on this again, remain silent and thus its annual report loses credibility. although, the annual report is disappointing, this committee's focus must remain on the frightening and likely unconstitutional powers it ended in designation process clearly gives federal regulators broad license to concentrate immense economic power in their own hands. the designation authority is taking our financial system regrettably one step closer to a

government controlled utility model, a model whereby washington will allocate credit to politically favorite classes at the cost of our freedom and our prosperity. this must change. finally, the highly politicized structure of a shadow regulatory system that is to democratic principles. that is why it's so important last week this committee favorably reported the financial choice act. the financial choice act will bring about economic growth for all and bailouts for none. it will end bailouts once and for all by removing the ability to designate privilege, too big to fail funds and replaces bailouts with bankruptcy. it would prevent our -- it would protect our financial system with high levels of loss absorbing private capital and impose the strictest for those committing financial fraud and will hold them accountable and focus its mention solely on the

vital task of emerging threats to the financial system. it is undoubtedly a better way for forward. >> thank you for joining us today to discuss the financial stability oversight council's, 2016 annual report. last week the u.s. census reported that median household income increased by more than 5%. the largest increase in both percentage and terms since the government began tracking this data, nearly 50 years ago. the census bureau also reported that the poverty rate declined by 1.3% and that the number of people without health insurance in the united states declined by 4 million. all told, our progress is rather remarkable, compared to where we

were 8 years ago, when doing the last days of the bush administration, we were shedding more than 700,000 jobs per month and millions of people were being displaced from their homes. but make no mistake, we need to be doing more, especially to address the wealth gap and, particularly, for african-american and hispanic households, whose economic security was devastated by the financial crisis. unfortunately, however, there's an unnerving sense of amnesia from our colleagues on the other side of the aisle about the dark days of the crisis. here we are, eight years after that devastation and more than six years after dodd frank became the law of the land considering the same harmful deregulatory proposals that will undue the critical progress we've made, just think about

this, two weeks ago one of the largest banks in the united states, which was supposedly one of the most well-run was found to have opened more than 2 million unauthorized deposit and credit accounts for unsuspecting customers. this is a massive fraud of historic proportions that begs to question, what further reforms may be needed, and yet, in this committee, the answer is deregulation and more opportunities for wall street to write the rules of the game. and like the consumer financial protection bureau, they're on the front line of those attacks, with wall street reform, recreated it to look across the entire financial system. identifying gaps that may exist between regulators and action to prevent another melt down.

no longer would we allow banks to shop around for the weakness regulator or move money around the globe to escape regulation. earlier this year, we saw just how effective the it can be in preventing companies from going too large, or risky as to threaten the economy. general electric capital voluntary agreed to shrink itself and sell off much of the consumer and financial business returning to its roots as industrial company. the firm is smaller, safer and less likely to cause risk to the rest of the financial system, if it becomes stress. in turn, they allow ge capital to share its systemically important designation and the higher regulatory standards that came with it. what this means is that wall street reform is working as it should. the system is creating incentives affirms to shrink

themselves and it's ensuring that companies like ge, renew their focus on creating jobs in the real economy. and, yet, despite this progress, my colleagues opposite side of the aisle are intent on dismantling it. nowhere has this effort been more apparent than the chairman's dodd frank repeal bill, which received bipartisan opposition in the committee last week. this harmful legislation would strip it of its ability to designate nonbanks for heightened supervision, repeal all existing designations, the large complex firms like aig and, otherwise, limit its ability to operate effectively. this bill and others will put wall street back in the driver's seat and leave consumers and investors to fend for themselves, rather than continuing this focus on harmful roll backs, we should be supporting further reforms and exploring how we can do more to

prevent scandals like the one at wells fargo. so i look forward to your testimony, secretary lou on the state of our financial markets and what we need to keep doing to prevent a repeat of the 2008 financial crisis. thank you, mr. chairman. and i yield back the balance of my time. >> chair recognizes gentleman from texas, chairman of our financial institution subcommittee for one minute. >> thank you mr. chairman, the financial stability oversight council mission is to ensure the stability of the u.s. financial system and to identify future risks to the system. it was given authority to designate banks and nonbanks alike for heightened regulation. i believe, however, it also has the responsibility to ensure that the recommendations and designations are appropriately calibrated and provide sufficient clarity to the marketplace. today they've failed to live up to the duty to be a responsible federal agency, first they've failed to exercise the authority

under section 115 of dodd frank applied fairly to the bank holding companies. in the face of analysis of the office of financial research that suggest $50 billion banks aren't systemically important, they've shown air -- they've failed to immement failed transport when designated nonbanks as systemically important. as the u.s. district court noted the determination process is fatally flawed. yet, f sock has created additional unregulatory uncertainty by appealing and third and finally, the regulatory protection has failed to identify market concerns like those seen with strengths in the bond markets. i hope today we'll finally get to hear the substantive answers to legitimate policy answers instead of the talking points praising dodd frank. >> time the gentleman has

expired the chair recognizes the gentleman from new jersey, mr. garrett, for one minute. >> thank you. mr. chairman and mr. secretary, good to see you again. i understand you're a tough man to nail down, to get to this hearing today, even though it is the rule of law. but i guess i would be, too, if my job was to come here and try to defend. so, you know, we're starting to get a point of add mip straminif people talk about legacy and what you'll be leaving behind. when it comes to it, the -- it will be remembered by what, secrecy, and the continue refusal by administration and especially you to answer the most basic and simple questions to provide transparency to either this committee, to congress, and most importantly, refusal to provide transparency to this congress and the american people. the recent course decision invalidating the decision of metlife is a reminder to all of us that we live in a system

governed by the rule of law, mr. secretary, and not by the rule of bureaucrats. mr. chairman, i hope the treasury secretary finally understands this, and i look forward to some of his answers today. with that i yield back. >> the time of the gentleman has expired. today we welcome the testimony of the honorable jack lew. secretary lew has previously testified before this committee on a number of occasions. i believe he needs no further introduction. mr. secretary, without objection, your written statement will be made part of the record. and you are now recognized for five minutes to give an oral presentation of your testimony. thank you. >> thank you, chairman h hensarli hensarling. we've just past the eight-year anniversary of the collapse of lehman brothers. every autumn, this date provides a grim reminder of the most severe financial crisis of our lifetimes. it's also an opportunity to

