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 risks we know how much of the risk that they're taking they can absorb before they have to look outside for any kind of help. i think if we were to roll that back it would be terrible. it would be -- 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 now days, we could 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 existed 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?

>> look, 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 are in a much stronger place now and i think it's a mistake to go back. and if i can just add, there's some things we still need to do. you know, 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 company station in a better way. >> i agree we've come a long way in recovery so 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 something that held back our recovery 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 jdp be hired today? >> i believe it would and we have seen since we have more sensible policies putting in place longer term savings and freeing up short-term spending the economy has done better. >> time of the gentleman has expired. the chair recognizes the gentleman from michigan, mr. huizenga, chairman of our monetary policy and trade subcommittee.

>> thank you, mr. chairman. so many issues, so little time. i do want to say first of all congratulations mr. lew. often times depending who is sitting there you get a jekyll or hyde performance. quite honestly, i'm waiting for the outrage of 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 by that. wall street is doing just fine, main street is not and inner city main street is even doing worse and i just -- i guess going to the dogs characterization depends on who's sitting in the seat so they like who's saying it, just not what is being said. i've not go teed up, i had a question teed up by my colleague from texas. you testified about dodd/frank and the council has made the financial systems safer, however former treasury secretary and

harvard presidents lawrence summers says that major financial institutions don't look safer than they were before dodd/frank and even -- 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'd like -- i'm going to follow up with that in a written question but i'd like for you to address that. >> that paper 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 so i would be careful to just

assume that one thing is -- you have to look at the whole picture. >> while we're on the united kingdom, obviously we saw that european unity was something that had been called for as greece has been bailed out before. we have had this personal conversation. i've contacted the treasury department well over a year regarding further imf financial participation and greek bailout and i'm urging you to oppose that. even the former executive director of the fund who voted for the first bailout has come out against a third one. the imf's valuation office released a scathing report blasting greece and concluding the best governance was not practiced as the board was poorly informed too late in several instances and as a result the decision making and supervisory roles of the executive board were undermined." we have to acknowledge that the damage of the imf's credibility has been immense and 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'd 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. >> 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 banks 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 was 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 with its behavior outside the nuclear file, the u.s. financial system including the branches of u.s. financial institutions abroad will remain off limits to iran and u.s. persons will not be able to provide 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 that were 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 -- >> well, the $1.4 billion in cash was used for it, that doesn't make it right. >> 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 u.s. financial system that will support it. but a licensed activity is the only exception. >> my time has expired. >> time of the gentleman has expired. the chair now recognizes the gentleman from new york, mr. meeks. >> thank you, mr. chairman. let me first welcome you, secretary lew. i was coming at it another way, but as a member of this committee and a member of the foreign affairs committee i think that i want to -- i mean, this piece talking about the settlement payment to iran as i've seen what they put up on the board and i've heard the questions by the chairman when i was listening in my office, it

just seems to me that my colleagues on the other side of the aisle are using as fodder for convenient political spin. they're playing politics. this is an election year. and the majority has quickly turned to these 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 long-standing claim with the government of iran. we did. 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 it's been done by past ones also, is that not correct? >> i believe that settling something for $1.7 billion when you're exposed to $5 billion to $10 billion of risk is the right

outcome. >> that's right. because isn't it true, mr. secretary, 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 by us doing that have gotten about -- what is it? about $2.5 billion in payments? >> i don't know the total but to my knowledge they've all been paid. >> and the record should be clear about that that this was a smart deal done utilizing leverage that you had, you have leverage, you don't give it up, you utilize it.

that was done by the administration and the fact of the matter is i like to say it was something nobody else did, it was unique, but other administrations have done the same thing, democrats and republicans, is that not correct? >> settling outstanding claims? >> that's right. >> yes, this is 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. so let me go back to what we're talking about in the time i have that left and that is dealing, which is fsoc. because fsoc, which was created by dodd/frank act is something that i believe is an absolute necessity as a framework so that we can deal with the complex multisector interconnected financial risks and our financial markets. and 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. if we work with them, they no longer become risky, it's much letter to eliminate systemic risk as opposed to supervising it is. that not correct? >> congressman, i think that the process that ge went through demonstrates that it's a two-way street. ge for its own business reasons changed its focus to going back to being an industrial as opposed to financial firm. it came and made the showing it was no longer engaged in the activities that caused it to be designated and we quickly responded by dedesignating and we have not -- for the debate about designation, you would think that hundreds of firms have been designated. you know, it's four non-banks and eight utilities. we're not going aggressively to designate firms.

we identified firms with a high level of risk and if another firm were to appear that presented risk, we should go forward, but 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. [ laughter ] >> 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, and welcome, mr. lew. i want to go back to the iran deal. i think you testified that wire transfer payments were made to iran before the $1.7 billion cash payment.

>> i testified that one $900,000 -- >> went before. >> yes. >> 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. so i'll take that at face value. >> no, congressman. it's very important -- >> no, no. >> you have to understand what a wire transfer does. >> let me get to my question, though. >> what you stated was incorrect. i want to make it clear what you stated was 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 based on your testimony today because wire transfers could take place. >> indulge me to answer your

question. >> sure. >> the wire transfer goes to an account in a foreign bank, a european bank, say. 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. >> 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 quite -- >> yes or no. >> it was quite challenging for iran to get access to that money. it was quite challenging. >> there's a 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. >> so 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? you 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 -- >> and 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 that was not unreasonable given that it was a negotiated settlement in this case. >> it is unreasonable because this is a bad deal. >> congressman -- >> no, mr. lew, they're the lead sponsor of terror in the world. >> let's go back to the deal. >> we've cut them off from cash because cash is the currency of

terror so when you make payments, yeah, you're going to make it to a foreign bank and they're restricted in how they might use that money and they want to access to cash because the cash is untraceable and they can use it for nefarious things that 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. >> i don't have much time left. >> let me answer your question. >> hurry up. >> 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 and i'm not going to apologize for saying we need to keep our deal. they need to get access to that cash.

and in the case of settling -- >> we can have a disagreement on -- mr. lew -- >> mr. chairman, can the congressman get a few more seconds to i can answer his question. we should haven't to talk over each other. >> the time belongs to the gentleman from wisconsin. >> i ask for another 30 seconds. >> this is an important issue. >> without objection the gentleman is accorded an extra 30 seconds. >> i respect the question and i don't want to be talking over each other. i'd 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'll make sure we keep our eye on what they do in terms of nefarious activities. >> i gave you time. we'll talk over coffee one day. >> the other half of my comment is very important. >> can you guarantee the american people that that $1.7 billion in cash will not be used to fund terror? >> congressman, i have said -- >> i'll take that as a no. yes or no. >> these are not yes or no questions. >> be serious, congressman. >> i'm very serious. >> then give me a chance to answer your question.

>> congressman, if i have the time to answer your question, if not, let's be serious. >> we've unfrozen assets, whether it's $100 billion or had payments that are $40 billion, do you know if any of that money has been allowed to go to iran in cash or gold or any other -- >> congressman, people are coming up with all kinds of -- >> you're the treasury secretary, that's why i'm asking you. this is not a theory. i'm asking the treasury secretary. yes or no. >> mr. chairman, may i answer the question? >> please answer the question. >> congressman, you have a letter that our department sent you described the transfer of cash. we have laid it out clearly. we have come up and given classified briefings, we continue to do. >> my question for you that you wanted to answer and i guess -- if he could answer the question he's asked for it, mr. chairman, and i ask unanimous consent to

allow that. i'm not talking about the $100 million of unfrozen assets that may only be $40 billion. any of that money that you're aware as the treasury secretary, do you know if any of that money has been allowed to go to iran, those unfrozen assets in cash or gold or any other kind of currency payment? >> congressman -- >> yes or no. >> congressman, the money is iran's money and when it comes to the central bank of iran, one way or another it gets turned into cash that they can use. so you're only talking about what mode of transfer. >> because you allowed it to happen. >> i'm not aware of cash transfers. >> the time of the gentleman has long since expired. the chair now recognizes the gentlelady from new york, ms. maloney, ranking member of our capital markets subcommittee. >> well, thank you, mr. chairman, and welcome, secretary lew. i want to ask you about cyber security and as you know there have been several reported examples where hackers have successfully stolen banks' credentials for the swift system and that banks use for international payments and then used these stolen credentials to initiate fraudulent funds transfers. in one case, hackers were able to steal $81 million from the

