on february 3rd, 2011. m did you. r. goolsbee then or at any time how we obtain that information? >> not my recollection. >> >> why not? thatis is a very important you should have looked at. did you take an oath at office? >> i did. >> ok. let's keep going. are you familiar with the news -- the publication of pending tax-exempt for conservative inning organizations question mark -- organizations? >> i'm sorry. can you repeat the question? >> are you familiar with the publication? >> i familiar with the public.

propublica. i saw news reports of issues around pro-publica. my best recollection is when the news reports broke that it was referred to be looked at. >> the confidential and applications making it through the internal review process should be available for publication? >> i saw news reports. >> it should have alerted you. if the head person sees things happening, you should follow up. i have watched you all day. you're good at taking part of details and you skew the rest. we think because somebody gets

in our face, we should not acknowledge it. are you aware that in 2012, senator harry reid claimed mitt romney had not pay taxes for the last 10 years? are you aware that? >> i have a recollection of reading that in the paper. >> do you know how he obtained that information? >> i have no idea. thatesn't that alarm you all of a sudden this pertinent information comes up and you are the head of the agency and you're not asking questions question mark -- questions? shame on you. did you ask for any other information on anybody else? i have illustrated three different instances of private information. yet you did nothing. let me ask you again. did you faithfully take this faithfullyt i will

discharge the duties of office for which i am entering. did you take that oath? >> i believe so. >> the gentleman has concluded. do you want to answer the same set of questions? i believe they were directed to mr. shulman. you were his superior and still his superior. did you investigate or have concerns of sensitive irs information? >> i remember reading news accounts of pro-publica when happened. the only thing i have learned about one of those issues was from the inspector general. he said he was looking into it. . did as i always do follow the taxes where it may lead. otherwise, stay out of the matter. >> you have exclusive

jurisdiction to review these types of allegations. but you have no authority to go to the white house or here on the hill or anywhere else? you are extremely limited. i understand, you cannot -- >> that is not true. we have the ability to go beyond the treasury. >> ok. thank you. ,> for further clarification some agencies come if they read ,omething in the newspaper members of congress can be subjected to an ethics investigation just by someone reading something in the paper. how does that work there within the irs? someone mentioned senator reed and others. maybe you could answer that. >> i can assure you.

we stick to jurisdiction to investigate information. provisions prevent me from discussing in detail other than what the chairman of the ways and means committee and the chairman of the senate finance committee. i can't even discuss this matter is with ranking member of the ways and means committee, nor the ranking member of the senate finance committee. if a matter is in the newspaper and publicized and they name names, if i were to repeat the names publicly, i'm in violation of section 103. >> could you do an investigation? >> i certainly could. >> thank you. the gentlelady from illinois. >> thank you, mr. chairman.

americans have a good reason to be outraged by the actions of the irs. i share their outrage. i'm frustrated. beyond the mismanagement and the miscommunication at went on, what troubles me the most is a violation of public trust. it is clear from the misguided actions, irs employees in cincinnati and yourselves, mr. -- in yourterfere failure to disclose this to congress, you have violated public trust. irs has an awesome responsibility. an incredibly important job to do. it is central to how the government operates. our talks is get more and more complicated. irs employees face furloughs and pay freezes. a difficultsingly

job to do. i want to get at your comments. anti-gay what will you accept personal responsibility for? how about the lack of training for the staff as identified by the ig. this possibility for the inability to train the staff? >> i would not go down a long list. i was the leader of the irs at the time this happened. i accept the fact that this happened on my watch. i'm very sorry that this happened while i was at the irs. i feel horrible about this for the agency and the people there. i'm not sure what else i can say. >> were you responsible for the training of the irs personnel

under your leadership? >> i do not hand on the side the training of 90,000 people. >> you will not accept response ability for the training of the personnel under the irs for your time there? >> i accept that this happened on my watch. when, yesterday you said someone found out about this problem, you said when someone spotted it, they should have rounded up through the chain. why they did it, i do not know. do you accept responsibility for this process of the chain all the way to you? , its i said yesterday should have been brought up the chain earlier so it could have been addressed. there is clearly a breakdown in this one unit of the irs and of the chain.

i accept this happened on my watch. >> but you won't accept responsibility that some sort of process needed to be in place or a check and balance so that if there was a breakdown, it improperlyrrected reported on how to report up to the chain? no need to answer. now, do accept responsibility for your failures to correct the public record when he found that testimony was the actor? >> i answered truthfully with the information i had. i feel confident that the actions i took were appropriate. >> to report indicated that after ms. lerner discovered the irs cincinnati employees were

using inappropriate criteria, you stopped. was that correct? but the employees teddy using inappropriate practices later? -- started using appropriate practices later? >> that is correct. asch started using inappropriate practices later? >> that is correct. at this stage, a lack of andsight of ms. lerner people within her immediate chain of command. you want to make sure what was being told for them to do in cincinnati was being done. that is inescapable. >> -- that is inexcusable. [indiscernible] had the same answer.

this happened on my watch. i cannot accept responsibility by all the actions taken by everyone in the report. >> i'm deeply be -- disappointed in your answer. 25-over the world, we have year-old sergeants and second lieutenants who know you can delegate authority, but you can never delegate responsibility. you're all for spots will for the training and actions of the men and women under you. -- you are all responsible for the training and actions of the men and women under you. chairman. mr. >> we will either formally or informally asked to designate to be the next commissioner who has been the director of the office of budget to come before us so we can perhaps see in advance whether the management skills are there and a plan is there for what has clearly been a

dysfunctional period of time. >> i want to thank you. i think that is a major move. >> absolutely. with that, we go to the gentleman from pennsylvania. he has been patiently waiting. >> thank you, mr. chairman. i would like to begin to follow- up on some of the information that wish and rated when my colleague from oklahoma. i'm holding in my hand a questionnaire from one of the organizations that made an application. the application was made in 2009. it is 2013. they still have not gotten a response. 39 questionsre, that are being asked. the second level of questioning. this is all being done for efficiency purposes and other kinds of things, but we are

people that have 39 questions that are being asked. the issue i have for you is -- haveere an ability to these questions result as was stated by your successor, but a few people down in cincinnati, or is there another level of questioning? mr. shulman? >> i guess i'm not sure i understand your question. >> the testimony of mr. miller the other day, your successor, he says this matter was contained. his specific language that this was the result contained by a couple of low-level employees in cincinnati. i'm having trouble understanding where this is all coming from. it was his testimony was that it was low level employees in

cincinnati. now i'm seeing 39 questions that are sophisticated and complicated. the question becomes -- is there someone else beyond cincinnati that is participating in the vetting of these questionnaires? to my the best understanding, i really do not know who approves all of the questions. it is pretty well outlined. i have made myself the miller with the ig report about requested -- i have made myself familiar with the ig report. >> what do you think about this? >> will the recommendation -- >> i'm not asking about the recommendation. the testimony was that this was contained to a few people in cincinnati. is the attorney who has made application. this is the word of the attorney.

me thate advised instructions regarding the processing of the tea party related organization clients were coming from the washington -- were there other levels beyond cincinnati as was testified by mr. shulman's successor? >> that is still to be determined. >> what have you looked at? what questions have you asked? >> i have not been virtually involved in the interview. i do know that there have been conflicting information to the auditors as to what and how this came about. >> did you ask specific questions on whether there is anyone asking or involved in these evaluations beyond the cincinnati office in washington question mark -- washington? >> yes. >> what was the answer?

>> i beg your indulgence. back to you?t no, you cannot get back to me. what did he say? >> i could not hear him. , the unit on a number tooccasions had made request the technical unit in washington for guidance on how to handle slipped and -- on how to handle certain matters. >> you are saying this was a request made from the floor that went up to the technical unit. there is no involvement from anyone in washington that was participating? >> the answer is yes. >> there was involvement in washington? >> the technical unit.

>> that contradicts the testimony of mr. miller. these explain. -- please explain. >> the technical unit took an enormous amount of time to respond to many of the request. >> four and half years for this applicant. >> is important to point out the ministration has agreed -- it is important to point out the administration has agreed to look at the recommendations. and have follow-through hopefully the matter will be addressed. >> i have a series of other questions. this is frustrating to me. this from time to time about accountability. all of the scandals are the same thing time after time with the government officials ap,lved. benghazi, irs, fast and furious. time after time we hear from

many people, it was not my job. i refuse. i do not find out about it until you found out about it. where is the accountability again? people's lives are on the lines. people's constitutional rights are at stake here. these were the resident of the united states were to sell. in a memorandum. government should be transparent. his parents -- transparency promotes -- what the government is doing. bespoke -- he spoke. transparency and the rule of law should be the touch stones of his presidency. who let this president and the nation down? >> a quick point.

the chairman will look at calling it -- one half years -- four and a half years. toi will direct staff attempt to contact groups that can come. there is tremendous sensitivity to information. we certainly welcome those groups. >> in my opening statement, you problems rule out because questions of internal controls. . assume the same is true today you may not be able to speak to intervention that came from above or any other place.

it cannot rule out that there was some at some time. >> that is correct, sir. >> thank you. we now go to the gentlelady. >> thank you. i want to ask you about a report. 6104a. public disclosure of tax exempt status only after an organization has been recognized by irs as exempt. last november, pro-publica reported that they requested from the irs the 67 different nonprofits. in response, cincinnati irs sent them applications and documentation for 31 groups. 9 of those were still pending and had not yet an approved. meaning they were not supposed to be made public.

she explained administrative employees in cincinnati were supposed to check each application to ensure that it had been approved before disclosing it had made a mistake. she also told us when the irs gives disclosure, the refer the matter -- matter to your office. is that correct? >> i cannot even acknowledge the existence of an investigation of this woman are suing to a certain code. >> can i read to you this? she said your office determined that this disclosure was inadvertent. theyl read about the ig -- found there is evidence that the employees had done -- there's no reason to believe it was anything other than a mistake. foundu tell us if you any evidence that this release was intentional or that it was

motivated by political motivation? >> notwithstanding the fact that the victim is in a position to disclose his or her . i'm not able to comment on that. i do not want to go to jail. >> no one wants to go to jail. >> any recommend taking any actions even if it is generic? that there is a matter came to us for investigation, i can assure you that we did investigate it. cases lastd many year and counting. >> ok. we also have a new acting commissioner. he is addressing problems and restoring faith in the irs. what would be your best advice for the acting commissioner? what are things that you think

you should undertake quickly? >> thank you for asking that question. mr. werfel reached out to me and has requested a meeting this week to discuss some of the problems confronting the internal revenue service. i have made a commitment to work with them and help them become familiar with the problems within the irs that we have identified. there are ways to hope two of you -- to avoid future problems. >> d.c. this meeting taking place -- dc this meeting taking place within the next 30 days? >> it will be taking place this week. >> when mr. werfel comes in to meet with you, how much latitude do you have with regard to disclosure? things that you cannot disclose or whatever.