measure the tremendous progress we've made to build a safer and more resilient financial system that will support long term economic growth. six years ago we worked together to put in place the most far-reaching, comprehensive update of the financial regulatory system since the great depression. the dodd/frank wall street reform and consumer production act put in place new consumer, investor, and taxpayer protections and effectively restored confidence in our nation's financial system. today, the success of these reforms continues to be reflected in a long and stable economic recovery. we've cut the unemployment rate in half. our economy is more than 10% larger than its pre-recession peak. u.s. businesses have added a total of 15.1 million jobs since private sector job growth turned positive in early 2010. and our financial system is safer and more resilient, providing the critical underpinnings for more inclusive

long term growth. recent census bureau data demonstrate that significant strides have been made. the nation's poverty rate is down for hispanics and african-americans. it's at the lowest level in more than a decade. household incomes are rising with 2015 seeing the fastest one-year growth since the census bureau began reporting on household income in 1967. recent enforcement actions by the occ and the cfpb also remind us of the ongoing need for robust protections and that that need is very real. without a strong consumer watchdog, the financial system can be dangerous for consumers and businesses alike. indeed, one of the most important lessons of the crisis was the need for a financial regulator dedicated to looking out for and protecting consumes. the last financial crisis had at its core abusive practices that should have been prevented. as the only regulatory agency

focused seoully on consumer production, the cfpb assures that markets are fair, transparent, and competitive. and it's been fulfilling this statutory mission actively and well. the conduct that led to recent enforcement actions again underscores the importance of finalizing strong, sensible executive compensation rules, a central component of wall street reform. moving forward, it's critical that we continue to build upon the success of wall street reform in creating a framework for responding to risks that arise in any part of the financial system. rather than regulating purely in reaction to crises, wall street reform focuses on regulating and identifying risks presented by markets as a whole and by types of activities wherever they're conducted. the financial stability oversight council exemplifies this approach. too often regulators operated in

silos and there was no single agency or group collectively charged with monitoring and maintaining financial stability. for the last six years fsoc has brought the entire financial regulatory community together to be on watch for signs of vulnerability and to respond to emerging threats to financial stability before they turn into crises. today, the council continues to benefit from the diversity of expertise and perspectives of its members. and the council has been open-minded and deliberative in its approach, regularly engaging with stakeholders, frequently updating the public on its views and actions and always aware of not emphasizing a one-size-fits-all analysis. before i discuss the council's finding in the sixth annual report, it's worth noting the report's significance. the council's annual report serves as a key mechanism for public accountability and transparency, setting a marker for action and outlining the

council's priorities. it includes recommendations to mitigate risks. importantly, the report includes a statement signed by each of the council's ten voting members that affirms that all of the aissues and recommendations in the report should be fully addressed. the council's 2016 annual report focuses on key areas that have been the topic of council discussions over the past year. these areas include cybersecurity, risks associated with asset management products and activities, reforms to wholesale funding markets and global economic and financial developments. for each area the report cites progress made and if necessary, the need for further action on the part of councilmembers and agencies. cybersecurity remains a focus. the u.s. financial sector has stepped up efforts to improve securities across the system. efforts to include greater information sharing and analysis

and establishing private sector best practices for assessing risk. the report makes several recommendations for building on this important work. the administration remains committed to staying ahead of this issue and we look forward to working with both the council and congress as we continue to address it. the council is focused on potential risks to financial stability posed by asset management products and activities. as these products and activities represent an increasingly important part of the u.s. financial sector, the council will continue to evaluate their implications for financial stability. to that end in april of this year we published an update regarding the council's review of potential risks in this area, in particular focusing on liquidity redemption and risks. it reflects the council's focus on asking tough questions to help inform its views. our work in this area is ongoing and we plan to provide timely public updates as our analysis

continues. let me close by saying that in the years ahead, it's vital that we remain vigilant to ensure that we do not return to the precrisis way of doing things, looking narrowly at jurisdictional lines dictated by the kind of charter a firm has selected and reacting to old problems instead of identifying and addressing threats that lie ahead. the old approach did not work. and regulators did not respond in time to prevent a crisis. we cannot go back. that means we must not only remain steadfast in opposing he was to roll back reform, but also that we must continue to build on the progress we've made. the work of the council has been critical to this progress and it's important that the council continue to have the tools necessary to respond to future threats as they emerge. i want to that anything the other members of the council and the staff involved in the development of the 2016 annual report for their hard work and commitment. i would encourage the commit to work with the council to build on the progress that we've discussed today. the recent news of consumer fraud by a large firm should

strengthen our collective resolve to work together to build on wall street reform rather than advancing legislation that would return us to the days when we had broad regulatory gaps and weak consumer protections. going forward, i'm confident that the progress we've made over the past six years will continue to promote the strength and stability of the u.s. financial system for many years to come. thank you, mr. chairman, i appreciate your accommodating my schedule by adjourning at 1:00 p.m. and i will do my best to keep my responses brief so we can get in as many questions as possible. >> the chair now recognizes himself for five minutes for questions. mr. secretary, one of the emerging threats listed in the fsoc report is the possibility of destructive cyberattack. as i believe you recall, it wasn't six months ago that seven iranians linked to the iranian revolutionary guard were indicted for coordinated cyberattacks on u.s. major financial institutions. attorney general loretta lynch

at the time said, quote, these attacks were relentless, systematic and widespread. a couple of questions about the recent 1. billion in payments the administration recently made to iran, payments that we now know were made in cash, made in secret, and 400 million of which we know coincided with the release of american hostages. secretary kerry, your fellow cabinet member, said of related sanctions relief under the jpcoa, quote, i think that some of it will end up in the hands of the iranian revolutionary guard corps or other entities, some of which are terrorists. isn't it true, there secretary, since the $1.7 billion was paid in cash, we have no way of tracing the money and you have no way of assuring us it will not be used for terrorist purposes? >> mr. chairman, the payments you're referring to are payments related to hague tribunal settlement. >> i understand that.

but the question is can you trace it and can you guarantee us that it will not be used for terrorism. >> we have laid out the facts related to this transfer in a letter sent to this committee. the payments complied with u.s. sanctions. >> i understand that, mr. secretary. it's a yes-or-no question. can you guarantee us it will not be used for terrorist purposes? >> mr. chairman, if you would just give themme a minute, i'll answer your question. you in your question characterized this incorrectly. it was not ransom. it was settlement of a contractual dispute. >> i didn't use the word ransom, mr. secretary. >> you didn't? >> no, i didn't. you can read the record. i said it coincided with the release of american hostages. >> you've asked a specific question about where the money goes. when the payment was made to the central bank of iran, we did work to monitor what support -- >> what i asked, mr. secretary, was could you trace the money. can you trace the money. >> we have not seen an increase in terrorist funding by iran.