bangladesh central bank's account at the new york fed. and i am concerned and i want to know are you concerned that repeated instances of fraudulent funds transfers through the swift system will undermine the confidence and i would say the safety and soundness of international payments and do you believe that this poses a systemic risk? >> congresswoman, obviously we're aware of the reported intrusions into the system and i would have to refer you to swift for detailed responses on that. but we're aware of the risks that the threat of cyber attack presents to every part of our

financial system and every part of our electronic lives. it's true about utilities, it's true about virtually every system that we deal with. that's why the president has been so clear that we need to take the strongest action to have a coordinated approach to both putting best practices in place, sharing information, removing the stigma of being attacked because whether you're a business, a government, or an individual, you didn't necessarily do something wrong that you were attacked. we have to stay a step ahead of the bad actors, that means the more you know about how attacks are made the more you can build systems to protect against them. you know that the attackers are going to come up with something new. it's not like they'll stop where they are. we need to make sure that systems are updated so that you have the right equipment as well as the right software approaches. i think this is going to be a

part of our lives for some time to come. we have to make sure it doesn't become a threat to financial stability. i actually think the financial system is a step ahead of most other sectors. but that gives me little comfort because the financial system requires electricity. it requires all of the other things that are part of our broader infrastructure that we all depend on. this is a serious, serious challenge throughout our economy and the world. >> thank you. i'd also like to ask you about brexit and just two days after the fsoc published its annual report, the uk voted to leave the european union and and the day after the vote the fsoc held an emergency meeting that was reported to discuss the financial stability and implications of the brexit vote. now that you've had time to reflect and consider various scenarios for how the uk will manage its exit do you see any real risk to the financial stability of the united states coming from the brexit initiative? and if the uk and the eu fail to reach a deal on financial services before the uk leaves, could that pose a systemic risk to our financial system?

>> congresswoman, i think in the period right around the vote and after there was a very good preparation by central banks and by finance ministries to make it clear there were sufficient resources in place to prevent what was a very volatile period from spilling over into a real loss of confidence. i think it was a measure of success of financial reform that there was enough confidence in financial institutions because we knew what their balance sheets looked like, we knew what their capital was and it gave central banks the ability to respond as decisively as they did. >> lastly, my time is almost over and i want to talk about your -- you dedesignated ge capital.

it was the first designation in the council's history and this came after ge capital made significant changes to its business model and divested nearly $300 billion of assets. now some critics of the fsoc have claimed that ge capital only escaped after they sold off virtually all of their financial businesses and that therefore fsoc requires companies to gut themselves in order be redesignated. is that true? is the only way for a company to get de-designated or is ge capital a unique case? >> each is a unique case. they're based on the facts that are presented and it had analysis of the company. in the case of ge, they made a business decision that, for my conversations with the company, had less to do with designation and more to do with their strategic vision of where the company should go. it had the effect of changing the analysis in a material way and they were de-designated. every company knows why they were designated, they all understand what their strategic

business plans are and they have the basis to make the decisions for themselves. >> thank you for your service. >> the chair now recognizes the gentleman from new mexico, mr. pearce. >> how are you doing, mr. secretary? nice to have you here today. >> always a pleasure. >> i could tell. when the fsoc was created basically you were charged with three statutory mandates and the first being to identify the risk to the financial stability of the united states. so that's pretty well establish ed now in your report today you say that for the first time ever we could identify and respond to emerging threats to the u.s. financial stability and then you go on to say that the fsoc council convenes regularly to monitor market developments and take action when needed to

protect the american people and then you continue on even further to say the fsoc is supposed to report on recommendations for specific actions to mitigate the risks. >> for over six years the fed has kept interest rates extremely low. in fact, near the zero level. mostly the inflation doves in the fed have down played the effect on the market. now just last week you had the head of the boston fed, president rosengrin, he's been one of the biggest doves, saying that it's no connection here, he came out and made a statement that says that he is concerned that easy money could be letting markets get out of hand as they were before the crisis. that sent the markets into turmoil and so a relatively -- a

market that hadn't changed barely 1% in the previous month and a half suddenly was changing tremendously in the next three or four days so the market is indicating some concerns that it might be true. so i guess my question -- i would like to also submit that article for the record, mr. chairman. >> without objection. >> and then you have also virtu saying they're not going to trade in the bond market because it's just too hard to price. it's too unstable. now, to me, those are things that in my small town new mexico way seem like they could be impacts on the stability, the financial stability of the united states. but i was kind of surprised because i'm just thumbing

through, i haven't read the whole thing but i'm looking at your report, not just what you said here today and i don't see much about monetary policy affecting the markets the way that they seem to be so i guess my question is when you're ever sitting around talking to janet yellen, do you ever kind of look away from the tv cameras and say "we ought to be talking about this." do you ever bring that up? >> congressman, obviously, like all of our predecessors, the chairman of the fed and i talk to each other both in meetings and out of meetings and i would hope that remains true because as the two senior economic officials -- >> you're just now talking, sir. with all respect, i'm not trying to interrupt. if you were really getting in and saying, yeah, we've talked about it and stuff but you're saying you want the conversation to be friendly and continue and my time is escaping and so i'm not going to bother you anymore,

i'm just going to continue to make the points because i think that you're not looking at the financial instability at all that is coming up when i'm taking a look here, the "wall street journal" of may 20 says that it's not china, not the uk, it is the lack of liquidity in the markets that is going to be a big problem. when i look at bloomberg they talk about today's post crisis regulations intended to make banks safer eroding profits and forcing dealers to rethink their business model, these changes have created a vacuum in the bond market making trading much riskier and then they go on in the same report to say that the -- that all of this matters because the $100 trillion global bond market is in a central part of the machinery that keeps the world economy going and it's not even being referred to in your report.

finally, then where it all comes down to hit the road is september 21, a $1.9 trillion shortfall in u.s. state and local pension fund is poised to grow as near record low bond yields and global stock market turmoil reduce investment gains. that they're expecting 7% rate of return and they're getting 1% and none of this is in your report which leads me to think that you're not dealing with the financial instability of the u.s. at all. i yield back, mr. chairman, thank you. >> time of the gentleman has expired. the chair recognizes the gentleman from massachusetts, mr. lynch. >> thank you, mr. chairman. welcome, mr. secretary. i have to say thank you for your service to your country and i think my predecessor joe moakley would be very proud of the job you're doing. >> i'm proud to have been connected to him. >> good man. we miss him. i do want to revisit the issue raised by the gentlelady from new york, ms. maloney, around the swift -- that system was

compromised, she's absolutely correct, $81 million, apparently a transfer from the bangladesh central bank but the payment was authorized to the new york fed and then the money ended up in the philippines and there we lost track of it. so given the size -- the volume of transactions between central banks and commercial banks on that swift network, it does raise some concerns and i was wondering, i did read a story in reuters that we are in informal discussions with the philippines, they would like to be part of tpp. now, i'm against tpp, but as long as you're having these discussions, one of the gaps in that whole theft of $81 million was that the philippines have created an exemption for their casinos under the anti-money laundering protocols that we have and i'm just wondering in those discussions if we could persuade, no matter where tpp goes the philippines to get in compliance with that anti-money laundering protocol that we've got with a lot of the countries. that might be a good use of our time.

>> congressman, i think in general the more we bring other countries up to high standards of being able to stop illicit financial activity, to see money laundering the better able we'll be to take actions not just in response to cyber crime but in terms of funding of terrific and other things of the like, i think the challenge of making sure our computer systems are safe is one that i was say to congresswoman maloney we deal with everyday. every ceo deals with it everyday and it's going to be an ongoing challenge. i know swift is taking very

seriously the breaches that have been reported and it's going to require action broadly through the financial system to stay ahead of these saber attacks. >> all right, chairman hensarling has set up a terrorist financing task force that i share with mr. fitzpatrick and we're just very concerned. the philippines, abu sayyaf is very active there so god knows where this $81 million went but that would be a problem. i want to revisit the sifi designation process a little bit. i know the courts rejected the application of sifi to met life and i'm just curious how that has changed your analysis and i know you've got sort of a three-stage review there. how is that going? do you think met life is a risk because they've been de-designated?

>> well, to be clear, the lower court has ruled in favor, we've appealed that. we believe we have the legal case to prevail on appeal so we don't believe the end of the met life case will be to de-designate but that's obviously up for the courts to decide. i think the process we went through was a rigorous one. the record supports the decision we made and i think some of the basis for the court's decision is very flawed. i've made that clear. that's something our appeal makes clear, going forward, the point i made earlier is important to keep in mind. we have not designated 500 institutions. >> i know, you said previously there's a small number of companies and utilities. >> for a reason because they're so -- >> my time is running out. okay, so there's this process that i hear from some of the

companies and banks that might be affected that -- and it was cited in the lower court's decision. it was cited in the lower courts position that there wasn't enough flexibility for them to discuss their structure in a timely fashion to avoid designation. is that monaco you're working on or part of your response? >> part of the designation process, it's been very good all along. >> that's something to you. >> it's not because of misunderstanding, it's basic issues what they are doing, what you're about. we obviously think if decisions are made to reduce risk that's a good thing. if you're going to maintain a business organization that presents high risk oversight is important. >> yield back. >> time of the gentleman expired. chair recognizes gentleman from california mr. roy, chairman of foreign affairs committee.