how much information can you provide him? >> i have the ability to provide him and the deputy secretary and the secretary of the treasury and the chairman of the ways and means committee and the chair the finance committee and the chairman of the joint committee on tax any and all information. tell himll be able to about ongoing investigations and what you have found to date. >> that is correct. >> he would be in a position to andble to make corrections try to create a better and correct some the things we we have been hearing and reading about. >> that is correct. and limitedonfined in what he can publicly disclose. provided with be adequate information so he can begin to deal with this. i think all of us want that

trust restored to the american people as soon as possible. i'm hoping you will disclose everything. >> i certainly will. >> thank you. >> we go to the gentleman from north carolina. he has been in and out of here. he has been active on this issue. the gentleman is recognized. >> thank you, mr. chairman. you have meetings with mr. shulman and his then deputy. did you do on a regular basis? orderly management meetings. we look at the budget and their i.t. and so forth. of thisull cognizance relationship with the irs.

we do not engage in discussions on work and the details. >> right. roughly four times a year you would sit down and talk through things. that is good. in terms of reports, you're the record or so for that to happen. you regularly have this meeting. you discuss budget issues. this issue about irs employees targeting conservative groups, did that ever come up in the meetings? >> it did not. i do not have any recollection. >> you think there might have been a concerted effort to prevent the group or its -- the reports from coming to you? >> i do not know what was going on within the irs. in general, the treasury and irs relationship -- -- e are not saying the irs

2012, the irs completed an internal review investigation. were you informed of the internal review investigation? >> i learned of that in the last few days. >> so, no. in june 2012rmed that the ig was undertaking their audit or review? >> i'm not sure precisely what it was. at some point, mr. george came to me. >> june, july, summer 2012. >> at some point in 2012. >> the first monday in november? >> might've been.

i don't really recall. >> was a hot outside? can you give me some kind of timeframe? not too good about it -- to glib about it, but -- ig is undertaking this review in summer 2012. --would've raised for me what a braced for me is that the ig is looking at the issue. >> i'm not making an accusation of manhandling. this is a very serious matter to you. we have received a letter from the left and the right to the department of treasury among various administration officials. they have sent letters to the treasury and the i.t.

the spring of that year, there are concerns. i.t. comes forward. don't you say, this is kind of a good thing? that thing -- bad thing? gimme some sense of your emotions. your human as well. well. are a human as >> well my learning -- >> no, no. talk about your feelings. your senate confirmed. very important position. ig comes to you and says, we are looking at this very damning thing. it is election year. >> what i said to him was, this is important. >> take it from there. did you tell anyone? >> not until much later.

>> when? >> i can't remember. sometime later. we're talking about summer 2012. the election is coming up. it is unclear who will win. guy -- i assume you still support him -- you do not pick up the phone and say to your contact at the white house, this is a heads up. this could hit the fan in a presidential year. >> i did not. >> you do not tell anyone at the white house? >> i did not. >> the first time he learned about conservative groups being targeted by the irs was when this report came out? >> the first time i learned -- before the report came out, a draft of the report were shared with irs staff.

we had conversations. i do not have any understanding. i understood from mr. george at some point that this is going to be a report that would reach a very damning conclusion. >> did you give a heads up to the white house? >> no. >> thank you, mr. chairman, for your indulgence. huge accusations being undertaken by the inspector general. toust -- it is beyond me think administration official -- let me ask another question. >> make a very quick. >> did you contact the campaign? >> no. >> mr. george, for the record, the date the draft was shared is on your timeline. >> shared with who? >> the treasury.

no. we shared with the irs. i do not have that dropped in front of me. -- draft in front of me. do you have an official date for that event for the record? >> march 28, 2013. >> that is the date with the irs. actings the commissioner. >> i have monthly meetings with the commissioner. >> outside of the office of the inspector general, the f -- before or after march 28, any other drafts circulated? >> and the question is whether

my office shared drafts, we would have shared with the irs, i believe. >> this set of timelines you gave us, wheeling have the ig, including acting commissioner and draft issued the next day. any other days in which discussion or preliminary portions we shared with anyone outside of your direct force? of an audit, quest there is a back-and-forth of sharing of information between the subject of the audit and -- >> mr. shulman knows nothing. mr. werfel knows nothing. can you make available to us forth discussions that occurred with anyone so we

have a complete record of who knew what and when? we do not know any of this until long after the 28th of march. >> very good. we will do that. >> we are on a roll on the illinois folks. >> thank you, mr. chairman, for holding this hearing. i commend you for your composure. it seems to me you have been testifying around the clock all week. this is my second encounter with you from another committee. 1/3 ofng to your report, the organization selected for further review were groups with party,"s "tea

"9/12."s," and is that correct? >> yes. >> not of these targeted groups have been denied. is that correct? >> yes. >> several progressive groups have come forward to say that they were also included in this enhanced review process. according to these groups, they also received requests for additional information similar to those sent to conservative group's. the irs asked them for detailed about meeting minutes, officers, and board members, and specific activities they have conducted. these groups also experienced substantial delays in the process of application. in some cases they were denied

tax-exempt status. mr. george, how is it that these progressive groups were included in the enhanced review that their names did not have the word "tea party" or other designated words? >> in the course of this review, we were looking at political intervention. that was the exclusive charge that we had. i have subsequently received information that what you are indicating might have occurred. as a result, we will be in a follow-up review to determine whether or not that is the case. and if so, the extent of that. >> thank you. you have testified yesterday that in conducting the audit, your office to not give further 200ew to any of the

501(c)(4) applications in your sample i did not have tea party, 9/12, or patriots in their title. correct? beg yourked -- sir, i indulgence. 202 non-tea party cases. various groups unit rated were reviewed for indications of significant political campaign intervention. that was the key criteria. god wait whether they were conservative or progressive groups and liberal groups -- we do not evaluate whether they were conservative or progressive groups or liberal groups. rpglookout term tea party patriout or 9/12.

thehen it is true that names associated with being conservative were not the only groups who went through this process and retreated essentially the same way? >> we do not make that determination. we could not determine what group stood for what position. but it is a possibility. >> thank you. i have one western. -- question. >> what is your title? >> deputy secretary of the treasury. everything gets reported up to you? >> it does. >> when they encounter these

applications, did anyone come to youfor advice or come to and say, we are getting all of these applications. we're not sure what to do with them. what do you suggest or recommend? >> no, they did not. >> thank you. mr. chairman, i yield that. >> thank you. i would like to let everyone know that the intent of the anyr is not to stop upcoming vote. as we get closer to the votes, if some folks in the q1 to go, there'll be two votes. you can go to one or both of them. if you're not here and we pass you by, we will dismiss dismiss the witnesses. do your best to get back quickly. we will go into a markup. this is a bipartisan markup. please make sure you are here. with that, the gentleman from

tennessee. >> thank you, mr. chairman. thank you to the witnesses for appearing today. to turnt want this political, but we are in a strange parallel in reverse. democrats and republicans alike are in agreement that what has happened here shakes the foundation of what this country was built on. people are today to get answers about what outcome of this will be and who will be held responsible. we all learned in our high school and history classes and told what a great country we are because of the freedom we firstn freedom of the amendment, freedom of speech, the right to hold elections. but now, we have a federal agency that has admittedly targeted conservative groups. this could go either way.

what people want to know is who's going to be held accountable and how they will be held accountable? how high up did this go or did not go? mr. shulman, do you consider yourself a good leader? >> i do. >> ok. you are outraged over what has happened in the agency. correct? >> deeply saddened and dismayed. >> what would be justice to you? what would restore the faith in american people in the irs in your opinion? what should be done? >> i do not have all of the facts. i'm not in any position to make a decision on what should be done. >> you admit people were targeted and he found out about it over year ago. you knew it. >> no.

year ago, i was informed there was a list. i did not notice the details. werelist of people who targeted. this is hard for you to say. you cannot say that there were groups targeted. sitting her 2013, today, -- here today, you can call it what you want. >> did mr. miller come your predecessor, and did he know groups were being targeted? >> i can't tell you what he knew, but only what he told me. >> what did he say? >> he told me there was a list. the word tea party was on it. >> you knew this before the election? >> sometime in the spring of 2012. >> before the election, i believe.

you did know there was a presidential election? >> i was aware. >> did you think that type of information could have harmed the president in an election year? did that cross your mind? >> no. but did not cross my mind. i was commissioner of internal revenue service. i viewed my obligation to not think about elections. it had beentold stopped or was in the process of being stopped. >> and is a good leader, that was good enough for you? i feel very comfortable with my actions. >> ok. ago, you and i had a conversation about the irs's readiness to implement the healthcare law. the two minutes for

people to reach a human being to talk about it. minutes for people to reach a human being to talk about it. you think the irs is ready for people to share their most personal information with them? to implement the new healthcare law? coupleink one, the last of years, congress has not been funding the irs sufficiently. i would defer to the inspector general. whether been looking at the irs was ready to implement its portion. >> are they trustworthy or not? people havermation to share. we had to restore confidence. we do know what to do in this case when our freedom of speech has been violated. you do not know who should go to jail or who should be held accountable. >> i felt very confident in the

did thewomen of the irs task given to them. there's a serious breakdown in this unit. it is very serious. the committee should be looking at it, etc. i felt very confident in the capability of the irs broadly and generally. >> i think america shares your views. i yield back. >> the gentleman from vermont is recognized. >> i thank the gentleman for this hearing to support that investigation. you're known to be aggressive and persistent. you will serve us well in this effort. two issues. visible of equal -- hasion been violated the equal protection been violated? that is the focus of the steering.

-- hearing. i support the aggressive efforts a, determine the facts, and b, follow the facts wherever they may lead. america deserves an answer. at the end of this investigation, was his poor judgment and mismanagement -- was this poor judgment and mismanagement? i was is politically motivated by politically powerful people bash -- was this politically motivated or politically motivated by powerful people? the oversight clash in ask, what is knowing on in the finance world that we all know?

it also raises the question as to whether the institution is .ailing americans this was a failure by the irs. the conduct raises legitimate questions as to whether or not motivatedn selective by local motivation. in that case, in my view, is a corporation is a person. has rights.n they should be protected. corporations serve very important functions in our economy. that should be promoted. a person like you or me, that is 90. -- nutty.

when it comes to question of the supreme court gets it wrong. said aneme court african-american was not a person. that is a stain on the court and our history. that was corrected by this congress in 1868. 14th amendment. one of the challenges we face as a congress is whether or not we are going to acknowledge what has happened in campaign finance since citizens united. this is a threat to the axis of democracy by everyday people. in the last presidential election, our candidate spent -- >> put a b on that. billion. >> thank you.