>> i think we'll move on, mr. secretary, because i'm not getting an answer. but i want to know, and we have pursued this line of questioning before, who authorized the cash payment. so we know that cash has been called the currency of terrorism. you have an entire office at treasury devoted to terrorism and financial intelligence. according to press reports, senior officials at the justice department indicated objections. did you object to the payment or were you the one who authorized the cash payment? >> mr. chairman, the president spoke clearly to the facts on this on january 17th. we've given you the details in a letter. this was a settlement of a contract claim where the united states government and the american taxpayer was exposed to -- >> the question is -- mr. secretary, the question is, you're voidiavoiding the questi who authorized the cash payment? >> the method of payment is a

technicality. the agreement to settle the contract dispute is a substantive issue. >> it's not on the technicality of those on the receiving end of hezbollah's missiles. did you authorize the cash payment, yes or no? >> the method of payment was worked through a process that we outlined in a letter that we provided to this committee. >> okay, mr. secretary. isn't it true under 31 usc 1304 you must personally certify payments for the the judgement fund? >> mr. chairman, i am telling you the payments were properly made. i was aware of them. i was cognizant that it was happening. it was an appropriate settlement of a contract dispute that saved the american taxpayer billions of dollars. >> if you won't tell us who authorized the cash payment, what we do know is on at least two -- on multiple occasions, the administration said that you had no choice but to use cash, and in fact your state department spokesman on august

3rd said, quote, it couldn't be done over wire transfers. the president himself on the very next day said, quote, we could not wire the money. yet a treasury department spokesman acknowledged that on at least two occasions, the u.s. did make payments via wire transfer on july 2015 or april 2016. so did politico get it wrong? did your spokesperson get it wrong? or did the president get it wrong? >> mr. chairman, the president got it right, you weren't misled. >> were two wire transfers made, one on -- >> mr. chairman, i'm happy to answer your question but you've got to let me speak. >> i'll listen. >> all right. we have done a very effective job cutting iran off from the international financial system. the payment that was made by wire to iran was not for a billion dollars, not for a

million dollars . it was for $900,000. it went to a foreign bank account that iran had. and it was a difficult process to get the money, as it has been difficult for iran to get access to its own money under the jcpoa, because we've been so effective in isolating iran from the international financial system. >> so wire transfers -- the method of payment is a technical detail. the agreement was that this settlement would go to the central bank of iran. and it was done in a way that was consistent with -- >> you're confirming that at least two wire transfers went to iran, correct? >> mr. chairman, i'm telling that you before the transaction we're discussing, the transfer we're discussing, one had gone. the other was subsequent. it was for $900,000. and it was a difficult process because as it has been hard under the jpoa and the jcpoa, it has taken iran a lot of time to get access to its own money that it's entitled to under the agreement. i'm not saying -- >> i believe that the president did get it wrong.

>> no. >> my time has expired. >> that's totally incorrect. i disagree with you, mr. chairman. >> i recognize the gentleman for five minutes. >> mr. chairman, i would like unanimous consent to enter into the record, from the opinion pages of the -- who is this from? from "the new york times." >> without objection. >> an editorial titled "the fake $100 million iran ransom story." i think it is perhaps incumbent upon us to have debunked the distortion of what took place with iran. let me just say, it's not simply about the so-called ransom story that has been, you know, made up by my colleagues.

every attempt that my colleagues on the opposite side of the aisle have made to discredit the iran agreement, to try to dismantle the iran agreement, has been made. just yesterday, we were on the floor with a bill that simply said that my republican colleagues wanted to identify and list, i don't know, a whole array of the leadership of iran, and expose them for their assets, where they came from, what they're doing with it. they've been told over and over again that even that action did nothing but signal harassment and a conclusion by iran of a bad faith effort by the united states. i don't know why they continue

it. as a matter of fact, i've said over and over again that this country needs the support of the congress of the united states, as our president takes rightful leadership to act on behalf of this country. and to negotiate deals. and to do the business of the presidency. what we find is an undermining of this president at every turn. and it has been absolutely shameful, what has been happening with this iranian agreement. and so this conversation that just took place is just one more effort for my colleagues to send a message across the world that our president cannot count on the congress of the united states, that we negotiate in bad faith, and that somehow what is going on in the united states is

bad for the rest of our allies who have supported us. this ties into what the presidential candidate mr. trump is doing. he has a thing about making america great again. some of us think america's already great to begin with. and his alliance with putin, his friend that he may be doing business deals with, all of this ties in together. what are we doing? in the name of trying to acquire the presidency and align themselves to trump, are they continuing to try and dismantle the leadership of this country, to undermine us, talk about how bad we are, how crippled we are, how mr. trump knows better than our generals, on and on again? it needs to stop. you should not have to suffer this today. this is a continuing of a political effort. i guess to align with the theme of america not being so good,

not so great. and what they're doing somehow with mr. trump is going to make it better? this is absolutely outrageous. i had some other things that i wanted to talk with you about today. but let's just put it on the line. what we have here is the opposite side of the aisle, the republican party, and mr. trump, who are not only not supportive of the president, they just don't think this country is much good. they just don't think that the generals know what they're talking about. they just think putin is our friend. they just think somehow this country has gone to the dogs, i suppose, and they have to do everything that they can to prove it by proving that somehow this iranian deal that's going to help keep the world safe and certainly the middle east safe, that somehow it is wrong, it's no good, and should be

undermined, be damned our allies who joined in this deal to help reduce iran's ability to have the kind of nuclear capability that could cause a holocaust. and so i just want to tell you, mr. secretary, i'm sorry that you have to endure this. this should not be a place where this kind of politics is placed, put before you. it is happening. i would hope that you would refrain from even trying to answer some of these questions that are being raised. this is a great country. the iranian deal was a great deal. the president provided great relationship. we don't have to be ashamed of it. shame on them. i yield back. >> the chair now recognizes the gentleman from texas, the chairman of the financial institutions subcommittee. >> thank you, mr. chairman. before i get to my fsoc question, just one followup