>> good to be with you. >> we're glad you're here. i know back in 1986 you set next to tip o'neill back when he and ronald reagan were working on the '86 tax act. i was wondering what advice you might give the next administration in terms of how the speaker on how they can work with the compromises to get us to the result. you're somewhat optimistic about consequences we saw after the '86 as well i wanted to speak for a second about this bipartisan agreement that current business tax growth is stifling economic growth, isn't makes us competitive. there is an agreement on the need to eliminate loopholes.

some of us agree we should be taking tax revenue from money parked overseas to pay for infrastructure here. there's that element, too, that could help move this through. there seems to be some disagreement small businesses file on the business side, including the past companies. i've followed your thinking through the years. i know early on you thought it should all be done at once. last month i think you mentioned it needed to be broken up in terms of how it was handled. i thought i'd ask you that question, especially in line in terms of how we were able to

achieve that result in '8'6. >> congressman, it's a great question, something i've given a lot of thought to. i think in terms of how we should close loopholes, how we should lower rates, deal with international income, have a minimum task, i think we have an emerging consensus that has the ability to get bipartisan support. you put your finger on something that's an issue, i think it's been a misunderstood issue. let me say why, can you do benefit to small businesses by letting them deduct everything they spend on investment, by giving them simplified procedures. real small businesses would benefit from where the emerging consensus for business tax reform is. the institution that is wouldn't -- the businesses that wouldn't benefit are not small

businesses. they are llcs that organize after last tax returns to go from being corporations to being passthroughs, pipeline companies, large something firms like hedge funds. i think if we look at the impact on real small businesses we can get there. i hope that we can like break apart where the impact of individual rates really falls. it doesn't fall on the small neighborhood business. it's falling on these very large firms. i think it would be a shame if that were to be an obstacle to cleaning up a business tax code that's profoundly broken. it's causing terrible consequences. we see the european commission reaching into our tax base with state aid fines. that's a terrible thing. we need to stop it by fixing the tax code. you put a finger so we should get bipartisan consensus, using one-time revenue that comes from having a tax supplied to overseas income whether it comes home or not to fund infrastructure. one-time revenue.

perfect for one-time revenue. >> let me ask you another question, on the intersection of domestic regulations in the area, financial stability board. i'm concerned u.s. regulators at least in part rely on fsb but fsb is not subject to procedural due process. so i think we have ab interest here, starting with fsoc rather than starting with other end swiss-based fsb where we end up without notice and comment or prohibitions on arbitrary and capricious actions and work to accommodate europeans rather than the other way around, given the impact designation can have on a company, why utilize a process that lacks some basic protections here. why don't we reverse that process? >> well, congressman, we do it

the way you want to do it. only made on u.s.-based procedures. fsb is a policy shaping not an action determining body. it's not binding on nations but it does help bring other countries closer to meeting our standards and i think it's good for us to have other countries with high regulatory standards. >> thank you, mr. chairman. >> time of the gentleman has expired. the chair now recognizes gentleman from georgia mr. scott. >> secretary lew, i want to go back to the iranian discussion for moment, from another perspective. we all agree the iranian agreement is open or not. right now iran stands flush with billions and billions and billions of dollars, as you alluded to much of their own money. i respect the president, he's tried very hard with his deal.

i respect that deal. here is my concern. we have an obligation to israel to make sure they have a memorandum of understanding. here is the point, the president issued his memorandum of understanding and it's woefully weak. it's about the same amount of money as we did in 2008 because as you know in the naval transfer vehicle act of 2008, we established a fact the amount of military in israel must make sure that israel has the qualitative military edge. there's no way the president in his memorandum of understanding giving israel the same amount of money we gave 10 years ago when we had our foot on iran's neck.

the economy is down. now they are flush with hundreds of millions more, so much they are shipping weapons to israel's enemies up and down and all around the place. as you know we were able to successfully stop, going to hezbollah, hamas, syria, all of those places. my point is this. the president, some of us here in congress want to work with the president. i want to ask if you can convey to them that david scott wants to work with him. i've served on nato assembly, i was chairman of science and

technology committee. we spent two years working object iranian agreement. i understand that that's past. now we've got iran, number one enemy flush with all this money. we have an obligation in the naval transfer act of 2008 to make sure they have the qualitative military edge. they don't have it with the president offering -- bush offered in 2008, i think it was about 3.3 billion a year. the president is talking about like 3.7, when iran is so far superior in money. it's put in $19 billion for moneys and weapons from china and russia and all that. so what i wanted to ask if you can convey to the president congress has a step in this, too.

let us work together. that memorandum of understanding for israel, in order to make sure they have qualitative military edge by law, as we're saying should be de los $7 billion a year. it is congress that appropriates that money. give usa seat at the table an let us work with him on it. could you do that for me? >> congressman, just a couple of points. first, yesterday i met at the u.n. with israel's footballs minister who saw eu very important guaranteeing israel's financial security. i don't think your view is shared necessarily by the government of israel. >> but let me tell you something what my view is. i helped write that law in 2008. we made sure that we got the qualitative -- >> we continue to stand by that.

>> well, you don't have the qualitative military edge with the same amount of money. >> i'll leave the discussion of the military issues to our military experts but this is a financial matter, is a very important commitment between the united states and israel. i'm proud that we were able to do it. >> congress appropriates the money. don't you think we have a role in that. >> congress has the right to appropriate the money. i won't challenge that. if i could just say, though, i think anyone comparing israel's economy and iran the economy, iran has a broken economy. they have gotten some relief because of taking apart nuclear program but israel has a very -- >> not a dime of that goes to the iron dome or to combat weapons going to israel. >> i totally agree with you we should stand with israel. >> the time of the gentleman has expired.

the chair recognizes the gentleman from florida, mr. posey. >> thank you very much, mr. chairman. secretary lew, i have an issue that ties in with the chairman's question about the role of the treasury in making payments. for six years, six long, torturous years i've been fighting with a group holding captives, known as farc. i know you're familiar with them. see, these men were on u.s. government counter-narcotics mission when they were captured by the farc. one american was executed and the other three were held hostage for 5 1/2 years. they were subject to conditions that neither you nor i can begin to imagine. horrible. after returning home, the former hostages were granted a judgment in the terrorism act against farc. however the accounts to fund this judgment have been blocked

by the treasury department since the office of foreign assets control is now designating all farc accounts as kingpin. congress clearly wanted terrorism victims to be compensated when it passed the law to allow them to access the frozen assets of terrorists. but the office of foreign assets control has eliminated their ability to do that by designating all farc assets as kingpin. a small change would fix this. the bill that accomplishes this hr-3394, the captive act passed the house unanimously, totally bipartisan unanimous in july. now i'm hearing that the office of foreign asset control is blocking the bill in the senate. in the meantime the farc peace accord includes reparations for colombian victims of the farc terrorism and $450 million

appropriation to implement the accord is waiting for congressional passage. however, here we have american however, here we have american victims of terrorism who went through years of torture on behalf of the united states government who have still not been compensated. my question for you is: will you please work with me and these former hostages who have suffered so much already at the hands of farc so that they don't have to suffer at the hands of congress and bureaucrats in the future and let's get them compensated. >> congressman, i share your concern for victims of terrorism and i understand that it's a very complex and heavily litigated issue regarding multiple claims to a limited pool of money. as i know you are aware, you know, tria allows a person who has a judgment to go against

blocked access, but currently the term blocked assets as defined by tria gives access to funds that are frozen pursuant to two statutes, iepa and the trading with the enemy act. iepa is the principal tool that we at treasury use to sanction terrorist organizations and their members as well as victims of state sponsors of terrorism. the kingpin act, as i know you know, is defined specifically to create tools to deal with the threat that our country faces because of internationals narcotics trafficking and amending tria to have the definition of blocked assets include property frozen under the kingpin act could very much undermine our efforts on that very important mission as well. so we would look forward to working together to pursue how we address the concerns that we share in terms of victims of