>> the republican candidates spent about the same. $42 million. that's an m. the congressional races we have been involved in, -- engaged in, the house races were $1.1 billion. the massachusetts senate race was $82 million. , $23ouse race in florida million. what has happened with all of this money coming into the political process, and i think of all experience this. second attack ads does nothing to elevate the debate. over whatess control

it is we are promoting to the people we are trying to represent. groups are starting to spend more than the individual candidate does. thatdespair by citizens this political system has anything to do with anything they care about. this is something i have noticed. there is less ability for us to try to find common ground and make compromises that are in the public interest. some loopy billionaire on your side or hours decides to hit the airwaves with an avalanche of cash and criticize us. is in dire need of reform. yes, let's get to the bottom of the situation, but let's also acknowledge that this money that is coming into the political system is a threat to our ability of this institution to

do the job that the people expected to do and what the constitution requires us to do. i yield back. we now -- >> we now go to the gentleman who got here based on his ability as an attorney and not as a billionaire. >> thank you. when you learn that conservative groups were being targeted by the irs for discriminatory treatment, what did you do? >> when i learned of the list, in that same conversation or around that time, i also learned a couple things. one, it was being stopped. >> who told you it was being stopped? >> my deputy. >> did you investigate further? can you give me the name of a

single person involved in the original decision to target conservative groups? >> i'm not aware of those names. >> why can't you give me a name? >> when i learned it was being stopped, i was told inspector general was aware. >> is the inspector general the only person who can investigate within the irs? >> my general activist -- >> answer my question and then you can explain. is inspector general the only entity who can investigate? canm, congress investigate. >> can you investigate? when inappropriate conduct is being done on your watch within that you will not step in and stop it?

is there someone wielding a knife in the parking lot, what he called inspector general? will you wait until his investigation is over until you stop it? about theses told allegations, i was also told that they were being stopped. and despite the seriousness and potential criminality of that conduct, you do not investigate it yourself at all? >> the procedures i inherited -- >> this will go much quicker if you answer yes or no. did you do anything to verify the practices were stopped? inspector general would look into it. >> is just that you cannot say yes or or no are you are choosing not to say yes or no? did you do anything personally

to make sure that this , criminal practice was stopped? yes or no? >> i learned two things -- first, it was being stopped. >> what did you do to verify it was stopped? >> responsible deputy of the internal revenue service told me was being stopped. had no reason to believe otherwise. investigate why they were being conservative -- why conservative groups are being targeted? you got the who. but why? unders the culture such your watch that an employee felt comfortable targeting conservative groups? did you investigate that? >> from a reading of the report, i couldn't tell if it was

political motivation or if it was tone deaf and someone trying to expedite away -- >> you'd still do not know if this was political? >> i defer to the inspector general. >> your predecessor says he was not sure if it was partisan. that requires the listener to be as stupid as the speaker to utter a comment like that. he just testified. what does that mean to you? if it is not partisan, what does that mean? we will get you a copy of the transcription. how is that? do you agree that the law is irrelevant or relevant? >> it is relevant. did you refer the matter to

someone with law enforcement to investigate the jurisdiction? >> i will not speculate what is appropriate legally in this matter. i knew mr. george's operation was looking at. >> i thought it was an audit? did you referred for criminal investigation? >> i do not refer it. it was being looked into at the time. >> i want to be really clear. the only recourse you have when there is an allegation of this kind of conduct under watch, the only thing you feel comfortable doing is waiting on an inspector general to finish his or her report? tothe general practices to make sure the inspector general will look into it. >> no matter how insidious the conduct? you would wait until mr. george dishes investigation? finishes his investigation? >> i will not answer

hypotheticals. if there is an allegation that groups are being discriminated based on their political ideology, will you wait until inspector general finishes his or her report before you seek remedial action? >> when i have a fact but not all the facts, i do not know the scope. >> did you investigate the facts? did you lift a finger to identify the facts? >> inspector general would run down the facts. it would be reported back. >> let the record reflect that. >> i thank the gentleman. i will give you time to use the men's room. we will take a short recess. five minutes. five minutes and we will bring you back. when the chairman gets back, i will try to do a quick run.

[captions copyright national cable satellite corp. 2013] [captioning performed by national captioning institute] >> if the audience could take their seats.

everyone, thank you to the witnesses for their patience. the gentleman is recognized for five minutes. >> thank you. i agree with the number of my colleagues here today. the behavior of the irs has been inexcusable in regards to the situation. no group or person should be in a purposely scrutinized because of their -- it appropriately scrutinized. this is not the first time it has happened. focusing on groups because of their political beliefs was wrong.

.t is wrong with the irs did it this behavior has to stop. what i would like to focus on is how we can reform this process so that it never happens again. following up on the ranking member and representative spears line of questioning, the inspector general's report found the irs employees in cincinnati lacked knowledge of what activities are allowed by tax- exempt organizations. it explained in the report that we believe this could be due to a lack of specific guidance on how to determine the primary activity of an ir c file will one see for organization. they should have social welfare .s their primary activity

however the regulations do not define how to measure whether anial welfare is in organization's primary activity. inthe past agency had judging whether a 501(c) four has conducted an impermissible level of political activity, the irs applies a wide ranging multifactor facts and circumstances test, is that correct? i am not anall expert in 501(c) four law and the details of how individual applications are reviewed but yes. broadly, they look -- the iris looks to see if political activity is the primary activity which would disqualify entered his -- an organization from being a 501(c) four and the inquiry is done or should be factsbroadly done in the

and circumstances basis. quick someone who is an expert has explained that the facts and circumstances tested reached roughly gives discretion to the administrators and leaves any organizations with little certainty on how to conduct their activity day today. clear brighte a line test for what is permissible -- a permissible level avenue activity could be helpful to the iris specialist? >> i am going to have to preface my response by saying the secretary has delegated tax policy to the assistant secretary for tax policy. there is no question that clarity in the law and how to command it would certainly help with -- anyone who is trying to apply the law. >> has your office made that recommendation chris to mark >> one of the recommendations in this report is that the iris

worked with the department of the treasury for clarity in this area. >> i think it is imperative particularly since primary activity is not even the standard. it is according to the federal law exclusively as stated twice a of the taxur code, it is stated nowhere primary activity and that is the standard that is being used and that standard is not clearly defined. this is a major loophole that must be addressed. are you intending to revisit these regulations so that taxpayers are on notice of what legal requirements are and how auditors can enforce the rules early? >> the report makes it clear that additional guidance is necessary and we will work with

the new acting commissioner to do just that. this is very old guidance and in a complicated area. we will endeavor to divide as much clarity as possible. >> i would hope that based on what the ranking member indicated, we have had this ambiguity. tax and campaign finance experts have urged the irs and the treasury department to better define electoral advocacy beyond the ambiguous facts and circumstances test and to set clear limits for how much political advocacy is too much. the agencies have failed to respond. i hope that based on the leadership of this committee within our oversight and reform role, this is a reform policy that cannot wait.

>> we recognize the german from -- gentleman from texas. >> earlier you testified that some of the questions that were asked to these groups included a request for their list of donors area do we know what happened to those list of donors question mark -- donors? destroy the information. they were not under oath. we were there when it happened but we have to take them at their word. >> we have no conclusive evidence that someone was not trying to create an enemies list. >> that is correct.

>> let's talk about the irs procedure. the president's brother got his 501(c) four approved in a matter of days. conservative groups and possibly other groups that are waiting multiple years. are there some processes and i willres in place? start with you. >> i cannot pursuant to title 26, 61 of three make any comment. >> i am asking you about the procedures of the irs. after a certain amount of time, the computer says what happened to this? >> i do not know exactly how it works but they do have target deadlines or dates for processing these areas >> are

you aware? >> i do not know the specifics. ofre is goals for processing any sort of cases. the goals generally have been very difficult to meet. law for a while. we had a tickler system. if after a certain number of days, it flagged it. after a few more days it would flag the boss. >> i was just informed by staff that the standard is 121 days for the processing of these. unfortunately, the average over 574 days. >> when they get behind, do supervisors get noticed? are you aware of an escalation procedure? i have never managed an

organization the size of the rs. the most i have supervised is 50. ,hen somebody was screwing up it moved up the chain of command. procedure -- you familiar with procedures like that? >> i do not have detailed knowledge of this specific unit handling these cases. >> a new station obtained a directory indicating who reports to whom. there poured two different toagers and above them even different territory managers. this sounds like a reasonable and rational organization. we love our chain of command here. guess my question is how in any sort of rigid chain of command do these extraordinary

delays not move out of one department and get up to a supervisory level within that department and then on up within the chain of command to washington, dc? it seems unfathomeable that would happen. >> unfortunately ended is not just this context but if you look at the processing of four- many times because agencies are overwhelmed by the -- they fall behind. return do not file my or extension by april 15, is there any chance it will fall cracks and get ignored? -- the command

structure is the one i want to get at. shouldn't there be a command structure where this gets escalated to a level that should have been caught long before it was? >> i would say this. the report includes an important series of recommendations that speak to some of these management issues -- [inaudible] >> thank you. now recognize the gentleman from georgia for five minutes. >> thank you. i appreciate the witnesses being with us for so long.

>> it is approximately 65,000. >> this problem isolated in a cincinnati office, about how 65,000 those applications flow through this office? >> it is my understanding that all of them do. >> when we are talking about what our challenge is, it is not that it is a couple of rogue employees in one small branch. we are talking about a problem that exists.