question from chairman hensarling. did we record the serial numbers on the crash that was delivered to the iranians? >> congressman, i would have to check. >> could you check on that? i think that was the chairman's question. we just wanted to know if we have some traceability there. my question applies to your capacity as treasury secretary and chairman of the fsoc. as you're probably aware, the federal banking agencies submitted a required report on investment activities of banks required under section 620 of the dodd/frank act. the federal reserve board made a recommendation to congress to repeal the merchant banking authority for banks. as you know, the gram/leach act gives the authority to limit merchant banking. before the submission of the 620

report, did the federal reserve consult the treasury department concerning its recommendations on reappealipealing the merchan banking provision? >> we were not involved in the preparation of that report. >> since congress gave the authority to the treasury has joint rulemaking authority with the fed reserve -- >> i believe there were two different pieces of work that were involved. >> it was a recommendation. do you agree with the recommendation? >> so look, we're looking at the report. and would be happy to work with this committee as we review it to respond more fully. we just received the report as well. >> so does the treasury believe it has the appropriate tools to analyze the risk from merchant banking activities? >> yeah, i think we have the

ability to understand merchant banking. it's not new to us that there are issues regarding merchant banking. you're asking about a specific report that came about a week ago. >> with the tools that you have and the activities that you had in the past, have you found that merchant banking is too risky, or you haven't been able to mitigate it? what would be your response on merchant banking? >> look, i think that the issue regarding merchant banking is really an issue that's arisen out of the fact that in the original legislation, dodd/frank legislation, distinctions were made between different kinds of activities. so that, you know, private equity is treated one way, merchant banking is treated another way. and i think we're going to need to take a look at whether there are inconsistencies there that

do require attention. and i would be happy to get back to you. >> so i think basically there's probably approximately $26.7 billion in merchant banking investments held by banks. if the vote was to eliminate merchant banking activities, who is going to take up that slack? >> well, i think it would require legislative action. as i understand the recommendation that the regulators made was a proposed legislative action to remove a provision that exempts merchant banking from the rules. so it would require this body to act. >> so that recommendation made to fsoc, and fsoc has not acted on that recommendation? >> we just got the recommendation very recently. we haven't had a meeting since we got the report. i'm not aware of administrative authority that exists to do that. but i would be happy to check and get back to you.

>> so you weren't consulted and you've just received the report, is that what you're saying? >> the report came to us. i forget if it was a week or ten days ago. and it was done by the regulators independently. >> but you couldn't have any prior knowledge that that was going to be the recommendation? >> no. i don't believe so. i'm happy to check. >> and so what will be the process moving forward? when will fsoc take up discussions on that particular recommendation? >> i will have to get back to you, congressman. we haven't had an fsoc meeting since that report came in. and i'm not in a position to respond until we've had a chance to look at it and discuss it. >> will fsoc report its findings to congress? >> we're happy to work with this committee going forward, as we review it, and as you review it. we got the recommendations, as i point out, just very recently. >> thank you. >> time of the gentlemen has expired. the chair now recognizes the

gentlelady from new york, ms. velazquez. >> thank you, mr. chairman. last week the majority passed legislation that will severely hobble the fccb by subjecting it to an appropriation process repealing the single director structure and putting up significant roadblocks to its ability to create rules and enforce them. it will remove the bureau's authority to bring enforcement cases against abusive products and services. in light of what we know about the impact of predatory products leading up to the financial crisis and the recent evidence that wells fargo was trying to extract profit in these deceptive ways, what will these changes to the cfpb do to americans' economic security? >> congresswoman, i think that

if you look at the financial crisis, it is undeniable that at the heart of it was a practice of mortgage lending that was abusive, and that when it became part of our financial system through complex financial instruments, ended up triggering a financial crisis. so we know that abusive practices are not just unfair and bad in terms of the individuals who are affected, but if left unchecked, can become a real threat to financial stability. i think the recent actions taken by the cfpb and the occ reflect the ongoing need for tough consumer protection, for independent consumer protection, and for an agency set up in a way that is workable, which is what we have now in the cfpb. i think there's the good thing there was a place for those issues to go, for them to be

addressed. it was the largest fine that the cfpb has made. i actually think it's important to address things even if it's just a question of abusing millions of consumers. but we also know that when these kinds of abuses occur, it can accumulate into financial stability risk. so for both reasons, i think it's critical that the cfpb retain the ability to operate. i believe it's operated very well, and if you go around to the industries that are affect by the cfpb, there are many who say the same thing, that they've done their job very well. >> thank you. we wonder why there is so much anger among working people in this country. so here we have regulations to prevent the same crisis that we saw from happening again, and yet people continue to use

deceptive ways to get people and to exploit working families in this country. i hope that if the department of justice look into this and bring justice, not only for the families that are impacted, the consumers that are impacted, or even for those workers that were tricked into going into behavior that was not the right behavior, just because of the pressure coming from the top at the bank. mr. secretary, you are well aware that puerto rico is currently facing a severe financial crisis. the median household income is $18,000, just one-third of the national average. 46% of the population lives below the poverty line.

on top of these challenges, the island is still struggling with the zika virus which has infected now 20,000 people on the island including 1500 pregnant women. and just yesterday, a massive power outage left the island without electricity. half a million people in the island today have no water. i know we passed promesa that was signed into law in june. it will provide for the control board and every structural mechanism for the island's $70 billion debt. my question to you is, promesa did not include any proposal to reinvigorate the island's economy for the long term. the u.s. government has a colony in the caribbean. it's puerto rico.