terror having access to compensation, but our concerns are to protect another, i think, shared goal that we would be able to take very decisive action to stop narcotics trafficking. >> i'm a little bit confused how giving american patriots the same or equal consideration of foreign people who have been terrorized would undermine any of our security efforts to fight terrorism or narco terrorism. >> so the kingpin act is designed to provide resources that go against fighting -- >> i understand that. >> -- narcotics trafficking. >> but this is taking resources from narco terrorists and compensating american victims. i just don't think there is any

excuse for any bureaucrat in this country to hold up to willingly, knowingly, willfully hold up the compensation of these gentlemen when it can be remedied so very easily. >> time for the gentlemen -- >> there is a special place in hell for people would would do that. >> the chair recognizes the gentleman from north carolina mr. pittenger. >> i thought it was to go between political parties. >> i apologize to the gentleman from washington. the gentleman from washington is recognized for five minutes. >> thank you, sir. i thought it might be interesting if we return to the ostensible purpose of our hearing today, namely the annual report of the financial stability oversight council. i want to direct your attention to page 16 and some of the

language relating to housing reform, among other things it says. the council recommends that regulators and market participants continue to take steps to encourage private capital to play a larger role in the housing finance system, further, the council acknowledges under existing regulatory authorities, federal and state regulators are approaching the limits of their ability to enact reforms that foster a vibrant, resilient housing finance system, the council, therefore, reaffirms its view that housing finance reform legislation is needed to create a more sustainable system. so i'm one who believes that it is a far stretch of the imagination to believe that conservatorship is a status which should exist in perpetuity. that it is by definition something that is temporary so i'd like to see us move forward but yet it's not all together clear to me what is meant in the

why's behind these assertions in this report. for example, what is inherently unstable about the stat can you say quo? as much as i would like to see us move forward i do not understand why it is that council believes that what we have is not stable as a consequence? >> congressman, we continue to have a housing finance system where most mortgages are in one way or another government backed, either through fha or through the gses which are in conservatorship. we think a more stable approach would be to have private capital coming in, taking risk, coming in and having a mortgage market that is not dependent on having a backstop of government support. >> why would it be more stable? i understand why it would be -- arguably i would understand why it would be more vibrant and

more dynamic because if we were to increase private sector participation we might have nor innovation, but what is inherently unstable about how we do this now? >> if ultimately the goal is to attract private capital into the housing market, it would be a good thing if we had avenues for private capital to have business models to get into the housing market and bear the risk that they are taking in a way that is not fully dependent on one or another form of government backstop. the challenge is how to get legislation that would permit the development of the structure that would meet those criteria. >> i agree with all that, mr. secretary, except i still don't hear an answer to my question. what is unstable about how we are doing it now? i agree with everything you said about the importance of moving

forward with increased private capital participation, but the report says that it would be more stable. what's unstable about how we're doing it? >> if you go back to the period before the financial crisis, it was explicitly said that the government didn't stand behind the gses. then there was a financial crisis and the government had to bail out the gses, which is why we are in the serve forship now. i don't think that anyone designed a system for permanent conservatorship or wanted a system of permanent conservatorship, but it requires legislation to move on from where we are. to me as someone who cares deeply in long-term access to housing in this country it would be better if we right now had a blueprint in legislation for what the mortgage finance of the future looks like. >> do you believe that home

ownership, the percentage of the population enjoining home ownership, would increase if we were to allow for increased private sector capital? >> i think it certainly could, yes. obviously it depends how it's done so i can't answer in an unqualified way. i think it's important that anyone who is credit worthy should have access to a home mortgage. i think right now we have a tighter credit box than is necessarily warranted and we have tried through clarifying some of the regulatory issues, things like put-back risk to ease the credit box some, but we also saw in the lead up to the financial crisis that it's not a good thing for people who can't afford a mortgage to get in over their head. so striking that balance right and having risks borne where there are decisions to take a

risk are being made would be a better way in the future. obviously we're going to do everything we can to keep the mortgage market healthy during the period of conservatorship. >> thank you, mr. secretary. >> time for the gentleman has expired. the chair now recognizes the gentleman from north carolina, mr. pittenger. >> thank you, mr. chairman. hello, mr. lew. >> congressman. >> good to see you. >> secretary lew, did the office of terrorism financial intelligence, did that office raise any concerns about the method of payment to iran, you know, the hundreds of millions of dollars in cash to a state department designated sponsor of terrorism? did they raise any concerns? >> congressman i'm obviously not going to get into any individual things that -- >> they're under your purview, i just asked you a direct question, did they raise any concerns? >> i would say that the view within the treasury department is everything that we did was

consistent with both good policy and -- >> so they didn't raise any concerns. >> and the law. i'm really not going to comment on one way or the other what i did or didn't hear from intelligence briefers. >> this is your office of terrorism financial intelligence in treasury. >> i mean, we have consistently seen analysis and shared analysis that -- >> were you apprised of any concerns by that office? >> congressman, i was not briefed internally on -- on reasons not to proceed with this transaction, but i'm not going to describe who told me what. >> did that office conduct any analysis as to the impact of sending ultimately billions of dollars over to iran? >> congressman, we have done extensive analysis on what iran is doing outside of the jcpoa, the joint comprehensive plan of

action, and we have tried as best we can and we have some ability to see what's going on. >> how many -- >> to see -- >> secretary, excuse me, but we have limited time. >> i didn't answer your last question. >> -- operate under the swift authority that gives them access through the international financial system, how many banks in iran have that capacity? >> i would have to to get back to you, congressman. >> that would be an important thing to know. >> if i can just go back, it really is important to answer your last question. we have been looking to see if as we said at the time the jcpoa was agreed to there that there would not be a substantial increase in funding and we are not seeing the increase in funds available to iran going to the purposes that we all want to stop. if we see it we will stop it. >> thank you. >> if we see ships going we will try to stop them. >> going through the financial system through the swift bank authority has enormous impact.

mr. secretary, pastor abedini, he was one of the hostages, i went over and greeted him in germany when he arrived. as he was waiting in iran to depart on the swiss airline, swiss-provided aircraft to go to germany he asked one of the guards why the wait? why can't we board and leave? and pastor abedini testified in congress and also in the media that they were waiting for a plane to arrive and once that plane arrived then they would be able to depart. of course we have seen pictures of planes that arrived and bags coming off. so did it ever really concern to you that the reality of paying for these hostages, these ransoms, was not just perception, but in reality that's what the iranians believed? >> congressman, i can't speak to

what anyone else believed but i can tell you what i understood at the time and what i know now. we had three separate negotiations all of which were going on because a window had been opened at the same time, we didn't talk to iran for decades but with the negotiation of the joint comprehensive plan of action we had the ability to negotiate for the release of americans being held against their will, we had the ability to settle an outstanding legal claim. the fact that all those things came together is because we were talking. >> when you see the three hostages were released -- >> i couldn't hear you, i'm sorry. >> it became very offensive to pastor abedini, he said what's going to happen now as we've exacerbated the problem and we are going to see a dollar amount put on every hostage. >> congressman, there is a fundamental difference between ran some which is when you give your money to another party than having separate transactions where you -- >> it all happened at the same time. >> and that's all this was -- >> one last question i'd like to ask you, 20 seconds. mr. secretary, have we ever paid

cash in large sums to any other government before? >> i would have to go back and check the history. i mean, we do a lot of business in a lot of ways. i know your time is almost up, congressman, i know this has been a very difficult week in your city and i just want to express my own personal sympathies to the families that are -- have been injured and suffered a loss. >> thank you. we need the leadership of martin luther king in my city today. thank you. >> time of the gentleman has expired. chair now recognizes the gentleman from kentucky, mr. barr. >> thank you, mr. chairman. secretary, welcome back to the committee. if i could just follow up from the questions from my colleague from north carolina related to the administration not seeing where the money is going and i think your testimony was you don't see money going to terrorist elements, but that kind of begs the question if you're transferring money to the

government of iran in cash, of course you are not going to see whether or not -- that's the whole point. >> we actually try to keep track of what's going on as best we can see it. >> but the question that has been asked and we still are looking for an answer is can you track cash payments to iran and whether or not that ends up in the hands of, say, hezbollah. >> look, the challenge -- this is an issue we dealt with directly when the joint comprehensive plan of action was being debated. i cannot tell you iran will stop doing things that we don't want them to do. we are going to do everything we can to stop it using those authorities, but just as we had agreed in the jcpoa that they would have access to their money we said we will do everything we can to stop the flow of money, but once money goes into the central bank of iran the mode of transfer is not the issue. if you had given them the money through a check we would still have to watch where the money goes afterwards, we are doing that. >> can you tell us in congress and the american people today

that the $1.7 million that was transferred in cash is not funding terrorism? >> look, i understand that you're focused on the cash but we are looking at how much money is going to support -- >> that's a no. i interpret what you're saying as a no. >> don't interpret me, i will speak for myself. >> well, we all know you can't tell us whether or not that money is -- >> congressman, can you show me contrary to our analysis -- >> the point is it was your testimony that you don't see it going to terrorism, but that's why you don't see it going to terrorism. >> no, congressman, that's not why. >> let me switch to another topic. >> -- but that's not correct. >> this is evidence why the iran teal is bad for america, it's bad for israel, it's bad for our allies and it's bad in terms of preventing terrorism. let me switch to another topic -- >> let me -- >> let me switch to another topic.