>> the mass -- a vast majority are here. i do not envy the job that you had at all. i have a bill that moves us away from an income tax to a consumption tax. it is an awesome responsibility. it is one that i would argue that no agency ought to be entrusted with. you took on that challenge. mr. george has tell me that 100% of all these tax-exempt applications are handled in this one facility.

your response is thanks for bringing this up. there has been a lot of press on this. and a lot of moving information. i appreciate the opportunity to clarify. let me start by saying yes, i can give you assurances. 100% of these applications being processed in this office in cincinnati. where this problem was discovered and widespread. who did you contact in order to give yourself the confidence to give the chairman of the subcommittee your assurances this was not happening? >> a serious question. off the topic. you gave your assurances several times, i cannot give you an

answer to that. i have to reference more information. we are not prepared to give you an advance on that. from what research did you arrive at that conclusion? targeting and that and so they did not have to apply. there were questions being asked that those questions were within the realm of the authority of the irs. > that was my understanding. >> you made that testimony. furthering your testimony there this back-and-forth that happens.

would that still be your testimony? of back-and-ind forth that happens? >> in may 13 -- 2013, sitting here, i would have answered differently. >> that is my concern. we saw a press conference with jay carney on this issue. the reporter asked, can you categorically denied the white house had any involvement? i just feel like it is probably true. here you are giving congressional testimony. your assurance, you could have said i do not know. it is outside the purview of this hearing. you said there is absolutely no targeting. as you sit here today you would say there was targeting. this line of questioning was absolutely inappropriate at that time. with one hundred percent of these applications being approved in one office, the office that has these problems, you contacted no one there

before making these assurances not just to this congress. but to the american people. .hat is my concern whatever the truth is we will bring the truth out but we cannot bring it out if folks treat the truth and that cavalier fashion. the on the record as set -- on something like this does a great deal to undermine trust in our government. >> i appreciate your concern. i answer that question truthfully based on the information i had at the time. >> to be clear, you ask no one. the information you had was no information. goes on infice work one office in one city in cincinnati. the chain of command which runs direct you to your office, you called no one in that chain of command. you asked no one in that chain of command.

i am not saying you are lying. i am saying that you were derelict in inquiring about what the truth was. it was a straight question about 501(c) four applications. all of which are processed in cincinnati. beforee not one inquiry testifying before congress about what the truth of that is. a truth that now is not truth whatsoever. that is troubling. iq, mr. chairman. thank you, mr. chairman. >> unmade 10, of 2013, staff sent the following. quotes.a portion in " the fact that this information is now public and we have not been briefed despite my repeated requests over the many months is completely acceptable. that was from my committee staff based on the release by the irs. .f your audit information

your response was and it is one of your staff on may 10. the irs issued a press statement without our knowledge, consent, or even advance notice. are you familiar with this exchange? >> i am not. >> is a correct, though, that the irs issued a press statement without our knowledge, consent, or advance notice? >> i want to make sure we have the dates. if this is the event in which ms. lerner gave a speech and responded to a question. >> a planted question, we now know. she planted a question that she was prepared to answer and thee was a trail of that plan. >> i had no inkling that was going to occur. go pastnot want you to

the hypothetical. release of this information is not legal. it may be criminal. >> i cannot give you a definitive answer their and i can say it has never happened before. >> ok. agree to research this under your authority so that we may all now all the details without us having to go unasked for those many papers that often take a long time to count? we do have the authority to do so. >> i appreciate that. will cut short. i only have one quick question. for mr. schulman. five-year term that you received is in fact statutory.

isn't that correct? you are appointed by the president to be a non--partisan because you are a term appointee. the president and the senate come to an agreement on someone who will normally transcend their one term or always transcend one of their terms, correct? >> the requirement for your position is management skills. this is not just any political hack kind of a deal. this is one in which you are supposed to possess management administrative skills. that is how you are chosen in an agency that gets to political appointees. one who is the commissioner and the other who is the console to the commissioner. you have one lawyer and one manager. am i setting the tone correct the for the record? >> generally the goal is to have a commissioner that has a

five-year term to run the agency. >> were you selected because of your management skills? >> yes, in my opinion. >> that is what i was trying to get to for the record. we recognize the gentlelady from wyoming for five minutes. >> thank you. i want to go back to something mr. schulman said. he testified earlier that he inherited the practice of deferring to the ig for audits and investigations when problematic issues arise at the irs. did mr. schulman have the authority to change the management practices he inherited at the irs? yes or no? >> sure. >> in this circumstance, do you think he should have changed the practice is to mark of deferring to the ig and look to the targeting on his own? igi think that once in

begins work, it is important to stay clear of it. if a political appointee involves themselves in the work of an ig or in topics that the ig is looking at, they are on -- run a big risk that that will be seen as interference. that is why for many administrations for the longest time that i can recall, it has been a core principle that when an ig begins their work but we stay clear. >> what kind of activity do you think you would take to change the practice of deferring to the ig for audits and investigations? >> i would say this. by the time i learned of the fact that the ig was conducting in on it, the offending conduct we have now learned was no longer taking place, i would expect that if the ig were looking at something and he determined

there was something that was ongoing that needed quick action, that he would raise that and we would have a conversation. so as to not interfere with an ig's work or be seen to be interfering. >> it is important, you keep saying and mr. schulman kept saying that by the time you learned about it, the offending activity had finished. the offending activity is two parts. it is the abusive behavior of questions, inappropriate questions. they make us doubt whether or not that information leaked. let's leave that aside. cutoffhas determined a off date. are you here to tell us that no entity has been denied approval or denial in a timely fashion because i believe mr. george will testify that as far as he knows, people are still in limbo today. all.t at you are exactly right. the ig has made that clear.

we learned that last week. this needs to be fixed quickly and that is part of the charge. >> he is the acting director at this time. >> exec we. in spiteld expect that of the strip tony and budget cuts, that these on hundred or more potential entities would get a prompt and accurate adjudication, meaning days now that it has been years. >> i do not want to speak for him in setting a precise timeline. >> you are his boss create you speak from the president to the secretary to yourself to him. what the heck appropriate timeline should we expect when you have been drowning these people for three years or more in some cases, what is the timeline today to my if you are not accountable today, you're not ever accountable. you give us a timeline, what would be the maximum time someone should have to wait when they have waited for years?

>> as we said what we have with coming back in 30 days and implementing the report of which this is one. >> three years you wait and you are sitting in that pile after three years, is 30 days to find out what the plan is and to have you come out of that pile when other entities also involved in this category have been approved, is 30 days before a plan is submitted the reason question mark none of these new anything apparently or ask anything. why is a new one important? if you could answer and i apologize to the gentlelady. >> i will allow. i believe -- i have made a commitment and he realizes the high priority that we have

placed on this issue. i cannot give you a definitive timeline or date. i will commit to you that we will work to expedite and help him expedite these stations. >> thank you. >> thank you. i reclaim my time. i want to take issue with one thing that our esteemed ranking committee member said earlier. he said the trust in the irs has been undermined. the issue i would take with that is trust has not been eroded or undermined. it has been destroyed. that trust is gone. , the people is represent believe the federal government is out to them. when things like watergate were going on, you had a battle of titans trade you had the politically powerful going after he the politically powerful.

in this matter, you have the politically empowered going after the people who hired them. and people who do not have the weapons of the imprimatur of the federal government to turn to. you have people who are relying on trust and that trust is absolutely gone. i have no idea how we can restore the trust that has been destroyed as a result of this. the irs has let down the very people that they were employed to serve. the people think the irs has turned against them. it is on a stack of other concerns where they believe the federal government has turned against them. this is goliath against david. these are the people who hired goliath and empowered goliath.

goliath has turned against those people. it is moms and dads who are taking kids to soccer games, who want to have a political organization like a tea party. it is people who believe a are patriots and their own government is telling them, we will not allow you to exercise your patriotism in this way because we do not like your brand of patriotism. this is far worse than anything i have seen and watergate or the government has done to the government. this is the government turned against the very people who hired them, who trusted them and to have destroyed that trust. i yield back. to the gentleman

from washington. mr. hastings. >> thank you. i think the tone of this hearing is the reputation of the iris being at stake. bet may be an oxymoron, to very honest with you. in response to a question, you stated that you were not aware of the complaints of conservatives and tea party groups that received extra scrutiny from the irs until you were informed by mr. george of the inspector general. when were you informed of that audit? >> i do not recall precisely but i am prepared to -- pt >> it was the summer of 2012.

you do not see any of the letters from members of congress about this matter. >> i do not think there were many letters. >> i asked if you were aware. >> i was not aware of this. >> i do not recall seeing any news articles. >> i have no divers nations. conversations. >> when you get a letter from congress, that -- did i hear you ?orrect the >> we get a lot of letters. you asked you questions, if personally signed those letters if they are addressed to you? >> some come to me.

>> what a letter from mr. kemp get your attention? >> generally yes. >> he wrote you -- to you in june 2011 about the tea party issue. somebody sign your letters other than you? the sameas not about issue. to the records we have he sent you a letter in june 2011 regarding this issue. >> that is not my memory. is our record. when you testify in front of congress, do you have a preparation prior to testifying before congress? >> yes. >> who participates? >> it can depend on the subject matter that it was generally people in my direct office.

.> probably your top aides >> yes. >> does it change from subject to subject? >> when you testified in front of the ways and means committee, asking you the question, and you had an exchange with mr. lynch. the question was and you -- can you assure us and you told him that you could assure him that nothing was going on and you had next change with mr. lynch. do you recall that reef conversation question mark >> yes. i do not recall the exact words. >> this is what you said. the phrase that you used in response is you can give assurances that there was no targeting. that is what you said in

testimony. you said in response and you said let me answer the question. you then said and respond -- and responded, you said that the for noces and -- targeting came in conversations. who were the conversations with? >> i had -- my understanding at -- time in march of 2012 >> was there no targeting and you said in conversations, that .s what i believe i am asking you, who are those conversations with? >> when the letters came in -- >> i am talking about the testimony. >> in my mind was the letters i had received about extensive questioning. those conversations were most

likely -- my memory is not clear deputy.eputy, with his the >> who are those by name? >> i would have us likely had conversations with stephen miller. flack, the deputy at the time. those are the two with the most knowledge of tax-exempt organizations that i relied on the most. and other people on my staff is well. >> which other people? >> my chief of staff was the obvious person. >> you said this is how you do that conclusion. you prepare for these hearings. did you anticipate that question prior to this ways and means hearing? >> i did not anticipate the precise question. i familiarized myself with the letters and the questions about donors were the main things

that were on my mind. >> that means prior to that question, when you gave assurances there is no targeting, when you give assurance, that is pretty hard targeting.it no in preparation you had discussions about this and yet you answered to him and gave assurances there was no targeting. the issue that we're concerned about is you have not apologized for not stating that correctly. you said in preparation you anticipated the subject of this question. i have to say i find once again -- i will not say nonanswers or vague answers, trying to find out who did all of this is hard to come by when we get answers like this create you prepare for and then yous respond to questions here today that in conversations with feel very comfortable.

there is something missing here --mime mind and i suppose i'm sure this committee will try to find those answers. leave me in the dark on that. >> thank you. i will note that this is a committee that was told that justice did not let guns walk at the etf. sometimes it is their definitions worse the common sense real definitions. i am asking consent that the page 16 from the gao report which is entitled budget data fiscal year 2008-2 thousand 12 be placed in the record for the purpose of authenticating that mr. schulman also is unaware that the fiscal 2008 budget of 11.9 billiong to dollars and stable at 12.6

billion dollars. there are no budget cuts during that time in which you are claiming you do not have enough money to do your job. so ordered. .ow the gentleman from missouri thank mr. george for being here and thanks to your staff. they have given our committee staff several briefings now and we appreciate their work. i your office was not particularly happy about the way lois lerner at the irs essentially tried to get out ahead of your audit. she basically orchestrated a an aban and answer at meeting on friday, may 10. in your experience, have you ever seen an irs official do something like that or was that a first? >> that was a first during my tenure. picture audit was not finalized

at that point to my is that right? that is correct. there is a clearance process served that has to occur to ensure that any title 26 information is not released. that process had not been completed by then. just to play devil's advocate. you had already briefed them on your finding. what was the problem with them going public before the report was final question mark >> they are privy to all the information that we find because they had access to information under the tax code. title 26. there is a provision within the tax code in section 6103 that

provides for potentially .riminal results if you release information, sensitive return information is what they call it. taxpayer information without the approval of the taxpayer. and a lot of the reports that we issued, this report included, it contains information that violation ofen in the law had it been prematurely released. >> the white house was informed on april 24. the white house took the more responsible approach. they were waiting until your report was final. that seems much more in keeping draft inspector

general reports should be treated. let me read from our chairman. this is one of those things where it has been in a sense an open secret. you do not accuse the irs until you have had a non-artisan deep look. that is what the ig has done. that is why it exists within to find this kind of waste and fraud and abuse of power. on this rare occasion, i do agree. i am asking the witness. do you agree with the chairman 's statement? >> i am sorry. the quote.