we have a moral responsibility. so given the situation that i just described, what is your view of what is needed to happen in puerto rico? should we in congress revisit what we did and come out -- >> the time of the gentlelady has expired. if the secretary could give a brief answer, please. >> thank you, mr. chairman. promesa was extremely important, it will provide the basis for puerto rico to have a fiscal plan that leads to debt restructuring and financial stability. but as we've always said, alone it's not enough. there needs to be more action. we've proposed that puerto rico be treated as states are treated for the pick up of medicaid reimbursement and for the earned income tax credit, things that would really stimulate the economy. we look forward to working with this congress to take additional steps to make sure there's a long term economic plan for puerto rico. >> the time of the gentlelady

has expired. >> thank you, mr. chairman. it's fair to say all of us in congress, myself included, are outraged at the activity that occurred over at wells fargo. i know you're very familiar with it. over a number of years. the entire incident now has a number of people clamoring for regulators to be tough when they finalize the incentive compensation rules under section 965 of dodd/frank, which i'm sure you're familiar with. the current proposal intended to limit compensation at financial firms includes something called clawbacks for compensation of high level executives that could go back as far as seven years. like a lot of things, for the other side of the aisle, when it depends on what executives we're talking about when this happens. let me give one example. you, mr. secretary. you joined citigroup back in 2006. by 2008 you became the chief operating officer of the

citigroup alternative investments unit, which at that time managed $54.3 billion. then the alternative investment group began to do what? hemorrhage money that year. by the end of 2008, citigroup had laid off more than 50,000 employees. the stock price dropped by 75%. and then of course they were bailed out by who? the american taxpayers, to the tune of $45 billion. then to add insult to injury, last year the sec announced that two city group affiliates, including the one where you were the chief operating officer, agreed to pay $180 million to do what? to settle charges that your unit defrauded investors. so you were the senior officer at citigroup, a unit which lost money, that contributed to the bank's near collapse, and which later was charged with defrauding investors. talk about a legacy. was any of your compensation at

citigroup ever clawed back? that's a yes or no. >> congressman, i am proud of my record implementing financial reform -- >> i'm not asking that, mr. secretary. let's just get to the question. i saw how you did not answer the chairman's question. simple question. was any of your money, your seven-figure compensation package, ever clawed back for the time that you were the chief operating officer? >> the issues regarding my compensation have been well worked over. >> so then it's an easy answer, mr. secretary. >> i've answered many questions. i was paid in a way that is well-understood and disclosed. i'm telling you my services in this role has been to make sure that we put rules in place that work going forward. >> mr. secretary, a simple question. you were paid, your unit -- >> congressman, i -- >> was any of your money ever clawed -- >> i was not subject to any

action of any kind, because -- >> okay. >> no one ever asked any questions that led to that, nor will they. >> see, mr. secretary, simple. the answer is no. >> and let's remember what my role was. >> you were the chief operating officer -- >> i was involved for administrative activities, not for designing risk products. so let's just remember what my role was. >> you were a senior executive. would the proposed compensation rules capture or impact any of your compensation if those rules were in place back then? >> i am not aware of anything that relates to me personally. but i also am not directly involved in writing the rules. so i can't tell you exactly what they are. i have urged the regulators to have broad and tough rules. >> should the rules be suv that senior executives, and elizabeth warren doesn't make difference between coos and ceos. she said all senior executives should have clawbacks.

is she wrong? >> the question in designing these rules is how do you align the incentives for risk taking. >> that's not the question. >> the driving issue is how do you make sure there's not an incentive -- >> here is an alignment. >> that's the right question. that's what we've been pushing. >> mr. secretary, thanks. when you left there, despite all the hemorrhaging and the taxpayer bailout, you received something called a bureaucratic parachute. you had a promise in your contract that you would be paid $944,000 if you took a high level position in the u.s. government. i guess you got that, didn't you? was that contingent on you doing or your unit doing a good job, was it contingent on whether or not there was any fraud in your unit or did you get paid regardless? >> congressman, my compensation was based on my performance at the job. the only thing that that provision said was that i didn't lose my last year's pay. >> the company lost 75% stock, it -- >> congressman, you don't know what my job was. >> well, yeah, i do.

it's in the disclosure as to what you are. you were the coordinator for all the units, oversee cooperation between operations, technology. it seems like you had your finger on every single aspect of the company. i guess you're telling me you're not responsible for anything. mr. chairman, i'll end with this. i want to make it clear for the record as long as you are a high ranking democratic official, you can make all the money you want on wall street but if you're not one of them, then you have to play by the rules, if the company collapses. >> the time of the gentleman has spid expired. the chair recognizes the gentleman from california, mr. sherman. >> mr. secretary, let me spend the first couple of minutes on stuff so noncontroversial that i don't think anybody in the room will disagree, because you deserve at least a couple of minutes. >> i don't need any time, i'm fine. >> i know, but you deserve it. first, thank you for the treasury department announcement and clarification that i asked for last time you were here, so

the 8,000 people from my district who had to evacuate for months due to the world's largest methane likeeak can cley understand they're not going to be taxable for the money they got to reimburse them for expenses when they were living outside of their home. second, last month, last time you were here, back in march, i brought up the issue of a u.s./armenia tax treaty. i know we told your staff, i'm not blindsiding you here, that i would bring this up again. and the answer i've got from your staff is, hey, it would be wonderful if we did it, but it's a matter of prioritizing our resources. so i want to review with you why i think it's a priority. canada, whose treasury department analog has maybe a tenth of your resources, negotiated a treaty with

armenia. your department has negotiated treaties with luxembourg and malta and dozens of other countries. but what i think your staff may be losing track of is the -- they're looking at everything through solely an economic lens. and they also need to look from a geopolitical and foreign policy lens. and i'm asking your department to just have one tax lawyer spend a few months to do something. and i want to describe how important it is from the standpoint of the congress and the standpoint of the executive branch state department, foreign policy, defense department. we in congress have provided a billion dollars of aid to armenia over the last 25 years. the executive branch has a policy of getting the newly independent states, it became independent from the soviet union, to wean them from moscow.

and that is so important that not only have you done tax treaties with estonia, latvia, lithuania, but we've put our lives on the line. we admitted estonia into nato. we could be at war with russia. we could lose soldiers in the field. i'm not asking anybody in the treasury department to put their life on the line. just asking to do something that should be rather easy, because i persuaded -- well, in talks with the armenians, they'll start with your model treaty. given that we, the congress has provided a billion for this objective, given that our soldiers are ready to die for that objective, can you spare a tax lawyer for a few months? >> so congressman, i understand the strategic significance of armenia and appreciate the source of your concern. we obviously look at these tax treaties through an economic tax

policy lens. and the basic question that we ask is, can we avoid the kind of double taxation that tax treaties are meant to avoid. we don't have any evidence that there is double taxation. >> that was the answer you gave last time. it's a chicken and egg. there's no investment because there's no tax treaty, there's no tax relate toy because there's no investment. i've done my best to convince you that too big to fail is too big to exist. you and fsoc have the right to break them up. you and people on this committee could co-sponsor the sherman/sanders bill to break them up. we know they're so big, they're too big to fail. we know that if they get in trouble, they will be bailed. the chairman says, well, don't list them and they won't be bailed. many of us were here in 2008. if they're about to go under, this congress will pass new laws to bail them out. we're talking about fail, we're

talking about bail, we're also talking about jail. the chairman said he would be reluctant to criminally indict them. but wells fargo has given us two more reasons, one democrat, one republican. it appears as if wells fargo, for example, was too big to manage. here you had -- they hired 5300 good people. they established a system that caused those people to commit 2 billion felonies. they didn't monitor. they didn't notice. that's too big to manage, and finally, too big to regulate, because all the regulators at wells fargo missed this too. please break them up. >> the time of the gentleman has expired. the chair now recognizes the gentleman from missouri, mr. luetkemeyer. >> thank you, mr. chairman. good morning, mr. secretary.