the time is mine, mr. secretary, let me switch to another topic. do small community banks and credit unions represent competition to large institutions like wells fargo? >> i'm going to go back and answer your last point. >> i want to move on. >> i want to answer the last question. >> i really do want to move on to the issue -- >> i think the world is safer with nuclear weapons -- >> i'd like to move on to the issue of wells fargo. >> time belongs to the gentleman from kentucky. >> mr. secretary, do small community banks and credit unions represent competition to large institutions such as wells fargo? >> look, i think that there should be competition at all levels of the banking -- >> do they represent competition to large institutions like wells fargo? >> in some of their business they do. >> according to the fdic at year-end 2010 there were 7,657 banks. by the end of 2015 the number had declined to 6,182, the number of community banks had

declined by 14%, double the rate of that in the period leading up to dodd/frank. credit unions, we are lost 1,500 credit unions in this country since dodd/frank, so since the enactment of dodd/frank the number of new bank charters can be counted on the fingers of one hand. you have few new charters, much fewer banks and 1,500 credit unions. you have less competition not a very good record for enhancing financial stability and i would add eliminating the competition to large banks like wells fargo. if i was a defrauded customer of wells fargo i would be angry at the institution no doubt about it, but i also would be angry that the promises from the politicians that dodd/frank was going to protect me are hollow promises and that there is no -- maybe -- maybe why that's the case is that large banks like wells fargo have less competition today. >> congressman, i think if i was

injured by a financial institution i'd be glad that there is a cfpb out there to protect -- >> the cfpb was around in 2011 when she is alleged activities began and it wasn't -- and the timeline that i've seen it wasn't until 2015 that the occ got the cfpb involved. looks to me like a case of regulatory incompetence. >> if you look at how the facts unrolled here, the action that was taken this week reflected the occ and the cfpb taking action and there would have been no cfpb if not for dodd/frank. >> do you know what, far from an argument for enhancing the powers of the cfpb. i think what the wells fargo scandal says is that we need to reform the cfpb so it actually focuses on its mission of protecting consumers instead of taking away choices from consumers. >> time for the gentleman has expired. the chair now recognizes the ja from pennsylvania, mr. rothfus. >> thank you, mr. chairman.

secretary lu, over the last several years the spirit of washington has been to never let the crisis go to waste and it's been the crafting of rules that take a wrecking ball to one city after another. came brae business college in johnstown pennsylvania, for example, closed its doors this summer after serving its community for over 100 years because of the department of education's crack down of higher education providers. thousands of coal miners have been laid off as their employers have been bankrupted by washington regulations and millions have had their health insurance wrecked. community banks are closing or consolidating in a desperate effort to stay viable in the face of a new swarm of new rules and regulations. now unfortunately the federal government's wrecking ball has another target, money market funds. as you know the july 2014 amendments to rule 2 a 7 require stable value institutional prime

and tax exempt money market funds to be allowed only with a floating net asset. i want to add some context here. many institutions face legal constraints or have policies that prohibit them from investing in cash pools that fluctuate in value. in fact, for them the stable nav is an intrinsically valuable feature of money market funds. we have seen nearly $1 trillion rush out of prime and tax exempt funds, prime funds, a key source of funding for corporations and banks have dropped by 48%. tax exempt funds which by approximately 70% of the short term debt issued by municipalities, universities and hospitals have dropped 42%. i'd like to offer into the record of letters from senator pat toomey from the authors of penn state and university of pittsburgh expressing concerning about what's happening in this

industry. >> without objection. >> also letters from the allegheny county executive -- the allegheny county treasurer and mayor of pittsburgh to my colleague congressman doyle expressing similar concerns. >> without objection. >> this has caused borrowing costs for firms, municipalities, hospitals and schools to spike at a time when they need access to affordable capital and much of the money that has moved out of prime and tax exempt funds has gone into treasury and government funds. in other words, the affect of the rule has been to stifle investor demand for commercial paper and debt issued by municipalities and important institutions in our communities and to stimulate demand for debt issued by the federal government and the gses. this rule effectively subsidizes fannie, freddie and the federal government at the expense of the private market and borrowers. this that warts investor preference by forcing investors into government funds to get the stable nav. with all of this distortion and disruption and the tilting of

the playing field i don't think we can say that this rule is necessary or helpful. money market funds have a long history of stability and security through the financial crisis and i worry that this wrecking paul will take out an important and necessary part of our financial system. are you aware of the exodus of funds from prime and tax free money market funds and the subsequent flow into government funds? >> congressman, we have been monitoring flow of funds, i don't think that the impact that we've seen is as dramatic as what you're describing. >> i would encourage you to listen to the municipalities and the universities that are out there and to gauge what they're seeing. >> so, congressman, i think we have to -- i'm sorry. >> go ahead. you were going to say. >> no, we have to remember that during the financial crisis there was a real concern about the stability of money market funds. there was a very careful measured action taken by the sec to try to put in place rules that would govern, which i think are going to enhance financial stability. we are not seeing dislocations in the marketplace on a broad

basis -- >> you haven't seen a trillion dollars move out of these funds? >> well i'm not -- >> isn't that a significant dislocation? >> i think that we are not seeing problems arising in the market where funding needs can't be met and, you know, that's -- that's the metric that we look at, is there liquidity in the market, are markets working and markets are working. i think that -- >> would you -- would you agree with me that this is a tilt to the playing field? if you need a stable nav and your only option is to go to a fund that has fannie paper or freddie paper or treasuries that that is going to have a preference over municipals and aaa corporate bonds. >> i think you have to look at the whole picture. we had a situation during the financial crisis where the risk that money market funds were going to break the book almost took what was the worst recession since the great depression and throw a switch to make it a depression itself.

so there was a serious issue here. i don't think the action taken has caused disruptions that to date have raised serious concerns but we will look at it. >> i think you will want to talk to the universities, talk to municipalities because this is a big issue for them. >> time of the gentleman has expired. the chair recognizes the ja from arizona, mr. schweikert. >> always an interesting time when you get to hang out with us. >> never boring. >> i'm interested in this and i ran over here so i didn't have enough time so i'm doing part of this from memory. in i think april there's something i think it's referred to as the 387 rule, it's how taxes are -- or how you value if you've taken a stock interest in a loan and just -- >> 385. >> 385.

that's it. sorry. thank you for correcting me. if i remember just the preamble on the rule proposal was, what, 75 pages, so the preamble trying to describe the proposed rule was actually longer than the rule itself. where do you see that? i know a number of organizations, number of folks from arizona, we are a state that's very entrepreneurial and trying to bring in capital and are worried about the tax treatments underlying. and i know i'm getting a little technical, but first where do you see those rule mechanics? >> congressman, we issued the 385 rule as part of our effort to make it harder for u.s. companies to invert, to take u.s. companies and change the address and avoid u.s. tax liability. the reason the preamble was a bit lengthy is we raised a number of questions that we wanted to get comment on so we weren't surprised that issues

were raised, we raised the issues ourselves in the preamble. while we got hundreds of comments it all comes down to six issues which we have been working hard at addressing and i'm pretty comfortable that we are going to be able to have a final rule that resolves many of the concerns that have been raised, but that won't damage the principal purpose of the rule which was to stop inversions and to stop earnings stripping and taking unfair advantage of the tax -- >> those are two very different things, though. i mean, on one side i will use -- i despise the term earnings stripping, i mean, between, you know, merged organizations or affiliated organizations and the recognition of do you consider this a stock holding or is it really a debt pledged with stock or, you know, convertible to preferred. that's different than the inversion debate. so you could see from my view of the world as sort of someone who sees the world as an accountant

are we sort of conflating some of the different issues. look, it's a hard read, i accept that. >> we have said the best way to deal with inversions is through tax reform and legislation. we have limited administrative tools and we use section 385 which in its simplest way has broader impact than you need. we are working to address the consequences that are not central. >> do you think as you're addressing towards the final rule there is that -- i'm reaching -- 2 -- 279, it's the tax treatment within -- or where you can't recognize the interest cost between the organizations, i think that was also within the rule sets. >> so are you talking about the financial transactions between foreign subsidiaries of a u.s. firm? >> actually i think it's within an acquisition and the costs in