>> " this is one of those things where it has been in a sense an open secret that you do not accuse the irs until you have had a nonpartisan deep . ok that is why the ig's exist, to find this abusive power." there has been a lot of discussion about why the white house did not come out publicly as soon as they knew about the ig report in april instead of waiting for the final ig report to be issued. i think the terrible way the>> s handled this proves the point. ,hanks to the ig's hard work we now have precisely the type of non-partisan deep look the chairman was talking about. i want to thank you for your hard work in this area. i will yield back.

in that line of questioning based on the timeline you gave us, on may 20 9, 2012, the audit briefed the ig in advance of the irs commissioner's meeting. may 30, the ig and function heads briefed the irs commissioner and the deputy commissioner, steve miller and beth tucker on the audit. specifically that criteria andeting tea party patriots other policies and issues were interviewing applications for tax exempt status. that is your note. theyyou say on may 30 is are targeting these groups. that is a confirmation. you have reached a conclusion. they are targeting using these keywords.

>> i did not type these notes up but they are accurate. >> they were delivered to us from your staff. on may 30 you briefed mr. schulman and two others. the generaled council on the same thing. the general counsel at treasury was aware that in fact these groups are being targeted in a conclusion that you made on may 30 and again briefed them on june 4. correct? thisyou also aware that conclusion had been reached by june 4? crexendo. i was not briefed. briefed on the fact of the

audit. i walked him on t the notes. the briefing was on the conclusion. that is a conclusion they were being used. >> i may have to my earlier response. made himeeting, i amde aware of the audit. i do not keep notes of those discussions. what it cal recall verbatim discussed. i may have characterized the audit that i certainly -- i did

not have findings because the audit was not concluded. i am not an rubber ig. the term finding -- remember i am not an ig. the term finding might be more technical. there was a conclusion these keywords were being used. we now understand how horrific this is on the face of it, correct? >> i would have characterized part of the audit, looking at those issues. we obviously had not concluded the audit so we did not have final determinations at that time. and again i am operating from memory here. it was a while ago and i had no idea this issue would come up in this manner. thatnot say with certainty i said to him this was definitively happening.

this is the allegation and this is what we are looking at. >> the question of who fired him, what caliber it is, whether someone was hit. , mr.ok a year. a year ago schulman was told that in fact there had been targeting. mr. schulman testified that the reason there was not further action is it was over as far as he was concerned and that although you were briefing him, they had targeted i believe mr. schulman testified effectively and i am paraphrasing, so correct me if i'm wrong. basically your reason for not doing further was although you now knew that they had inappropriately targeted people, that it was now no longer happening. is that correct? to the best of

my knowledge earlier today. when i learned, i learned the ig would be looking into it and the practice was being stopped. >> and the may 30, what i read to you about that targeting, the briefing in 2012. ms.reasoning of you and tucker occurred and you were in that meeting. >> the language you used their, there was a conclusion of targeting is not my recollection of the meeting. my recollection is they were looking into the allegations. >> thank you. >> we are here to repair the trust of the governed and repair

the public trust, we have to fix the problem. before we can fix the problem we have to define the scope and the type of problem we have. how many employees work for the irs? >> over 90,000. ?> how many work for ms. lerner >> she stated 900. i do not know the exact number but that sounds about right. rex the behavior of some of those employees has been described as inexcusable and deplorable. responsibility for that behavior of those employees? am have said before that i saddened by this event. it occurred on my watch. >> i heard that answer before. are youept --

accepting responsibility for their behavior? >> i do not accept responsibility for putting a name on a list. >> did i hear you referred to some of the behavior as gross mismanagement earlier in your testimony? >> that is correct. >> that was at the cincinnati office. >> that is correct. >> would you be referring to [inaudible] >> it extended to washington. >> realizing that you do not accept the responsibility for all the employees at the irs, do you accept the responsibility for the mismanagement that occurred at the irs? >> i am sorry that this happened. >> i understand you are sorry. can you answer that question? >> i do not know. i do not accept their

responsibility for every single action of every single employee. it did happen on my watch and i accept that. >> you mentioned before that there were lists that were used as triggers. were used as triggers to refer cases to the fraud division or to state and local governments. is that correct? ex-pat is correct. >> my constituents whose trust has been damaged in their government are asking me, were they audited because of list and can you guarantee to us today that there were practices in place and management such that none of these audits would have been triggered by a list such as we have seen the list today for your constituents? >> yes. i do not believe of it that audits were triggered. >> can you guarantee they were

not? >> i cannot. >> that concerns me. we have to fix that before we can fix the trust in the government. mr. george, you stated that there were 143 unauthorized disclosure cases that were started in the last year. >> that we looked at last year, yes trade >> you cannot comment on the particular cases but would you expect some to be confirmed leaks from the irs of confidential information? -- he past, have you ever >> i am being instructed i counsel that i cannot acknowledge the results of those investigations. >> can you acknowledge results of prior investigations am a that a lake has ever been confirmed and someone's private information has been released? >> we do not have an answer to that. need more hearings, we need more investigations. we need to get to the bottom of

this. people working for the government right now need to be fired for abusing the public trust. let's not delude ourselves. we are just treating a symptom of the disease. the disease is a bloated, abusive government that has become self-serving. we have seen that mr. schulman has stated he cannot be held responsible for 90,000 employees. i doubt any man or woman could be held responsible for a bureaucracy that is 100 years old that has that many employees. we sit here comfortably on the dais questioning three men here today. congress created this monster. we need to look inward. we have 70,000 pages of tax code. 90,000 employees that work for this bureaucracy. a lot of these -- this text code is open to interpretation. it is right -- ripe for corruption and abuse. , werder to restore trust

will have to address this issue. congress needs to take it upon itself after today to shrink the size of the irs, to simplify the tax code, and to rip restore the public trust. thank you and i yield back. >> we go to the gentlelady from new mexico. , mr. chairman. certainly the town of this hearing and a bipartisan fashion has been that any government agency targeting in any way any inappropriate investigations or information is deeply disturbing and the fact that it is the rs makes that even more troubling. i do not think that there is a member on this committee who does not also agree that we want to -- a thorough and complete investigation and we want all those held accountable and we want steps implanted there and everywhere and government to make sure that this never happens again.

i certainly want to be on the record echoing those statements and deeply troubled as well. i do want to talk about 501(c) fours. back ofort explains the .uidance -- lack of guidance one factor that led to the terrible decisions made by irs personnel. but one key reason that this problem even exists is because of the difference between the original staff -- statute and the [inaudible] issued. the original statute said they qualify only if they engage exclusively in social welfare activity. that seems clear that lyrical activities are not allowed at all. in 1959, a regulation was issued provided that entities could qualify as long as they engaged

primarily in social welfare activities. these groups now believe they can spend up to 40 -- 49% of their funds on campaign related activities. requiring organizations to be primarily engaged in social welfare activities is significantly different than requiring them to be exclusively engaged in social welfare activities. wouldn't you agree? >> yes. >> would you agree question mark >> yes. agree?d you also >> whether or not clarification is necessary. >> would you support that maybe congress should make this even clearer? it seems to me that this is issued fairly arbitrarily. >> as i said earlier, this is an area that requires additional clarity. we report recommends that

at treasury working with the irs provide that clarity. we will get to that right away working with the new acting commissioner. >> while you do that, it is now my understanding that in addition that the treasury department plans to start investigating further 501(c) fours to determine if they have spent more than that amount on political activity. if a 501(c) four violates the law and used more than 49% for political activity, will the names of those donors who s beted to those 501(c) four released? within ournot purview. it is important to reiterate that the treasury not involve itself in matters that relate to the administration of the tax code. in particular, ones that have these political overtones. createill be my office

we have committed to doing that type of examination. >> will be names -- will the names be released? >> the issue would be that the donors would be required to pay taxes. >> with the gentlelady yield -- would the gentlelady yield? >> you will note that it says contributions are not deductible. this is not the entity paying taxes. if you are declined status, some of these organizations, you have to pay corporate taxes on this as though it was income. you then could even have the offices and directors personally responsible. it is not a c3. these are c4's. wereis about if you

determined to be a 527, nothing would change. except as you said, the potential names. the difference is not a taxable event. xa appreciate that clarification. however, i am not clear that some of these organizations provide the right disclosures. clear based on the scope of this investigation that we have got clarity about whether folks are qualified as a 501(c) three or 501(c) four. as we uncover more information about those donors and the engagement of activities of these organizations, it seems to me if there are violations made, the disclosure of donors in a violation and taxes be recovered if they still apply should be done by the irs.

the gentlelady 's comments. would someone clarify the taxation policy so that can be clear. you certainly know the difference. there is obviously a huge misunderstanding as to the taxability and ramifications which you get on a 1 -- 501(c) four versus a 527. >> there is a chart that has the different taxable entities. >> 501(c) three is a big deal. cano the extent that you answer to clarify for the lady. >> certainly. a 501(c) three may do the following. they may receive tax-deductible charitable contributions. they may engage -- may not engage in political campaign intervention. they must publicly disclose the identity of their donors. disclose theot identity of their donors. .hey may engage in lobbying

it must not be substantial. they may engage in general advocacy not related to legislation or the election of candidates.

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everyone who's accountable, we held accountable. >> let's look at some of the people that maybe you are responsible for. according to the ig's testimony last week, he alerted the treasury department. have you confirmed the general counsel and deputy secretary were briefed by the inspector general in 2012? >> congress man, i think that we have made clear that the deputy secretary was aware the fact

that an audit was under way. he did not become familiar with the details until i did last tuesday. >> do you know whether or not deputy secretary neal wolin, if the advice to anyone about the investigation at that time? >> over the last few days we have made clear that there were appropriate conversations among staff where the fact of an investigation was clear and subsequently in the last few , the fat inorts them or the reports themselves were available, but there was conversation. there was no action taken by anyone in the treasury department in any way interfere with the inspector general's report. that was the number one goal. >> did the contact the irs commissioner? --kyburz ma

>> that there were conversations as appropriate for people who needed to understand there was an investigation? correct the time of the gentleman has expired. the gentleman from north carolina for five minutes. >> thank you, mr. chairman. and i thank mr. lew for being here. let me turn our attention to fsoc, because i thought that's what this hearing was about. not the internal revenue service. >> that's right. >> one of the things you all have been doing, according to your testimony is designating some financial institutions as particularly significant to the economy, which results in them being given enhanced scrutiny

and some higher standards. so you have designated some financial institutions. at the bottom of page 6 of your prepared testimony you say you have designated 8 financial market utilities. utilities are those? >> utilities like clearing houses. >> you also say that you are looking at a number of non-banks financial companies that will be designated -- what kind of institutions are those? >> congressmen, the identities of the companies has not been publicly noted. because in order to go through the process, it requires getting very confidential information

from the companies and it would be inappropriate for me to list the specific entities. used, theata is standard, is whether the failure of those companies, material distress of those companies would be a threat to u.s. financial stability. if something were to happen in a non-bank entity that could become a kind of systemic problem, and that's the way to review the structure piccata. is the interconnection between the company and the broader state of financial stability. >> which gets me to what i was trying to get to. --umber of people has raised have raised concerns that by designating these entities we somehow give the impression that they are so important that the government will not allow them to fail. how we wouldgh

make sure that does not end up happening, both statutory under dodd-frank and the process that the council is following? not atdetermination is all to create the impression that a firm might be too big to fail. it is quite the opposite. it is to ask the question of does a firm need to be regulated in a way so it will not fail and cause the kind of distress to the broader financial stability. the more likely consequence being designated would not be to get bigger. any don't think that designated firm gets any protection by being designated. with a gatt is a higher level of scrutiny and regulatory oversight by the appropriate

regulatory body. fsoc does not actually take on the regulatory function. if the vote is to designate a be-bank, there will regulatory oversight by the appropriate regulatory bodies. in many cases it will be the federal reserve board who gets -- banks over ban and and such institutions. >> would each one of those institutions have to do a living will scenario, if fsoc designated them? >> i think there's a size level that would require that, case by case determination, but i would have to get back to you on that. of your testimony, you indicate that reforms are needed in the libor system to address the reliance on voluntary self-regulated and

self-reported reference interest rates. can you tell us what kind of reforms might be in the contemplation on that front? >> briefly, if you could, mr. secretary. >> thank you, mr. chairman. these reference rates are woven into millions of financial transactions on a contractual basis. we need to have reference rates that are reliable and not subject to manipulation. not in that status, they have an alternative to go to. working with the international financial regulatory agencies and working with market participants developing an alternative is critical, because even if you don't ultimately need to move to a different reference rate, there needs to be in a reference rate available. >> the time of the gentleman has

expired. recognizederitus is for one minute to speak out of order. >> thank you. ofay the staff of the house representatives loses one of its most valuable staff members. i think we all know and love warren, and served as a deputy staff director, a very intelligent, diligent, inform the individual. him and all the valuable work on our staff both on committees and our personal staff, i would like warren to stand up and take about -- a bow. [applause] thank you. i appreciate that, mr. chairman.

>> the chair recognizes the chairman emeritus for his five minutes. >> thank you. gao and many, the press reports and articles have criticized the secrecy of the fsoc. last week there was an article in the paper rare one gentleman heading up a non-profit organization with liberal leanings said fsoc's proceedings made the politburo seem open by comparison. they treat their information as it were state secrets. not transcribed its meetings, correct? >> minutes are kept. would you commit to transcribing the meetings that the gao has recommended and releasing those transcripts with

appropriate reactions after a certain period of time as the fed does? that mr. chairman, i think fsoc deals with matters that specificom very company- proprietary information to a broad policy. parkside understand appropriate reductions. the fed redact confidential matters. where fsoc has moved in policy areas, it has tried to be very open in terms of public notice and taking comment. for example, in the area of the money market rule recommendation to the fcc, they've been open for comment. understand, but would you commit at least the following the same thing the fed does about releasing the transcripts? >> i would have to go back and look at that. >> thank you.

take a look at that is all i am asking. the fsoc does not keep transcripts. i don't even think they keep minutes of their staff meetings or subcommittee meetings. the committee meetings is where most of the work is done. would you commit to transcribing those minutes -- i mean transcribing those proceedings and keeping minutes of those meetings? awaregress man, i am not of practices where meetings like that are normally transcribed. the challenge of working in complicated areas involve many, many meetings. i'm happy to follow up with you on concerns you have. you areu know, chairman, this is one of the most important committees or councils in response to financial crisis. i think it's important from a historic basis. >> congressional staff need to draft important legislation.

there are minutes of those conversations. it's a complicated question. >> take a look at what the gao recommended. >> i will take a look. >> and secretary language that encourages transparency, and see if you cannot give us some transparency -- some assurances. >> you have been questioned about this irs thing. you now know that there was a beyond a lookout list that included tea party, patriot groups, and 912, which is glenn beck/s group. and that it was maintained since early 2010. in 2012 there was quite a bit of press reports about this. it's my understanding that in may, several people in treasury were briefed but then the chief -- as chief of staff of the white house you were briefed in june and alerted by mr. george.

>> my first conversation on this with russell george was march 15, 2013 after i became treasury secretary. >> are you aware last friday he testified that he briefed you? >> testified that he briefed in march of 2013. me.riefed >> he says tyler did -- the talk about may and june of 2012, "i alerted commissioner douglas shulman on may 30 and subsequently alerted the general counsel join forces and subsequently alerted the deputy secretary neal wolin about this matter. and then upon the assumption and into the position i mentioned it to secretary lew." >> that was march 2013. i was confirmed on february 27. it is important to note that the fact the ongoing audit was not a secret. it was publicly posted on the inspector general's website.

>> it was the subject of numerous newspaper articles. >> there was just the fact of the audit being undertaken. >> there was specific information that even democratic legislators have leaned on the administration to conduct investigations. >> the time of the gentleman has expired. the chair recognizes the gentlemen from new york. >> thank you, mr. chairman. i want to finish off where i attended on my opening statement, because we've got to make sure that we tighten up. i want to make sure that we don't lose the fact that some people abuse their tactics and status. i stated i had a specific example in mind and i talked about not only the 501 (c)(3) exemption required to be tax- exempt under section 501(c)(3) of the internal revenue code, an organization not attempt to influence legislation and may not participate in any campaign activity or against any

political candidate. 501(c)(3) is supposed to be more confined. i of a fund-raising letter from a 501(c)(3) organization. it's as a " i'm writing to ask for your help. we want to finish him off. let me explain why this is important. barack obama is president. the democrats controlled congress. your gift would allow us to show the interest nancy pelosi -- that the empress nancy pelosi has no clothing. soon barack obama will have to take a stand. your gift would help us expose the bureaucracy of barack obama. so is this ok for 501(c)(3) organization to send a fund- raising letter like this? i hope that in the face of the very real need to prevent any future overreached in targeting by the irs that we don't lose sight of the important role of the irs in answering questions like these that are also at the heart of public trust. with that i will go to the issue

at hand. i just wanted to make sure to let people know that the irs has oversight over this and it's important for all the people to make sure that once you get the 5013 c or 501(c)(4) designation, they should still oversee those organizations to make sure they don't overstep their bounds. going to fsoc and the issue and hand, as i stated in my opening, i am encouraged to hear that while you have stated that there's a need to and implement dodd-frank quickly, you also mentioned the need to look at the system as a whole. that by crafting rules that are more tailored to institutions rather than a one-size-fits-all regime. are yoursking what thoughts on bifurcating bisal 3 in order to make community banks more secure by establishing a single cap ratio applicable to community banks in order to allow them to operate more effectively for our economy?

i think that the rules that are being worked on now by the federal reserve will in all likelihood, based on public statement being made by members of the fed, reflect the differences in risk in some ways. so there are capital surcharges for very large institutions already. i don't know where they are going to set the rates, how they are going to address it. but i think there are important differences between small and large institutions. the thing we have to keep in mind is small and medium-sized banks are not without some element of systemic risk. and we are all focused on the financial crisis of 2008, and the 1980's the financial crisis was a savings and loan financial crisis. so i think we have to look at risk of not just as a question of size but as a characteristic

of the activities and exposure. we are very much aware of the fact that community banks play an important role in all of our states, in all of our communities. i think that the law reflects that. and i think the regulators are attempting -- attentive to it as they are writing their rules. it is difficult for twe to address how they will not exactly be taken into consideration, but i know there's an effort to do so. >> also, yesterday you mentioned that 3 would be a force as opposed to a ceiling. how will the implementationit pull up global standards everywhere, thereby reducing the risk that the united states faces by undercapitalized institutions around a role? >> we have made a lot of

progress since the financial crisis in terms of putting liquidation authority and resolution authority in place. there's a lot of work to be done. our financial stability is connected to the financial well- being of institutions that are regulated in other parts of the world. it has a lot to do with our ability to address some of these cross-border issues. we will not lower our standards to some other standard. we're going to have to have the world standard at a higher level. we're working in the g-20 and in other bodies to try to bring world standards up. piece of that. >> the time is expired. the gentleman from texas. >> thank you, mr. chairman. secretary lew, welcome. in your previous life as the chief of staff to the president, i'm sure you are where the president was not fond of the citizens united case. he is quoted as saying the supreme court reversed a century of law that i believe will open

the floodgates for special- interest. you may also be aware that some of the senate democratic that,s wrote in 2010 including chairman baucus and senator schumer, a call for the irs to investigate conservative 501(c)(4) organizations. at that time, did you or the president think that was a good idea, with the senators suggested, that the irs look into those organizations? >> congressman, i was not familiar with that statement at the time, so i cannot comment. greg they sent to the irs. you're not aware of that? -- it was a letter sent to the irs. >> as chief of staff, i would not get a letter. >> i think it was rarely

publicized. let me ask, had you known about the letter, would you think you and the president would think it's a good idea for members of the senate or the house to ask the irs to investigate or to audit organizations? >> opposition has and always will be that the irs has to be beyond -- my position is that the irs will always have to be beyond political approach. there can be no question of bias or political motivation. that's why we made it so acceptable that these practices happened. -- that's why we said it is so unacceptable. the question is how to fix this. we are committed to fixing this. there are legitimate questions as to who qualifies, but it has to being under a politically neutral manner. i've said that the democrats and

republicand i that before this set of facts became available. how americaay that will be watching how you handled this, because i think it will define a lot of your service in that capacity. i want to move to another question. as the secretary of treasury, you are governed by laws including a provision set forth in dodd-frank. you are also one of the three representatives on the financial stability board, which i understand is about to finalize their designation of what we [indiscernible]. given the policies that will be determined by this board versus what we will do with them, which many of us are very concerned in particular that some of our u.s. insurance companies could be disadvantaged by this designation because it would be a lot less transparent process

than what is going on in the u.s. can you comment on what you can assure us that we are not going to disadvantage domestic companies with a process that is going on that is not as transparent? correct congressman, as we go through the review of whether or not to make these determinations, we are working with all the firms and understanding will have every opportunity to comment. there will be a full visibility into what we are doing. we have worked at the international level to try and to have as much as we can common approaches. it's more complicated in an international setting, obviously. it's important that we strike the right balance of protecting the u.s. economy. sometimes that means taking actions that may be higher levels of credential concern that other countries are taking. what we are trying to do is

convince them to raise their standards, try to level the playing field, because it is in their interest and in our interest for us all to be comparable in taking steps to make sure we don't have financial crisis. the questions we're asking for these non-banking institutions get at their interconnectedness to the broader question of the financial stability. so we are not stepping into the role of being a state insurance commissioner. we are looking at whether or not there are levels of risk that aren't the designation. capitalg different requirements for the people that are inside the box versus the people outside the box will cause some competitive disadvantage, would you agree? >> i think we need to make sure we are addressing the statute's requirement that we do the review based on whether or not there's a material risk to financial stability. >> the time of the gentleman has expired. the gentleman from massachusetts.

>> thank you, mr. secretary. and thank you, mr. chairman. i want to associate my remarks with the likes of mr. meeks. the only difference this is we are willing to give you the benefit of doubt that you are willing to do the right thing, but you know the country is watching. all of us are watching. i have faith you will do the right thing as we move forward. it strikes me as not surprising that had you not fire someone, today you would be criticized for not having done so. it is interesting box of tricks to play, but i think it's worth pointing out. either way, you would use that argument. i'm not point to participate in that. i will try something else. mr. secretary, i want to talk about what fsoc does. all the money almost given out in the bailout and in difficult times has been paid back.

almost all the money. most glaring example of who has not is fannie mae and freddie mac. $187 billion of taxpayer money went to them. none of that has been technically paid back. $65 billion has been paid. another 66 is about to be paid, which would represent 76%. but that money is not allowed to go towards payment of principal. it's my understanding that treasury or fsoc could simply change the way that is accounted and allow them to pay off their debt like everyone else was allowed. diprivan, every private company was allowed to pay off their debt with interest and dividends. every penny that has been paid back, the government has made a very good profits. i am not suggesting we should not make one on fannie and freddie. i'm simply asking as you will forward to take a look within your own shop now to make sure that we allow fannie and freddie to be credited as they

pay back that they met. if that happens, it's the right thing to do. no. two, it is reality. reality is they pay back almost $130 billion of the money or about to do it. almost $130 billion of the money we have loaned them. they should get credit for at least some of that. it's my understanding that could be done internally at treasury. i would like you to get back to us. if you can, please do it. tell us what action we need to take. similar to the fha, the fha right now is probably about to have to take a draw on treasury. even though they have $30 billion sitting in the banks and no thoughtful person thinks there will have to access taxpayer money, the law requires them to do it because it's below certain percentage of the outstanding members. that's ridiculous. at the straight-a should be allowed to draw when they need the money but should not be

required to draw when they do not. should be allowed to draw. i wonder if that's a move you would like to see amended? i have one more after this, but go ahead. >> i'm happy to get back to you on both issues, congressman. treatment of fannie and freddie was set up so that all the profits go to the taxpayer until they are out of conservatorship, until they have discharged all their obligations. that is a very high priority. i'm happy to follow up with you on the other question. >> as currently done, they will not be able to get out of conservatorship because they will still owe us $187 billion at any given time. the drawdown, on the fha drawdown, i'm

happy to follow up with you. we are following prudent practices of the role to make sure fha is able to continue functioning. >> i totally agree. but it distracts us from the real discussion of fha. derivatives, i know you had a discussion on the libor issue. libor issue might involve a 500 trillion dollar market. there's an international review going on. i have read recently about another potential scandal that is interest rates and in the interest rate swaps category, another $400 trillion market that may be the exact same thing in the exact same place. , whicho $1 quadrillion is ridiculous. that is 15 zeros.

i've never used the term quadrillion in public before. i hope to never do it again. i'm not a scientist, i don't get to count molecules'. [laughter] fsocld like to know what will do about the scandals that are brewing. >> the time of the gentleman has expired. gentleman from california, mr. campbell. >> mr. chairman, thank you. i will say quadrillion just so it's a bipartisan term. secretary lew, getting back to auditrs issued, the ig's determined whether or not there was targeting and they determined there was targeting. you believe it is important to know why that targeting occurred? >> congressman, i think it's important to hold accountable everyone who is accountable. that process is under way. we have a new acting commissioner who has taken over today. that will be his first order of business to make sure we know who made what decisions, and xavier warrants' accountability.

>> should they not know why this occurred? thatct it's very important the ig's report noted there was no evidence of political pressure being brought to bear. i can tell you -- , because theary idea did not present any evidence in that report, does that lead you into conclude that there was no political involvement in the saddle? investigatorhe general did not present any evidence? >> that report came out just a week ago. there are ongoing efforts with a new commissioner coming in to take review of the personnel involved and to take any necessary action. multiple hearings underway at. of justice is

undertaking a review. there's an awful lot going on. >> including to determine white? >> their review is to determine if there was any criminal activity. >> have you asked? >> we have said it is unacceptable behavior. those who participated will be held accountable. the fact that there's no evidence of any political involvement is very important. it does not make the actions and less acceptable. >> just because there's no evidence now does not mean there's no evidence we have not found, correct? are you trying to find that evidence? if somebody robs a bank, mr. secretary, it's reasonable to conclude they did it for the money. you cannot assume they did it for the money, but it's reasonable to conclude they did it for the money. when someone target organizations entirely of one political bent, it's reasonable to conclude that it was the

reason for doing it. arisen concerns like this -- >> should you not be trying to find that out? >> the place you go is to the inspector general to do an investigation. that is what has happened. that is what is ongoing. >> so now it's out there. it's in the irs and you are the secretary of the treasury. don't you want to know why these people did this? >> congressmen, i have said many times and will repeat, i am committed, the president is committed to making sure we figure out what happened, hold people accountable and make sure it never happens again. of course i care, but i also believe it would be inappropriate to stand between it and investigator general and an investigation or to interfere with other investigations like criminal investigations. >> and be spoken to anyone in treasury or the irs about this since you found out in terms of why these people were doing this

or what they're trying to accomplish? >> congressman, i think the facts -- >> have you had any conversations like that, as a question? >> i have had many conversations about what steps we need to take. step number one was getting the resignation of the commissioner. i am going to meet after this hearing with the new commissioner. i've not had a chance this morning to do so. >> have you learned anything you can share with us perhaps about the motivation for this? >> congressman, we all have to to but look ate the facts before us. we will cooperate with the investigation, because we want to know the facts. i will not put any kind of political intervention in the review of an inspector general. we don't want political intervention now, but we need to find out whether there was political intervention then.

this is significant. >> he found no evidence of political pressure. if there becomes evident, that would be significant. but i cannot respond to evidence that is not yet been uncovered. there will be much time into figuring out what happened. >> thank you. i yield back. >> the chair recognizes the gentlelady from new york for five minutes. chairman and ranking member. and welcome, secretary lew, to the great state of new york. the residents of our state are proud of your public service and proud of you. congratulations on your appointment. >> thank you. there were aank number of regulations that we call upon the agencies to come forward with. could you bring us up-to-date on how quickly we are going to get these regulations into effect, specifically i'm interested in three areas,, the non-banks

designation, the volcker rule, and the capital rule requirements. legislatingor capital rule requirements. i think it dependent on many changing factors. the geiselomment on requirement of roughly a 3.5% which looks awaits. but also the new build and has been put in the senate with mr. would and others that require 15%? and again, congratulations on your service. >> thank you very much, congressman. in my first day as treasury secretary i have been putting an enormous amount of my time into stepping on the accelerator in the implementation. of implementation i went from my swearing in to a meeting of the financial stability oversight council and shared my first

meeting within an hour of being sworn in. i have met with -- we have had three fsoc meetings and i've met in between that with many regulators independently. is tole of the chairman keep the pressure on for action. i've made the case to them and publicly that we have to measure our progress in weeks and months and not years. we have to get to the end of implementing the regulations. it's important to stake a step back and remember one of the reasons for delay was that there was a political fight over repealing dodd-frank. we had an industry that was fighting with everything it had to slow down the implementation. i think we are beyond that. i think there's no consensus in the industry and certainly from the view of myself and other regulators that getting dodd- frank implemented is a top priority. i think that will give stability in terms of knowing what the rules of the road are. like everything else we do, it will require fine-tuning as we

go along. one of the problems we got into was between the great depression of 2008 is we took more than half a century without taking a hard look at what we had done. this will require constant attention. the financial history involved too rapidly to take 60 years off without taking a look at whether the tools we had were affected. on the non-bank rules, we hope to make a determination soon at the fsoc level. on the vocal role, we have five agencies working together trying very hard to come out with a common approach that would be the best way to have clarity in the marketplace. -- on the volcker role. on capital requirements, the fed is looking at working on finalizing regulations, from statements made by the fed members in the last weeks, i think they're working on trying to create a system that get as close as possible to meeting the concerns of small financial institutions while being able to

say we have ended the big to fail. we are encouraging them to get to a conclusion as quickly as possible. >> on the volcker rule, the institutions i have the privilege of representing have already implemented the proprietary rule. they have moved out of their major headquarters in the proprietary trading into a different organization or stop it completely. onld you speak a little more the market-making rule that they are working on, on how we maintain liquidity in the market but at the same time have financial stability and safety and soundness? many people are very concerned about getting that rule right in order to keep our competitive edge. >> it's very important to get the roll right, because what looks like the same activity may be a very different activity. if you are market makers and if need to have an inventory in order to play the role, it's

very different from taking a bet and buying with proprietary capital a stake for yourself. so the rules are going to after distinguish between the different reasons that financial institutions hold assets. they're working very hard on this. the definitions matter. the coordination amongst the agency's matter. i will be reconvening those groups to make sure all five agencies are talking to each other. >> produce stand on gse reform -- where do you stand on gse reform? [laughter] my time has expired. >> the chair would like to yield a few minutes for the witness to speak on the matter, but he will not. the chair recognizes that gentleman from new mexico for five minutes, mr. pierce. >> thank you, mr. chairman. thank you, mr. secretary, for being here. in college i had a professor of statistics who was making the

an incidentou put number of chimpanzees with their role in an infinite number of typewriters and they would eventually write the work of shakespeare. you are asking us to believe that you have an infinite number of irs agents conducting an audits andumber of product they all just happened to be conservatives. that is more preposterous than my statistics professor. got an e-maili before the story broke from a gentleman in new mexico who had been singled out andy did not know why he was singled out and there was nothing in the audit that said what it was about. but he noticed a handwritten name on the outside of the folder at the end of the interview after no significant

questions on his practices in his business was asked if he knew that name. he did not know the name at. all the way home he said, by golly i think that is the guy i went to that meeting three years ago. the tea party had not yet organized, but it was the same guy who will eventually organized the albuquerque the party. went to one meeting, wrote a check of $25. for that, three years later he is picked out, and you want us to believe there are no political overtones. you don't find any political nuances to the situation, and i find that to be an incredible situation. as we have inold, many other scandals in this administration, that the administration had no knowledge. few, fast and furious,

the administration had no knowledge. we had an american border agent killed with rifles sent illegally to mexico. crime was committed. no one has yet been held accountable. $1.5 billionook from segregated accounts. 2011. i hear you saying things like i don't want to get in the way of the investigation. the facts will come out. at what point, sir, are you going to be suspicious the facts will not come out? in 2011 jon corzine has yet to be charged. it's a crime to take out money from segregated accounts. we could take a look at the gsa conference. tapping of ap telephones. doj tapping of mr. john rosen's

telephone and his parents. they said he is a co- conspirator. the co-conspirators says guilty. i wonder what his parents were accused of. we are sitting here today understanding that this administration had no knowledge of any of these circumstances, not even of benghazi. -- i thinkit here one of my colleague said we are us to sit here and take the artful answers that you give. myself, i don't know what i'm calling to ask about is the war that thisor administration is engaged in, and driving interest rates to zero. you are decimating the people who have no financial sophistication. these are people eight times more likely to have money in

just bank accounts, the aging, the elderly. they are the people who come to my town halls and say i live my life correctly, i bought my home, i have a savings account, i was expecting that i could live on my savings and now i'm having to dip into it because i get no interest every month. this administration continues to , theits war on the poor elderly at the benefit of wall street. for thedoing so much 99%, you said, when the case is opposite. so i don't have any great impression that you are going to answer any of the questions today. i don't have any great impression that you will stop your warrant on -- war on the poor. new mexico, $31,000 is

our per capita income. i yield back. >> the time of the gentleman has expired. the gentleman from georgia, mr. scott. >> thank you very much, mr. chairman. welcome, secretary lew. good to have you. i think that you have expressed your concern over this issue, the administration's concern. we certainly look forward to you helping to move to a speedy conclusion of this irs situation, where there is no more penetrating -- for there is no more penetrating agency that penetrates into the personal lives of the american people as the irs. let me say that this concern of this investigation goes for democrats and republicans as well. this is not a democratic or republican issue. this is an american issue. and the american people are expecting us to get to the bottom of it and not politicize

it. one of the things i do want to mention to you is yesterday in the senate finance committee, former commissioner douglas shulman mentioned that he knew about this investigation, that there were facts shown to him, but he did not take that information to allow the higher- ups. a bush administration appointee. as the commissioner of 2008 untilm may of october of 2012. in getting to the facts of who knew what when, would you not think, since irs is the agency of the treasury department, that the agency

head should have brought this administration to the treasury department when he knew of it? should he have not done so? thatngressman, i think the first line of responsibility is the irs commissioner. the commissioner is in day to day contact with all the different departments of the irs. fixing anything that is wrong in the irs is a fundamental part of the irs commissioner's job, making sure the system runs well is part of his job. we're bringing in a new acting commissioner today and we are charging him with first making sure we find out who is accountable and second finding out what went wrong and third making sure anything that needs to be fixed is fixed going forward. >> the point i wanted to make is

because everybody is looking at where this goes, does it go all the way up to the president? it's very important for the record to show that this commissioner, who was the commissioner during that much of the investigation and what was going on and testified before the senate finance committee yesterday, that he did not take it to be higher-ups. about basal. >> one additional word. i did not even know there was an audit until march 15. i did not know the results until it was final. the president did not find out until the report went public. is there any sense of political involvement in any way interfering with this investigation, that would be a real problem. and it did not happen. so it's a good thing we did not know about the investigation. 3.let me ask about basal what would you say are the

likely effect that the differences of the implementation between the u.s. and other foreign jurisdictions of the derivatives credit evaluation or judgment capital requirement might have on american financial institutions and end users of these derivative products? do you share the concern of implementing basel iii requirements? >> congressman, we are concerned with other areas of implementation of dodd-frank and other financial rules that we do what we need to do to protect the u.s. economy from the kind of risk that we never want to see again but also to work with our international partners to where we can harmonize standards and reach a level so there's a competitive level playing field. we have made good progress in the g-20. we're working with our g-8 partners. i've already been in many meetings with my counterparts at finance ministry level and with

central bankers. it's going to be a complicated undertaking. we have different legal systems, different standards. the thing we have to be clear about is our first obligation is to make sure that we make the u.s. financial system sound. and then work with others to bring their standard tire. >> the time of the gentleman is expired. the gentleman from florida. >> thank you, mr. chairman. mr. secretary, how long was left on the term of the commissioner was a wreck -- whose resignation that you sought? gretzky was an acting commissioner was an acting commissioner and is a career employee, so there's not a term limit. >> you expect he would have been commissioner forever if not for this event? >> there was a limit of how long you could have the title. >> how long remains on that timetable?

>> it was coming up sometime in june. >> on the have five minutes. would have remained in the position he had with all the authority afterwards, unless he resigned, which he did. clerk i read your written testimony. it says the strength of our financial system depends on the strength of our economy. you said sequester has hurt the economy. i think everyone knows that spending more money than you make does not do anything to inspire confidence either. representative speier never balance does not do anything to inspire confidence either. in plain english, you might have recommended we try to do the budget process and not [indiscernible], and they send that message to the senate. you mentioned job creation and economic growth path to be a top priority. next to obamacare, the biggest impediment to job growth in this country seems to be over use and

overstepping of administrative rules that are killing more jobs than this administration could never begin to put in place. last year the treasury wrote a rule that would require all banking institutions to submit to them the names of all non- resident alien depositors. they said that could have an impact of over $88 billion. it the department of the treasury never did a cost- benefit analysis, which is required of every agency invites a rule with an impact of shafting the public of more than $100 million. can count on you to at least to a cost-benefit analysis before that rule takes effect. and before we add further financial harm to our country? >> congressman, i will have to get back to you on that specific rule. and i'm happy to do so. >> how long before you can get back to us, because we would like to stop this in its tracks as soon as possible?

>> in two and a half months i've been involved in a lot of different matters. i've not work on that specific matter. i will take a look at it and get back to you. >> any idea how long it? >> i will take a look at it and get back to you. >> in regards to mr. pearson's question, and mr. campbell's from california, said there's a lot you would have to look into to answer mr. campbell's question, but when the gentleman from georgia ask you, you had no hesitation in saying there was no knowledge of the talk about what was taking place. how do you make the distinction between the two dancers? >> i know when i heard about this for the first time. i did answer with great confidence on that. >> there's a pattern. everybodying, denied everything, and blame everybody until it blows over. i think that would be the proper answer to your question, mr.

pearce. my time is up. i yield back, mr. chairman. been yielded back. chair recognizes the gentlemen from texas. >> thank you, mr. chairman. i thank you and the ranking member for the hearing. thanks to the witness for appearing today. i also thank the witness for making notes of those who are victims in oklahoma. it is important that we not forget, notwithstanding all the other things on our agenda, we should remember what has happened. i assure you that at the appropriate time i will cast my to the victims in oklahoma. i would also like to remind us that dr. king called to our attention that on some questions ishave to do that which neither safe nor political or

popular. your not interceding in the audit may not have been safe, may not have been political or popular, but it was the right thing to do it. and you don't need validation when you are doing the right thing, secretary. it was the right thing to do. let us move to page 5 of your testimony or your statement that you provided. indicate under the impact of fiscal policy, "to guard against future threats to our economy and financial stability, policymakers should avoid using last-minute resolutions to fiscal policy ceiling and as debt deficit reduction as a negotiating tactic." i would like for you to

elaborate on this, because we will again confront a debt ceiling and deficit-reduction question, as you know. would you elaborate on how this adversely impact the economy, given that you have indicated that the economy needs confidence, the consumer's need confidence, businesses need confidence. would you elaborate on how this impacts the confidence factor? >> happy to, congressman. in 2011 we had a series of crisis-driven, deadline-driven negotiations that created a broad sense that there was dysfunction in our government. that undermined confidence in the business community in the united states, confidence in ratings agencies who saw a downgrade in the u.s. credit rating for the first time, because of our economic conditions but because of our political condition. i talked to people around the

world in positions of authority. it makes them very uneasy, whether they are in businesses or making economic policy decisions when the u.s. looks like it is in constant crisis. 2012,k if you look at there was some progress made. we saw less of the brinksmanship in 2012 than we did in 2011. we saw issues getting addressed and an attempt was being made to avoid having that kind of anxiety which makes it harder for businesses to invest and harder to get the economy moving. we got to stay on a path where we do our business, where congress does its business. on the debt limit, the president has made clear congress has the responsibility to raise the debt limit. every bill that we owe, whether it is interest on treasury bill or a patent for the rent in a building that we are leasing, it's an obligation of the federal government. for our entire history, the u.s.

government has paid its obligations. the way to control spending in the future and to reduce the deficit in the future is to make sensible tax-and-spend policies. it's not to say we will not pay the bills we have already obligated. that's why congress needs to pass the debt limit. >> let's move to an additional topic. you talked about how we have to concern ourselves with the ability in terms of the oversight council. i would like for you to just explain briefly how important it is to maintain fsoc, given that you have made a comment about too big to fail. help us to maybe not eliminate but help us keep taxpayers off the hook on too big to fail issues? is unique.

it has some areas of direct responsibility but mostly it is a coordinating role and it is to pull together the to act in a decisive and coordinated way. i think it is important. we have five regulators going off in five different directions and it could cause massive confusion. i think there is analytic work being done that is very helpful and i hope as chair i will play the role and help drive the process toward sensible decision-making in a timely manner. >> thank you, mr. chairman. i yield back. >> the chair recognizes the gentleman from missouri. >> thank you, mr. chairman. thank you, mr. lew. -- of the parts being in the disadvantages being in the lower part of the total ball, a lot of the questions have been asked. let me clean up some questions that was brought upn