i would like to have my questions in the areas of sifi designations in community banking. let me start out with an sifi designation stuff. dodd/frank calls for the automatic designation of any bank with more than $50 billion in assets to be an sifi. mr. secretary, we've had barney frank, the author of the dodd/frank bill, in this committee, sitting in that chair, who has testified to this committee that he told us that the $50 billion threshold is arbitrary and we should look at alternative methods for determination. we've also heard from other regulators such as chair yellen, and they support a different approach as well. would you agree that size should not be the only thing to determine what a systemic important financial institution is? >> congressman, i think ultimately the real issue is risk. >> do you agree that -- >> i think part of the challenge is that when people talk about

what size bank is a big bank, the conversation is often unconnected to whether banks fall in terms of size. there aren't that many banks over 50. when you talk about drawing the line at 500, you're talking about only a very few institutions. some of the largest institutions are in between. >> mr. chairman, i've got just a few minutes here, please. my piece of legislation takes away all of the size definitions. as you can see on the board here, you probably can't see from where you're sitting, behind you is a copy of a chart from the office of financial research, brief series dated april 13th, 2016. this is how globally systemic banks are determined. as you can see, there's five separate things. those are exactly the five criteria i have in my bill. size, complexity, cross

jurisdictional -- >> i think the challenge is the designation process is a very cumbersome one. and if you were to require the decisions firm by firm for every single firm, it would require a much more massive structure than we currently have. >> so a minute ago, though, you said that, you know, complexity is something we need to take a look at. now you're going back to size. you know, if you do that, we're looking at an institution that's $50 billion at the bottom end of this versus the larger banks that are $2 trillion. that's 40 times difference in size. >> i totally agree there's a difference. >> how can a bank that's $50 billion -- >> we have tried in every way we can to use regulatory flexibility and keep looking for new regulatory flexibilities to trees firms differenttreat if i differently.

>> the way to do it would be to support my bill. this is something that even the office of financial research says is a way to go about it. i'm -- it's a little frustration on my part. can you tell me, sir, what the cost is to designate an sifi? >> i would have to get back to you on what the -- it's a long process. >> okay. what's the cost to de-designate? >> i'm sorry, i didn't hear you. >> what is the cost to de-designate? you already have the information, your examiners are in the banks, they live there. what additional costs are there to de-designate? >> which institutions are you talking about right now, congressman? >> the ones designated sifi. >> the ones that fsoc have designated, the largest firms? >> the one designated sifis by the $50 billion threshold. >> there are two different issues. we've designated 12 institutions that are large, nonbank institutions for insurance

companies -- >> the ones over $50 billion, sir, also have to pay fees, under the same regulatory regime. >> that's not an fsoc determination. they're covered under dodd/frank for oversight and supervision. we don't make the designation. >> my question is, you already have the information to designate them. what additional costs are there to de-designate? i'm just asking you a question about cost, not whether you can or not. i'm just asking about cost. >> i think the process of determining whether they're covered now is a fairly simple one, because it's based on a review of information that's available in size. if you had an individual firm by firm review to see whether you meet multiple criteria, it's a very different process than the current one. so for me to answer the question in the current versus -- >> one more quick question, my time has totally expired here. in my whole state of missouri, we've got 44 banks less than $50 billion. 26 of them lost money. those are all targets for merger. in fact one in my district, 30

miles away from me, was merged on monday morning. this is all due to the complexity and increased cost of compliance. what are you going to do about that? does that concern you? >> i agree with you that small financial institutions, regional banks, play an important part in our financial landscape, meet important needs. we are continuing to look to craft flexibilities that are appropriate to make sure the risks are visible and not overly burdensome. >> the time of the gentleman has expired. the chair recognizes the gentleman from new york, mr. meeks. instead, the chair recognizes the gentleman from texas, mr. hinojo hinojosa. >> thank you, mr. chairman, and thank you, my good friend, gregg meeks. thank you.

mr. secretary, thank you for your testimony today. we appreciate your efforts. as chairman of the financial stability oversight council to identify the risks to our financial stability and to respond to emerging threats and vulnerabilities in our financial system. the chairman's dodd/frank repeal bill which received bipartisan opposition in the committee last week would provide a so-called off-ramp for dod/frank capital liquidity requirements. it would replace those safeguards with an insufficient leverage ratio that fails to contain the guardrails in other proposals. for example, while the chairman has attempted to conflate this bill with proposals from people like fdic, vice chair thomas hoenig, the chairman's proposal doesn't include the same limits

on derivatives activity in order to receive regulatory relief. so, mr. secretary, my question is, can you discuss how replacing more complex risk rates along with other dodd/frank measures might make sense for community banks engaged in traditional banking activities but is wholly insufficient when it comes to global megabanks? >> congressman, that's a very good question. i mean, we i think should be looking for ways to simplify reporting where appropriate for small banks that don't engage in a lot of risky activities. we have to always be aware that even small banks are in the business of making risk decisions. that's what banks do. and we have seen in the past that in the accumulated activity, small institutions can create a financial risk that's significant. but it's different than the activities of large global financial institutions. and we should be trying to distinguish.

for the largest financial institutions, i think if you look at what we've done in financial reform, and wall street reform, that's made the system safer, we have gotten much more transparency. we see what they are doing. we see what they're holding. we understand how it's connected to the financial system. they have capital buffers internally. so when they take risk, we know how much of the risk they're taking they can absorb before they have to look outside for any kind of help. i think if we roll that back, it would be terrible. we have done it, a lot of other major economies have done it. if you look at how the global financial system responds to shocks nowadays, we can just look back to the week after the vote in the united kingdom on brexit. there was a sense of confidence in financial institutions that just wouldn't have exist without financial reform. >> thank you for that clarification. so what impact would hr 5983, the chairman's dodd/frank repeal

bill, have on financial stability and international confidence in u.s. banking system and capital markets if it were enacted? >> i believe that if we were to roll back some of the protections and wall street reform that that legislation would roll back, it would bring back concerns about the stability of the u.s. financial system the next time there is a bump in the road. i mean, bumps in the road happen. they're either geopolitical or economic. you want a financial system that can withstand those kinds of shocks. we're in a much stronger place now. and i think it's a mistake to go back. and if i can just add, there are some things we still need to do. from the back and forth a few minutes ago, you wouldn't know it. we are pressing very hard for executive compensation rules to be finalized by the regulatory bodies so we can align risk taking incentives and

compensation in a better way. >> i agree we've come a long way in recovery. let me ask you a question on the economic recovery of our country. much more progress needs to be made in order for us to climb out of that hole created by the 2008 great recession which was spurred by an historic wall street created financial crisis. tell us, to what extent would our progress have been even more remarkable had the republicans in congress not been so committed to fiscal austerity? >> congressman, i believe that the early imposition of tight fiscal controls was actually something that held back our recovery here in the united states. we would have grown faster if we had put longer term deficit reduction in place, not slammed on the brakes so quickly. >> would gdp be higher today? >> i believe it would. we've seen, since we have more sensible policies through two

budget agreements, putting in place freer spending, the economy has done better. >> the chair now recognizes mr. huizenga. >> thank you, mr. chairman. so many issues, so little time. i do want to say first of all, congratulations, mr. lew, oftentimes, depending on who is sitting in there you get a jekyll or hyde performance. i'm waiting for the outrage from the other side with vaunted claims of how the economy has benefitted hispanics and african-americans that you just spoke about in your testimony, a robust economy is needed for all, unfortunately this administration has not provided that. wall street is doing just fine, main street is not. and inner city main street is even doing worse. and i guess it's going to the dogs characterization depending on who is sitting in the seat. they like who is saying it, just not what's being said.

i got just teed up, i got teed up by my colleague from texas about this. you testified as well about dodd/frank, and the countecil he made, quote, the financial system safer. however former treasury secretary and harvard president lawrence summers says major financial institutions don't look any safer than they were before dodd/frank and may even be more risky. he also flagged dodd/frank's myriad of regulatory restrictions as a prime suspect for this duplicity. so i would like -- i'm going to follow up with that in a written question, but i'm going to give you literally 20 seconds to address that. >> i don't think that paper in any way called for rolling back wall street reform. >> but it isn't it didn't work. >> i think what it did was looked at one indication, market evaluations, and used that to do some analysis. we've seen markets get things wrong. they didn't predict the subprime

crisis because of what was going on in the financial sector. it didn't predict the outcome of the vote in the united kingdom. you have to look at the whole picture. >> while we're on the united kingdom, obviously we saw that european unity was something that has been called for, as greece has been bailed out before. we've had this personal conversation. i've contacted treasury department well over a year regarding further imf financial participation in the greek bailout, i'm urging you to oppose that. even a former director of the fund who voted for the bailout has come out against a third one. the ims office released a scathing report on the fund's involvement in greece, blasting its debt stability analysis and concluding the best governance was not practiced as the board was poorly informed and too late in several instances and as a

result the decisionmaking of the executive board was undermined, end quote. at some point we have to acknowledge the damage has been immense. you have stated that it was important for european unity. we've seen elections, the brexit in england, recent elections in germany that i'm sure have many of your colleagues over there very concerned. my next issue is the world bank, and mr. chair, i would like to submit for the record a couple of letters to the record that was sent with ms. moore, my ranking member, and myself. we wrote a letter to president kim. >> without objection. >> thank you. expressing our alarm over a failed transportation project in uganda, this project was linked to the sexual exploitation of children among other appalling consequences. moreover, the bank's new safeguards have been criticized for ignoring human rights, even as they protect, and this is not a joke, the rights of farm animals.

given all this, i hope we can work together so the ongoing negotiations result in realistic commitments as well as true reforms at the bank. and finally, just kind of rounding off, going back to the chairman's questioning on iran, there is a letter to senator marco rubio in june that thomas maloney, the senior legislative affairs, said the administration has not been and is not planning to grant iran access to the financial system. to be clear, until iran has addressed other concerns we have have with the u.s. financial system, including the branches abroad will remain off limits and u.s. persons will not be able to do void financial services or products to iran without explicit authorization. iran's behavior is outside of the nuclear profile. terrorism remains unchanged. you even said that earlier. you said it hasn't gotten worse, that means it hasn't gotten better either. just yesterday you announced the authorization of u.s. financial institutions to finance aircraft sales. doesn't this contradict your written assurances to congress?

>> no, congressman. the licenses issued yesterday for aircraft were something that were negotiated in the joint comprehensive plan of action, and they were consistent with it. it goes only to entities that do not engage in terrorism. >> the 1.4 billion -- >> and they cannot be used for it. the u.s. financial system remains closed except for very specific purposes. and this i don't believe -- i'm not aware of a transaction through a u.s. financial system that will support it. but a licensed activity is the only exception. >> my time has expired. >> the time of the gentleman has expired. the chair now recognizes the gentleman from new york, mr. meeks. >> thank you, mr. chairman. and let me first welcome you, secretary lew. it's coming another way, but as a member of this committee and a member of the foreign affairs committee, i think that -- i mean, this piece talking about the settlement payment to iran,

as i see what they put up on the board and i heard the questions about by the chairman as i was listening in my office, it seems to me that my colleagues on the other side of the aisle are using as fodder for a convenient political spin, they're playing politics in this election year. and the majority has quickly turned to talking points about the administration's settlement being a ransom payment. this despite the fact that the obama administration had in fact briefed congress in advance, i'll say that again, it's been said before, congress was briefed in advance of the $1.7 billion settlement of a longstanding claim with the government of iran. you did brief congress; is that not correct? >> it was fully described by the president at the time and we briefed congress at the time. >> and it is not the first time nor is it unusual that -- in fact i think it was a smart thing, using leverage when

conducting diplomatic negotiations. that's a common and smart strategy that is utilized not only by this administration but past ones also, is that not correct? >> i believe that settling something for $1.7 billion when you're exposed to 5 to $10 billion of risk is the right outcome. >> in fact, that's right, because isn't it true, mr. secretary, that had the administration not negotiated the hague settlement, we would have ended up ultimately paying much higher for the 1979 failed arms sale? >> i believe that we resolved it in a way that saved the united states and u.s. taxpayers substantial exposure. >> and on top of that, for the record, on top of that, since the establishment of the u.s./iran claims tribunal, all u.s. citizens' claims against iran that were registered under the algiers accords have also been resolved, and americans as a result have gotten, what is it, about $2.5 billion in payments? >> i don't know the total.

to my knowledge they've all been paid. >> so let me -- i mean, and the record should be clear about that, this was a smart deal done utilizing leverage that you had, you have leverage, you don't give it up, you utilize it. it was done by the administration. and the fact of the matter is, i would like to say it was something nobody else did, but other administrations have done the same thing, democrats and republicans; is that not correct? >> settling outstanding claims? that's right, that's not a new phenomenon. it obviously is a new conversation. for decades we haven't had an ability to have a conversation with iran to settle this, and we faced the possibility of an enormous judgment against the united states. >> let me go back to what we were talking about in the time i have left, fsoc, because fsoc, which was created by dodd/frank act, is something that i leave is an absolute necessity as a framework so that we can deal

with the complex multi-sector risks in our financial markets. i encourage fsoc to further embrace greater transparency in its designation process and in how designated entities would be regulated, because it is key, i think, i strongly believe that we should emphasize and focus on working with the designated firms so that they can derisk. we work with them, they are no longer risky. it's better to eliminate systemic risk as opposed to supervising it; is that correct? >> congressman, i actually think the process ge went through demonstrate that it's a two-way street. ge changed its focus to go back to being an industrial as opposed to a financial firm. it made the showing that it was no longer engaged in the activities that caused it to be designated and we quickly responded by de-designating. for the debate about designation, you would think

that hundreds of firms have been designated. you know, it's four nonbanks and eight utilities. we're not aggressively designating firms. we identified firms with a high level of risk. if another firm were to appear that presented risk, we would go forward. we always lay out the basis for designation so that they know what it is that is making them be designated. and it's a business decision whether they want to be in the form they are with some additional oversight or change their business structure. it's not like being designated stops you from doing your business. it just means we have more visibility so we can see what's going on. >> thank you. i had another question but i think i'm out of time. and i don't want to hear that gavel from the chairman. >> the time of the gentleman has expired. the chair now recognizes the gentleman from wisconsin, mr. duffy, chairman of our oversight and investigations subcommittee. >> thank you, mr. chairman. welcome, mr. lew. i want to go back to your iran

deal. i think you testified that wired transfer payments were made to iran before the $1.7 billion cash payment. >> i testified that one $900,000 -- >> went before. >> yes, sometime before. >> that's my recollection too. and a wire transfer also went to iran after the cash payment; is that correct? >> yes. >> so the fact is, per your testimony, that wire transfers to iran are possible. i'll take that at face value. >> no, congressman. it's very important, the wire transfer -- you have to understand what a wire transfer does. >> let me get to my question, though. >> but what you stated is incorrect. i just want to make it clear what you stated is incorrect. >> you made a wire transfer before the cash payment, you made a wire transfer after the cash payment. and the president told the american people that we could not wire the money. so it leads me to believe that

the administration has not been truthful -- >> no, congressman. >> -- with the american people, because wire transfers could take place. >> indulge me to answer your question. the wire transfer goes to an account in a foreign bank, a european bank. it doesn't go to the central bank of iran directly. the question is, if you have a contract settlement with a party that you have no trust, they don't trust us, we don't trust them, they're not asking can you get the money to an account that they may or may not be able to get access to. it was part of the negotiation to get the money to the central bank of iran. >> okay. but wire transfers can take place. and did you -- the wire transfer before the $1.7 billion and the wire transfer after the $1.7 billion, were those also converted to cash? >> just as a factual matter, congressman, it was -- >> yes or no? >> it was quite challenging for iran to get access to that money. >> there's the reason for that,

right? they're the lead sponsor of terror. we have rules in place so they can't access cash. >> i enforce those rules. i understand those rules. >> let's talk about the rules. in the code of federal regulation, you can't load up a plane full of cash in the u.s. and fly it to iran lawfully. so to get around that rule, what did you do? wired the money to europe, and then had it converted to cash, and sent to iran so you didn't violate the law. so yeah, you complied with the law but you got around the spirit of the law, right? >> congressman, we have successfully cut iran off from the u.s. financial system. when we agreed to settle a legal claim with iran, part of that agreement is you make payment. the way you make payment is you wire money to their account or you transfer -- >> convert it to cash? >> the question was how do they get access to the payment of the settlement. and we worked through foreign banks and they wanted access which was not unreasonable given that it was a negotiated settlement in this case.

>> it is unreasonable, because this is a bad deal. mr. lew, they're the lead sponsor of terror in the world. we cut them off from cash because cash is the currency of terror. when you make payments, you'll make it to a foreign bank. they're restricted in how they might use that money. they want to access the cash because the cash is untraceable and they can use it for nefarious things we object to. and you made the payment anyway in cash. >> congressman, the joint comprehensive plan of action gives iran access to its own money in international banks. no, let me answer your question, congressman. this is a very important question. part of the agreement that caused iran to dismantle its nuclear program and increase their -- make it take 12 plus months, not three months, to develop a nuclear weapon, was they dismantled their nuclear program. we had to keep our part of the deal which was to give them access to their own money. >> in cash. >> they have been having a hard time, i'm not going to apologize for saying we need to keep our

deal. they need to get access to that cash. in the case of settling -- >> this is my time, mr. lew. >> mr. chairman, can the congressman get a few more seconds so i can answer his question? we shouldn't have to talk over each other. >> this is an important issue. >> without objection, the gentleman is acorded an extra 30 seconds. >> i respect the question and i don't want to be talking over each other. i would like to explain it. a deal is a deal. when you have a country dismantle its nuclear program and you give them access to their money, that means they're going to get money, it's going to go to the central bank. we knew that. we said all along we're going to make sure we keep an eye on what they do in terms of nefarious activities and use their authority to stop that. >> i wish i had more time. >> the other half of my answer is very important. >> you say you cut a good deal. can you guarantee the american people that that $1.7 billion in

american cash will not be used to fund terror? >> congressman -- >> yes or no. >> these are not yes or no questions. >> congressman, let's be serious. >> one more question for you.