between. >> i'm going to have to follow up and get the specific question. what i can tell you about the way we've handled this rulemaking is we've done it by the book, by the administrative procedures act, we've gotten comments, taken meetings, hundreds of conversations, we've talked to committees of congress of jurisdiction and i think we're going to be able to put final rules out that address many of the concerns that have been raised. >> could i throw -- and then i had one other question i've always wanted to ask you. if we would do tax reform, particularly if we would clean up our territorial tax system -- solution? >> what we have propose add and i think bipartisan support for is something that is a bit of a hybrid system. we think there should be a minimum tax on u.s. income overseas -- >> no, truly if we developed a true class dig -- >> i think the hybrid approach is better myself knew prefer it and i'm a territorial tax system person -- >> but that's why i think -- you know, in answer to chairman

royce's question i think there is the basis for bipartisan compromise here. we work very hard to build that. >> you saw chairman brady a couple months ago did sort of put out an outline, within that -- >> and chairman camp before him put out proposals that overlap considerably with the proposals that we have put forward. >> okay. >> i think that this is something tax writers should be able to work through early next year. >> okay. i'm just -- can i steal 15 seconds? >> 15 seconds. >> we have our demographic crisis, you in a previous life did great writings and talking about what's about to happen debtwise. can i beg of your organization to at least do a solicitation of the appetite for long-term u.s. sovereigns debt to see if we can maybe do some of our financing over the demographic bubble? >> congressman, we remain open-minded to approaches but we have done a lot to lengthen the

weighted average of ma torts -- >> i'm talking 45, 65, hundreds. >> i'm happy to have a longer conversation, i can't with the gavel going. >> the chair now recognizes the gentleman from maine, mr. poliquin. >> thank you, mr. chairman, very much. mr. lew, thank you very much for being here. i noted when you walked in you indicated clearly to me that you had not taken your maine summer vacation. maine is a wonderful place to have a fall vacation and i am sure your wife will greatly appreciate it. >> if only i got a fall vacation. >> yeah, really. sir, americans are very alarmed, very frightened, about an increasing number of terrorist attacks here at home and abroad. do you agree with the state department's assessment that the country of iran is a primary state response or of terrorism, yes or no? >> we have implemented all of the -- >> do you agree -- do you agree

that iran is a state sponsor of terrorism, yes or no? >> i have -- i have -- >> mr. lew, you are very good about not answering questions. >> we have made that designation. iran -- >> do you agree iran is a state sponsor of terrorism, yes or no? do you agree with the state department? >> i obviously agree that they have a state sponsor of terrorism, why he. >> okay. do you also agree that untraceable cash is the currency of terrorism? >> i do believe that cash in the private economy is a big problem because we can't track it. >> now let's go beyond -- okay. we agree on those two things. thank you very much. >> congressman -- >> my time, not yours, sir. now, you authorized the cash being flown into iran. now, for whatever reason you authorized t that's fine, that's your decision, i think it was a mistake, but you did it. now, my question is the following: i know that the united states government owed iran this money. how about if we had instead put pressure on them to abandon

their support of terrorism and disavowed their goal in their public statements about destroying israel, what if we just had not transferred -- you had not authorized the transfer of cash to iran until they gave up their goal of destroying israel and stop sponsoring terrorism. >> as a simple matter we wouldn't have been able to resolve the dispute that left america at risk of having a $10 billion settlement. >> that's not the point. >> that's precisely the point. >> why in the world -- >> we would have -- >> i'm asking the question. why wouldn't you continue to withhold those payments until they stopped sponsoring terrorism? why wouldn't you do that? >> congressman, i think mixing a bunch of things up. we are taking action, we have taken dozens of actions to designate entities that support terrorism, we are continuing to take our sanctions responsibilities very seriously to stop iranian activity -- >> let's move on.

you are not going to answer the question, mr. lew. >> i am answering the question. >> you are very good about not answering the question. >> if you would give me the time i'm happy to. >> last year your administration or the administration of which you are part floated a horrible idea which was to tax college savings plans. do you agree that was a very bad idea? >> congressman, that was withdrawn before it was -- >> i know it was. >> -- each dry ink. >> the reason it was withdrawn was because there were so many of us that made such a stink that it is a bad idea to tax college savings plans to make it more difficult for kids -- >> we have done an awful lot to expand opportunity for college education. >> let's move on. your administration walked it back and i thank you very much, mr. lew, for agreeing with everybody that was a horrible idea. now, here is my next question to you -- >> i hope you agree expanding pell grants and student loans is a good thing. >> i may not have this number exactly right, there's roughly $24 trillion of private pension

savings out there, retirement savings, folks that are trying to build up nest eggs to augment the social security payments when they retire. do you think it's a good idea to tax retirement savings like your administration thought it was a good idea to tax college savings plans, do you think it's a good idea to tax -- >> i'm not sure i understand your question. >> do you think it's a good idea to tax retirement savings? >> i mean, we have promoted retirement savings through -- >> do you think it's a good idea -- >> what proposal are you asking me to comment on? >> your administration thought it was a great idea to tax college savings plans until you folks walked it back. >> this is your proposal i'm happy to look at it. >> i do not advocate for that. so you don't, either. thank you. >> i thought you were proposing it. >> you know better than that, mr. lew. >> i would tell you i don't think it's a great idea. >> great. we agree on something. you think it's a bad -- >> we have ira's, 401(k)s -- >> do i get your commitment and will you speak to the american people right now that if the

administration sends out a proposal to tax retirement plans you will stand up against it, sir? >> i think i can safely say in the next four months we are not going to be sending a new proposal. >> will you stand up against it if that idea is floated. >> congressman, we are in the last four months of this administration. if this was two years ago -- >> i'm assuming since you think it's a bad idea we are on the same page, thank you, mr. lew, you will stand up against any attempt to tax retirement savings. >> congressman, don't put words in my mouth. >> time of the gentleman has expired. the chair recognizes t s the gentleman from pennsylvania. >> mr. secretary, proposed staff riyal case at the treasury's office of terrorism and financial intelligence have raised some concerns about how they might affect the execution of tfi's various missions, but

also raise questions about compliance with appropriations language, civil service rules and constraints on the gathering and use of financial intelligence data. the amount of information on the proposed moves supplied to congress has been minimal and it appears that tfi is proceeding with them at full speed. that despite bipartisan staff admonitions to slow the process down until there's congressional buy in for fear of creating disruption in this critical part of our country's effort to stop the financing of terrorism and other financial crimes. the fact that the plans are intended to be complete before a new president, a new secretary or deputy secretary takes office raises the possibility that they may not agree with the realignment creating more disruption as further moves or a reversal might have to occur. so with that in mind, mr. secretary, i have a couple of questions. first is what is the purpose and what are the specifics of the proposal, if you can share them with us, please?

>> tfi is an extraordinary organization, i couldn't be more proud of the work that they do and the effectiveness they have. it's a new organization, it was pulled together, cobbled together from a number of different subagencies -- >> can you tell us about the proposal specifically? >> one of the things that good management requires is that you -- with a -- particularly with a new organization try and make sure that you get it right. i think the current acting undersecretary zubin who grew up as a career official -- >> what is the proposal, mr. secretary? >> i'm happy to get back with you on the details of the proposal. i have deferred considerable latitude to the acting undersecretary because he is truly expert in all of the detailed work that they do. >> i appreciate -- you may not have the answer to the question but if you're agreeing to get back to us i appreciate that. the staff has repeatedly asked for the information and it has not received any information about it. >> you know, we have, you know, scheduled, you know, a briefing on the senate side, we're happy

to schedule a similar conversation on the house side. the challenge here is to ask how do you take an organization that used to be separate organizations and make sure that it is as healthy as possible to do the very important work it does and that's what the acting undersecretary has been looking at. no final decisions have been made it's still a work in progress. >> on the work in progress knowing where it's going because my concern -- you just in response to mr. poliquin's question said this is the end of the administration. if looking for a proposal to change the alignment you would need to come with some specifics. with the specifics that you do know what impact would it have on the treasury's ability to enforce the bank secrecy act. >> we obviously take all of the responsibilities including the bank secrecy act at the highest level of seriousness. there is no aspect of tfi's work that isn't important and this is about -- >> do you have any idea of the impact of these proposed moves on the bank secrecy act and the

enforcement by treasury? >> the objective is to make sure tfi as an institution operates more effectively and more efficiently -- >> you are not speaking to all these questions at the 30,000 foot level, you don't have any specifics? >> i didn't come here today with the plan in front of me. we will follow up at the staff level. >> mr. secretary, are there any declared whistleblowers at the agency? >> not that i'm aware of. i mean, i'm looking back to see -- yeah, my staff is not aware. >> not that you're aware. >> yeah. >> has any staff at tfi been ordered not to talk to congress about this proposal that i spoke about in my first question? >> i know there are some things that are in the clearance process and we have to go through the clearance process internally within the administration, but it's only a normal process, it's not anything specific about this. >> why can't tfi redirect a portion of its anticipated 17% growth in fte in the president's fiscal year 2017 budget or, you

know, what ends up appropriated in a continuing resolution -- >> if i could ask if you could submit a question i'm happy to take it. that's at a level of detail that i would have to look at the question in more detail. >> mr. secretary, i appreciate your willingness to try to answer the questions. you are not able to answer any of the questions here today. i would just -- >> congressman, i pay attention to a lot of details but these are pretty small details. >> -- first of all needs to be included so that we understand in the appropriations process what our responsibilities -- >> i agree. it has to be consistent. i'm happy to answer the question. >> how long will it take to you answer these types of questions? >> if you give me the question today we will get back as soon as we can. i mean, i'd like to understand the question and be able to give you a complete answer. >> time of the gentleman has expired. the chair recognizes the gentleman from colorado, mr. perlmutter. >> mr. secretary, good to see you. thank you for your service. thanks for coming in and answering these questions even

when my friends, you know, are kind of pounding away, i appreciate the way you handle it. the seriousness of this, but also your willingness to have a little bit of a give and take with my friends. so i'm going to just talk about a couple of things. first to thank you, thank the preside president. when president obama took office my district was at about 10% unemployment. we are on average of about 3% today and that's even so the suburbs of denver and that's even with oil and gas not doing very well in my state, which would put us at about 2% unemployment. but strong economy, foreclosure which had been off the charts at the beginning of the obama administration now, you know, very strong housing market, almost too strong, hopefully supply starts catching up with demand. and lots of jobs, strong economy. i just want to thank you for your part in doing that because

it's been a long -- long road. so thanks to you, thanks to this administration. the other thing i want to talk about and say thanks, but we certainly aren't there and since the chairman is here he knows this subject, it's marijuana and banking and he knows it because i keep -- i always bring it up because we have to confront this and deal with it at some point, at least 25 states have some level of marijuana legalization, some kind of a regulatory structure in place, either for medical marijuana or recreational marijuana. if you add the states that have cannibis oil to deal with seizures that's probably another eight states and there are several that have it on their ballots this year. and the federal law, particularly in the banking sector and the state laws kind of run smack dab into each other and i appreciate the assistance that the administration and treasury has provided to have -- give banks some potential path

to allow legitimate businesses to be able to have banking services. so thank you for that. now, my question is on this proposed 385 rule. on debt equity kinds of transactions between subsidiaries or the parent and subsidiary and money going offshore. i know that you all are trying to deal with inversions and i appreciate that, but i guess i would -- i want to ask -- talk to you about it, i want you to tell me what you think the 385 is intended to do and i would just ask you all to be looking at those transactions that sort of have been in the hopper and then this new rule comes down and it changes the economics of the deal in a tremendous way and i would ask you to consider either, you know, grandfathering in those deals that are in -- you know, haven't yet closed or

may be closing and the affects on those particular deals. so i turn it over to you, sir. >> congressman, the principal objective of the rule was to try to shut down inversions and to shut down the use of kind of blatant tax avoidance devices. there were a number of issues raised in the preamble to the regulation, the draft regulation, saying, we know that we took a kind of simple approach, that's going to raise concerns. we would like to get comment on each of the issues that might not be central to the core purpose. not surprisingly we got a lot of comments. the comments kind of circle around half a dozen issues, we've been working on each of those issues to try to come up with policy solutions that address what might be peripheral or unintended impacts protecting the core objective of the rule. we're making very good progress,

i think that the business community feels that we have listened to the concerns raised, that's certainly what i'm hearing, we have listened to the members of the tax writing committees of congress and many other members of congress and we are working to try to finalize the rule. critics of the rule quickly asked us to add enough time to the comment period so that it would be impossible to do a final rule and we did not want to do that. we will only do a good rule so if we don't finish with a good rule we won't do it, but i think we have time to do a good rule. >> i think you do, too, and i appreciate the fact that you have been taking comments from folks. i guess i want to hear again particularly those instances where there's this look back of three years or 36 months, there is the potential for a deal that was -- and these are big and complicated deals -- that you take into consideration the fact that they were under way as this deal -- as this regulation came

into play. so please look towards some grandfathering on this. >> and thanks for your comments at the beginning of your remarks. >> time of the gentleman has expired. chair now recognizes gentleman from indiana, mr. stutzman. >> thank you mr. chairman, thank you mr. lew. good to see you again and i appreciate your time here. i'd like to talk about the situation at wells fargo bank. looking at an article that you have a couple of quotes and i'd like to read them. it says that after the senate hearing the other day that -- that senator robert menendez of knowledge has said they will hold a hearing on the bank's aggressive sales tactics next week, the magnitude of this situation warrants thur crow and comprehensive review and now treasury secretary jaboc lew is adding his voice to the chorus of criticism. the pattern of behavior we have seen here is something that needs to stop, it is not

acceptable to do things that are designed to increase either an individual or firm's bottom line by deceiving customers or passing on charges that are either invisible or they don't know about. this is a wake-up call, he continued, and should refinmindl of us in firms that culture and competition make a difference, how you reward people, moat vad people, what values you hold people to matter. you said that, correct? >> a couple words i think were misquoted there. >> well, looking at the timeline -- and i will talk about the cfpb. i don't think the cfpb is serving the american people. this is case number one, proof number one. you look at the timeline that we know that wrongful termination lawsuits were filed against wells fargo by former employees, alleging fraudulent accounts, back in 2009. wells fargo started seeing a cfpb presence in the wells fargo

offices in 2011, early 2012. is that correct? >> congressman, i can't comment on a specific regulatory matter. i don't have -- i don't have visibility into all of the details -- into any of the internal details of regulatory actions. >> okay. but then in mid 2013 cfpb apparently first hears of the problems at wells fargo through whistleblower tips. the point that i'm trying to make to you is cfpb is not doing its job. >> i don't agree with that. >> when did you know about the situation at wells fargo? >> congressman, i was not aware of the situation and the depth -- the scope of it until the final action. obviously there had been some news coverage, but the full magnitude of it was a matter that regulators were looking at. i think but for the cfpb the penalties would not have been in place. >> well, that's -- that's true, but do you know what the greater penalty to wells fargo is going to come from their customers. i'm a wells fargo customer.

and i'm mad. i'm upset about it and i'm mad at them but i'm also mad at the cfpb, i'm mad at the government because 5,300 people were fired, i mean, this is not just a small scam. >> congressman, if you're proposing increasing cfpb resources so they can have more people watching. >> i knew you would say that because that's always the answer from a failed agency is give us more funding, give uls more so we can go in and find this. they were in wells fargo as early as 2011, 2012. and approximately 939 employees were fired for improper sales practices in 2011, another 1,012, another 1,250 in '13 and then cfpb who has been there for almost two years first hears about it through whistleblower tips. what were they doing? >> congressman, i really can't comment on what the regulatory

actions, i just don't -- they properly do that independently. what i can tell you is for a brand new organization the cfpb has done an enormous amount of good work to make sure that the american consumer when they get a mortgage can understand what they're doing, to make sure that banks cannot put in place the kind of provisions that led to the subprime crisis in '08 and they have a cop on the beat role as well and i think it's a good thing they were there to levee a penalty against this behavior. >> i don't see how it would take this long. i mean, 5,300 people talking somewhere, somebody had to know something. i mean, i don't know how you didn't know about it. when did you first hear about it? >> congressman, i don't recall when i first heard about t i just told you the scope of it was obviously quite dramatic in the final regulatory action. >> well, i tell you the american people don't trust washington and now this has happened. this was supposed to prevent situations like this happening. >> let's agree on what we can

agree on. we should have tough regulators who are watching to see that things that hurt consumers get stopped and don't happen. let's work together on that. >> let's fire a bunch of cfpb regulators. >> i think you're going in a place that i wouldn't go. that's not fair. >> well, i mean, we're firing them at wells fargo. >> we can continue this conversation. >> thank you, mr. chairman. >> time of the gentleman has expired. the chair now recognizes the gentle lady from utah, miss love. >> thank you. secretary lew thank you for being here. we're getting close to the final moments you get to head out. but i ran across an analysis that was done by corporation for enterprise development and institute for policy studies and the analysis stated that it would take 228 years for black families to amass wealth of white families in the united states. is that something that the administration is concerned about? >> congresswoman i am not familiar with that analysis but

we are very, very concerned about the differences in asset accumulation and income earning capability. >> it was really interesting because in your opening statement it almost sounded like you thought that we were doing okay and that everything was -- >> we're doing a lot better but we have consistently said that the benefits of growth are not being experienced as broadly as they should be and the difference in terms of the impact of the housing crisis on the only asset that a lot of african-american families had, their home, was disproportionate. there is still a lot of work to do. >> well, it also states that it's going in a different direction. that, you know, when we look at all of the industries, we just talked about the cfpb, we talked about some of these other agencies that has made it a lot more difficult for black families to get ahead. what we are concerned about and what i see often is that most -- a lot of the times, the majority of the time these are agencies that actually hurt the people that they vow to protect and i was wondering if you were

looking into some of these policies and if you could see the same things that aren't just my opinions but opinions of people on both sides of the aisle. >> well, we have done quite a number of things to look at financial inclusion, access to the financial system, access to credit, to actively promote more inclusive practices both in the private sector and in terms of things we can do. i will give you an example. when we have summer jobs we are promoting that summer job programs are linked to -- >> are you actually looking at the current policies that actually are hurting american families, especially the poorest among us and seeing if there is any way we can correct some of those policies? that's what i'm asking. i'm not asking to do more, i'm actually asking if you are seeing any areas where we can undo some of the damage that has been done? >> i don't agree necessarily with the source of the damages, but i am certainly agreeing with you that the result is

unacceptable. >> okay. i just want to -- i know i have very little time i just wanted to get your opinion on that. i want to -- >> it's an interesting subject that i'd love to spend more time on. it's one of the central top picks we have to make progress on as a country. >> in the next few days my colleagues and i on the subcommittee for monetary policy and trade are scheduled to have a hearing to examine the implications of the financial stability board for the u.s. -- for u.s. growth and competitiveness. since you are here today i wanted to take an opportunity to ask you just a few questions about the fsb. as you are aware many of us remain concerned about the extent to which u.s. regulators defer to international bodies like the fsb when it comes to promulgation of regulations that impact the united states institutions and the united states economy. so another international organization similar to the fsb is the basul committee on bank

super vision, they are currently consideration changes to the regulatory framework known as basu l3. as reported last month european members of the committee are apparently pushing back against the proposed changes to how the framework assesses credit, operational, market risks with some european members reportedly threatening to reject the proposals. it seems that the european regulators are willing to defend their roles, their institutions in such organizations. why are the united states regulators by contrast so willing to defer to the agenda of the fsb? >> i don't think that's an accurate description of how u.s. regulators participate. we have used our involvement in the fsb in the basul committee and all of the international bodies to drive an agenda of increasing -- >> can you give me a single example in which you or your treasury colleagues have objected to or resisted an fsb

initiative? >> well, the fsb only makes decisions by consensus so it doesn't get to the decision if it's not a consensus. we drive that process with our -- >> so you have never objected to any -- >> no, i didn't say -- things that -- >> can you give me -- some sort of example. >> i have ten seconds left. we're happy to get back to you in writing. >> yield back. >> gentle lady yields back. there are no other members in the cue so i'd like to thank the secretary for his testimony today. without objection all members will have five legislative days in which to submit additional written questions for the witness to the chair which will be forwarded to the witness for his response. we would ask, mr. secretary, that you respond as promptly as you are able. without objection all members will have five legislative days within with i to submit extraneous materials to the chair for inclusion in the record. this hearing stands adjourned.

this hearing stands adjourned.

extraneous materials to the

join us later for a discussion on money and politics. topics include what new ideas for picksing our democracy are possible with a new progressive

majority including judicial elections, financial. live at 6:30 p.m. eastern on c-span2. watch c-span's live coverage of the third debate between hillary clinton and donald trump tonight. live debate preview from the university of las vegas starts 7:30 eastern. the briefing for the studio audience is 8:30 eastern and 90-minute debate at 9:00 eastern. stay with us following the debate for viewer reaction including calls, tweets and facebook postings. watch live or on demand using your desktop, phone or tablet at c-span.org. download it from the app store or google play. . every four years the presidential candidates turn from politics to humor at the al

smith memorial foundation dinner to raise money for catholic charities at the wall door of h historia. >> vice president, i'm glad to see you here tonight. you said many, many types that you want to give america pack to the little guy. mr. vice president, i am that man. >> it's an honor to chair with a descendant of the al smith. al, your great grandfather was my favorite kind of governor. the kind who ran for president and lost. >> al, you are right. a campaign can require a lot of wardrobe changes.

blue jeans in the morning perhaps, constitutes for a lunch fund-raiser, sport coat for dinner. but it is nice to the finally relax to what ann and i wear around the house. >> watch the foundation dinner with hillary clinton and donald trump thursday night at 9:00 eastern on c-span and c-span.org. listen at 9:00 p.m. eastern with the c-span radio app. . now, a pam of global finance experts discusses the impact of china's currency on emerging markets, specifically in the latin american region. the atlantic council hosted this event earlier this month. it is just shy of 90 minutes. >> good morning, everybody. i'm shawn huntsman, chair "the atlantic" council. we are indeed delighted and grateful to of you all with us. thank you for being here today to discuss a topic that has the former u.s. ambassador to china

is very near and deer to my heart. and that is china in its evolving global role. and we're delighted to be able unveil the adrienne arch latin america centers latest report called a globalized rumble bee. grateful for his leadership. thanks to our generous partners at hsbc represented here today by their chairman of global banking for the americas and atlantic council board member jerrymadow. i'm absolutely delighted that our interests lined up for this special relationship. jerry, we thank you. but it is a partnership that goes for beyond today's discussion. and a similar event in mexico city next month. of the next two years with

hsbc's generous support, we will look at a number of issues critical to the china/latin america relationship investment, trade, energy insurance with report launches and events in washington, new york, china and various latin american countries. stay tuned for more programming on this hugely important set of issues. now i would also like to say a very warm welcome to the executive vice chair "the atlantic" council board, adrienne arsht in the audience today. adrienne, thank you. adrienne is in large part responsible for division of this organization and the work across a range of issues which have been so successful in recent years. she really is a remarkable driving force. and, adrienne, we thank you for so many good deeds that you do for this organization. today's discussion is on a topic

which requires global attention beyond just the financial world. so i'm delighted to be joined by a distinguished panel of experts to discuss the profound impact of the nationalization. and the impact it will have on emerging markets, particularly in latin america. our event comes at a critical moment as just on saturday it became the fifth global currency to be accepted as a official reserve asset by the international monetary fund. this is a telling moment in the country's emergence as a global economic powerhouse. for countries in latin america such as brazil and argentina, that already have substantial trade and investment partnerships with china, this develop could further improve bilateral cooperation. however, it is vital he we also consider the broader ramifications through the. >> rob: will have on other

latin america economies as well as implications for our own domestic economy. today's discussion will delve into the meat of these issues, providing further context to the report's findings, and to china's highly complex relationship with latin america. after i invite jerry to say a few words, we'll have two separate panel discussions. the first one moderated by sam fleming of the financial times. and then by jason marchzach, director of the adrienne arsht center. please remember today's conversation is record and is being live streamed online. i encourage all of you to tweet about the event using the #rnb in latam. thank you all for joining us today the. it's with great honor that i now turn the stage over to jerry mato.

thank you all so very much. [ applause ]. good morning, everyone, and welcome. thank you for your kind remarks. it is is such a pleasure to be working with you and your time to couple on this important endeavor. governor hanson, your remarks encapsulate why it is such an important moment to host this event. just a couple of things. after the. >> rob:. this is time for us to publicly launch our two-year partnership. an constitution known for its vision. an institution with whom we share many core values. without being redundant, during this two-year partnership we will dive deeper into issues of trade, investment, energy, and security in the china/latin

american relationship with events around the world. we had a very successful private roundtable in new york on this topic which featured the present group of people. finally, thank you to douglas and an tree ya as well as a team at the atlantic council for producing another high quality publication. so why focus on the china/latin american relationship and now? after nearly 2500% increase in trade since 2000. the terms of the china/latin american relationship are on the cusp of change. we will make trade and investment between the two regions a more seamless transaction. at the same time, global will mean cost savings for hundreds of companies in latin america and other emerging markets.

there is some risk involved as our own market has shown. and the infrastructure for more >> rob: