The Annual Report of the Financial Stability Oversight Council

[Recess.] [Gavel sounds.] The Committee on Financial Services will come to order. Without objection, the chair is recognized to declare a recess of the committee at any time. Today's hearing is titled, "The Annual Report of the Financial Stability Oversight Council." Without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. I now recognize myself for a four-minute opening statement. Good morning, Treasury Secretary Bessent. Welcome. It's an honor to have you with us today to provide testimony as the chair of the Financial Stability Oversight Council. Today, we will examine recent actions taken by the FSOC and provide members the opportunity to address any questions or concerns regarding FSOC's 2025 annual report. As the 2025 annual report makes clear, economic growth is essential for financial stability. In a growing economy with rising incomes, debt burdens fall, American standards of living rise, and the financial system remains stable. It's encouraging to have financial regulators and policymakers who understand this fundamental reality and aim to foster a regulatory environment that considers how both new and existing regulations alter and impact economic growth. Committee Republicans share the commitment to promoting economic growth through the elimination of unnecessary regulatory burdens, a hallmark of the Trump administration. Since assuming the presidency just over a year ago, President Trump has built on this critical work that he achieved in his first administration to make further progress in rolling back overly burdensome regulations that stifle innovation in our economic growth. These efforts go beyond reducing just regulatory red tape. They are about fostering an environment where financial institutions can thrive and contribute to the stability and growth of our economy. I'd be remiss if I didn't remind everyone in the room today of the doom and gloom economic predictions that we heard across the aisle as the Trump administration was sworn in. In late 2024, Moody's Analytics anticipated that a Republican-controlled government would bring 3.5 percent inflation, 5 percent unemployment, a recession, and a budget deficit of 6 percent of GDP. Since then, Democrats have repeatedly and wrongfully accused Republicans of "tanking the economy." With most of the official data in the books, these warnings missed the mark by a mile. Inflation came in at nearly one percentage point lower than that forecast. The unemployment rate never increased beyond 4.5 percent. No recession materialized, and GDP is on track to have three consecutive quarters above 3 percent growth. Meanwhile, the budget deficit is on track to fall to some 5.4 percent of the GDP. These numbers speak for themselves. Under President Trump's leadership and Treasury Secretary Bessent's steady hand, the economy is back on track, reversing the damage of the previous administration. Throughout the 119th Congress, Congress and committee Republicans remain steadfast in our goal of reinvigorating the commercial banking system and make life more affordable for our American families. That commitment is why I introduced the Main Street Capital Access Act with Subcommittee of Financial Institutions Chair Andy Barr last month. Our community banking package is designed to revitalize local bank formation, right-size regulations that are intended for far larger and more complex institutions, ensure that community lenders can focus on serving our families, small businesses, and our local economies. This bill also aligns with the administration's efforts to right-size regulation and reflects the committee Republicans' dedication to ensuring that financial operations focus on safety and soundness with a tailored approach to supervisory complexity. Similarly, our bipartisan Housing for the 21st Century Act addresses housing affordability head-on by reducing the burdens that have made home and apartment construction untenable. Improving affordability requires directly expanding the housing supply. Paired with Main Street Capital Access, Americans will benefit from more homes and more affordable ways to finance them. We're grateful for your time today, Mr. Secretary. We look forward to the discussion, and I yield back the balance of my time. I now recognize the ranking member of the committee, Mrs. Waters of California, for a four-minute opening statement.

Thank you very much, Mr. Chairman. Last week, Donald Trump marked his first year in office with consumer confidence plummeting to a 12-year low. That is not a coincidence. Trump promised a so-called golden age, but apparently, he only meant one for his family and billionaire friends. Instead of helping families, Trump's trade wars are driving up the price of goods like groceries, clothing, and furniture. Small businesses and farmers feel it too, and we all know exactly who is to blame. Instead of lowering costs, Donald Trump has doubled down on chaos and cruelty while handing more power and more freedom to Wall Street. For example, instead of directing the Financial Stability Oversight Council to address threats to our economy, Mr. Secretary, it appears that using it to do the exact opposite and deregulate Wall Street. While Trump claims he wants to cap credit card interest rates, his administration has repealed rules that curb excessive credit card late fees and shuttered the Consumer Financial Protection Bureau, the very agency that returned $21 billion to Americans after they were ripped off. In fact, Trump's team has dismissed enforcement actions against predatory firms even after they admitted to defrauding consumers. Why? Could it be because they gave to Trump's campaign or bought his crypto coins? Or could it be this president is not on the side of the American consumer and never has been? It does not stop there. Right now, Trump's Justice Department is conducting a baseless criminal investigation into Jerome Powell to bully the Federal Reserve so they serve Trump's agenda instead of the American people. Since Trump returned to office, Republicans have looked the other way while consumer protections were gutted. Instead of offering solutions to help families, they have protected corporate profits. Under this administration, billionaires are winning and hard-working Americans are losing. We've seen this movie before. The same blind loyalty and deregulation led directly to the 2008 financial crisis when millions of Americans lost their jobs, their homes, and their savings, all while Wall Street walked away with bonuses. Despite repeated demands from Democrats for accountability, Republicans have refused to bring other key administration officials before Congress. That includes CFPB Acting Director Russell Vought, who must be held accountable for dismantling the CFPB. This includes FHA Director Bill Pulte, who has unlawfully installed himself and his staff on the board of Fannie and Freddie, weaponized mortgage data to try to attack Trump's political enemies, and who is incompetently pushing just plain dumb housing policies like a 50-year mortgage. Every turn, committee Democrats and I are standing up for America's consumers, defending strong safeguards, fighting corporate abuse, and the corruption of the Trump family. It's just common sense. Our economy should work for everyone, not just for Trump and that billionaire circle that he's involved with. Republicans need to stand up to Trump, defend our regulators, protect consumers, and put families ahead of Wall Street. Anything less is complicity.

The gentlewoman's time has expired.

I yield back.

I recognize the chair of our Subcommittee on Financial Institutions, Mr. Barr of Kentucky, for a one-minute opening statement.

Thank you, Mr. Chairman. Secretary Bessent, welcome back to the committee. Under your leadership, FSOC has done a terrific job eliminating unnecessary regulatory burdens and promote economic growth. Common-sense legislation like the Main Street Capital Access Act is exactly the type of pro-growth proposal to promote financial stability that FSOC highlighted in its annual report. I'm proud to sponsor the TIER Act and the Community Bank Regulatory Tailoring Act that will modernize outdated statutory thresholds that impose disproportionate regulatory burdens on our financial system. This committee, along with FSOC, can successfully support our community lenders and allow them to thrive under right-sized regulation with this legislation in place. Regulatory tailoring helps to protect the diversity of our financial system, which is itself key to promoting financial stability. I look forward to working with the Treasury Department as you implement my outbound investment legislation that the president signed into law in December. With you at the reins, FSOC has returned to its core values and away from the weaponization and disarray we experienced under the Biden administration. I yield back.

Gentleman yields back. I recognize the ranking member of our Subcommittee of Financial Institutions, Dr. Bill Foster of Illinois, for a one-minute opening statement.

Thank you, Chair Hill. Mark Twain is credited with observing that history does not repeat but often rhymes, and those of us who served on this committee during the financial crisis recognize this poem and its tragic ending. We have once again a historically unpopular president fixated on the glory of his overseas misadventures and foreign bailouts. We have once again a multi-trillion dollar asset bubble underpinned by opaque and conflicted financial mechanisms that nobody understands by design, being willfully ignored by partisan financial deregulators. And we have families all over America who, despite all the happy talk from the president, are having a hard time paying their mortgages and their monthly bills. You can hardly open any financial news source without seeing a discussion of the pending collapse of the AI circular investment bubble, and that is why we created the FSOC. And that is why last November, Democrats on this committee sent you a letter as chair of FSOC to figure out what we'll have to do when the music stops. Your response was insufficient, dismissive, and dangerous to our economy. I look forward to hearing more from our questions and yield back.

Gentleman yields back. Today, we welcome the testimony of the Honorable Scott Bessent, Secretary of the Department of Treasury and chair of the Financial Stability Oversight Council. Secretary Bessent, we thank you for taking time to join us today. You'll be recognized for five minutes to give an oral presentation of your written testimony, and without objection, your written statement will be made part of the record. Mr. Secretary, you're recognized for five minutes.

Chairman Hill, Ranking Member Waters, and members of the committee, thank you for inviting me to discuss the Financial Stability Oversight Council's 2025 annual report. This report is a culmination of extensive collaboration among FSOC members. I'd like to thank them for their hard work and dedication in advancing the president's bold vision for a better America. Since day one, President Trump has focused on building parallel prosperity, an era of economic expansion where Wall Street and Main Street can grow together. To that end, Treasury has tirelessly pursued pro-growth policies to unlock the potential available to all Americans when they are free to save, invest, build businesses, and drive their own economic destinies. The Financial Stability Oversight Council plays an important role in delivering on this agenda. Too often in the past, we have seen regulation by reflex. Rather than preempting crises, regulators have frequently reacted to them after the fact. They've played the role of a HAZMAT cleanup team instead of preventing dangerous spillovers in the first place. Regulation by reflex has led to a regulatory myopia that has undermined safety and soundness. Under President Biden, the bank regulators preoccupied themselves with reputation risk, climate-related financial risk, and other risk with no clear nexus to safety and soundness. At the same time, they centered supervision on management and other governance matters that distracted examiners and banks' risk managers from the real risk to safety and soundness. The result, predictably, was the second, third, and fourth largest bank failures in U.S. history in 2023. Besides undermining safety and soundness, regulation by reflex has driven excessive regulation. That can lead to economic stagnation, and economic stagnation is itself a grave threat to financial stability. In calibrating regulations, federal agencies must avoid the temptation to create a zero-risk financial system, which would result in what others have called the stability of the graveyard. FSOC should aim to identify vulnerabilities that could lead to systemic crises and encourage the private sector to mitigate those risks before recommending additional regulation. FSOC should also work with its members to support efforts to avoid or pare back existing regulation that stifles pro-growth lending, capital formation, and innovation. And the best way to achieve these goals is by centering economic growth and economic security at the heart of FSOC's agenda. Promoting economic growth and economic security is essential to ensuring financial stability. Economic growth strengthens household, business, and financial institution balance sheets, creating capital buffers that reduce the risk of defaults and financial stress. And economic security reinforces domestic production capacity, raising living standards while reducing vulnerability to external shocks and supply chain disruptions. FSOC's annual report prioritizes economic growth and economic security accordingly, with a specific focus on four policy areas: Treasury markets, cybersecurity, regulatory modernization, and AI. First, the council is ensuring that the U.S. Treasury market remains the deepest and most liquid in the world. The council is supporting efforts by member agencies to strengthen this market against future shocks, including through the Interagency Working Group on Treasury Market Surveillance and the Market Resilience Working Group. Ongoing monitoring and targeted reforms by individual agencies remain essential to financial stability. Second, the council is taking action to protect our financial system from increasingly sophisticated cyberattacks. Nation-state actors and criminal groups continue to target our financial institutions and infrastructure. To address this risk, the council is supporting expanded information sharing, joint monitoring, and scenario-based exercises, and it has emphasized the need for regulated firms to manage cyber risk tied to third-party service providers. Third, the council is committed to supporting efforts to modernize supervisory and regulatory frameworks for banks and credit unions. Going forward, regulation and supervision should address material risk, enhance transparency, and reduce unnecessary burdens, particularly for small and community banks. Fourth, the council is prioritizing the responsible use of artificial intelligence to strengthen financial stability. The council is working with public and private partners, including international counterparts, to enhance system resilience while closely monitoring emerging risk. I will close by highlighting our progress in enhancing the utility of our annual report. In this year's report, FSOC shifted away from its past approach where nearly every major market and financial sector was described as a financial stability vulnerability. By introducing a new structure centered on fostering economic growth and security, we're tuning out the noise to concentrate on the issues that matter most for U.S. financial stability. With this overview, I look forward to taking your questions.

Well, I thank the secretary, and we will turn to member questions, and I recognize myself for five minutes for questions. You made a persuasive case that since President Trump was sworn in, that economic growth is a cornerstone of his presidency, and you highlighted today, as you have in speeches over the year, the importance of that Wall Street's doing well, but it's Main Street's turn, and you'd like to see economic growth expanded into what I always quote from Steve Case, the rise of the rest, where we see that economic performance expand across the country. We share that commitment here on this committee by reversing elements of the regulatory framework that have sought, possibly certainly well-intentioned, the concept of too big to fail, but ended up in creating an environment over the past 15 years where community banks are too small to succeed, or maybe avoiding your term today you chose to use, the stability of the graveyard. The committee has worked together on a bipartisan basis to highlight some of the principal actions that we've considered over the past year, our Main Street Capital Access Act, which we intend to bring to the House floor. We're grateful for your undersecretary, Mr. McKernan, who last month joined us as we rolled out that package to talk about how we can collaborate. Would you take a minute and from your perspective, how do strong, well-capitalized community banks and the benefits of tailoring that are in this legislative proposal help accomplish faster economic growth and the rise of the rest?

Chairman Hill, as I've said, it's Main Street's turn, and essential for Main Street's having its turn are the small and community banks. And I would note that thanks to onerous regulation, and as you and I both say, community and small banks became too small to succeed. Tragically, more than 50 percent of our community banks have disappeared since the great financial crisis, not during, since. There have been virtually no de novo banks created, whereas before the GFC, there were more than 50 per year. And small and community banks not only are the anchor for community-based lending, but they provide the bulk of the lending for agriculture, for small real estate loans, and for small business loans. So a thriving community bank infrastructure and ecosystem is essential. I've met with more individually and in roundtables more than 200 community bankers, I've spoken at conferences with more than a thousand, and tailoring is essential. I had one banker from my home state in South Carolina with assets of about $200 million tell me that under the previous regulatory regime, she was told that she should be more like Bank of America, the second largest bank in the country. And so it is essential that we have the right tailoring, right risk levels, and right monitoring of these important institutions.

We thank you for your perspective on that, and to illustrate it in our work we've done on housing in the committee, also on a bipartisan basis, it was noted that banks under $10 billion in size, really the heart of our community banking system, several thousand banks across the country, they make 60 percent of our one-to-four family construction loans. And while banks of all sizes deliver amazing capital access in our economy, at the heart of our Main Streets, if we want more housing supply, we find that it's really that local grassroots, publicly or privately held community bank that helps lead that. You mentioned de novos, and under Chairman Barr's leadership in our subcommittee and on, again, with bipartisan support, we've enhanced in the Main Street Capital Access Act ways we think that will speed up and make easier to get both deposit insurance, raise capital, and tell the story about having more dynamic de novo bank formations that, as you say, have been so slowed by the last 15 years. Turning to digital assets, something that we've talked about quite a bit in the time remaining, can you tell me your assessment of how the regulatory process is coming for the implementation of the GENIUS Act?

The GENIUS Act was an important act, an important piece of legislation for bringing back onto into the U.S. the regulation, creation of digital assets and making the United States a national champion. The GENIUS Act and the stablecoins that will be created with that could, in fact, be an important feature of financing the U.S. government, and we are moving with deliberate speed to round out the House and the Senate's intention on that important piece of legislation.

Thank you very much, Mr. Secretary. Appreciate your work and leadership there. I now recognize the ranking member of our committee, Mrs. Waters of California, for five minutes for questions.

Thank you very much, Secretary Bessent. In the FSOC annual report, you stressed the importance of economic growth to promote financial stability. While you noted many ways you plan to deregulate Wall Street and plant the seeds for another crisis, you said little about the harms of inflation. I find this odd as the president and you have finally begun discussing in the media how the price of goods are way too high. Notably, you mentioned that tariffs may need to come down to lower costs for Americans. So I have a few questions about this. As a former hedge fund manager in 2004, and I don't want you to go into any long details about this, but did you write a letter to investors raising concerns about the impact of tariffs, writing that, quote, "tariffs are inflationary"? Did you say that at that time, yes or no?

No.

Okay, thank you. Okay, we have a New York Times article that, you know, agreed that you said that. Then last summer, when you testified before a Senate committee, you stated, and I quote, "There is no inflation. Tariffs are not being passed on to consumers." You were quite definitive and even claimed that critics had, quote, "tariff derangement syndrome." Well, those comments are at odds with the statement you made to investors that tariffs are inflationary. Again, I want to be clear, so just let me ask you, are tariffs inflationary, yes or no?

According to the San Francisco Federal Reserve, with 150 years of data, tariffs do not cause inflation.

Yes or no? Well, last November, as the Trump administration finally began to realize that affordability issues in America are not a hoax, you told Fox News that the government was going to reduce tariffs on goods like coffee and bananas, and that doing so would, quote, "bring the prices down very quickly." Mr. Secretary, why was that announcement even necessary if tariffs aren't inflationary and as you and the president like to say, are paid for by foreign countries, by the foreign country? A tariff on coffee or bananas shouldn't raise the price of either for American consumers. Well, that's the Trump logic, but that isn't reality. It did raise prices across the board, and you know it. I think you knew back in July also. The real question is, why would you even impose a tariff on a good that a country doesn't grow or make, as that would only serve to punish the American consumer? Now, as you know, this committee has taken a bipartisan approach to addressing another real affordability crisis: housing. Rents are too high, there are not enough houses. However, one clear reason that the housing crisis has grown worse is that you and the rest of the Trump administration levied tariffs on housing production goods like lumber and steel, as well as appliances.

The lumber is at a five-year low, Congresswoman.

Reclaiming my time. You don't get to talk. Reclaiming my time. Reclaiming my time. Let's just have the facts. Reclaiming my time. Thank you. However, one clear reason that the housing crisis has grown worse is that you and the rest of the Trump administration levied tariffs on housing production goods like lumber and steel, as I said, as well as appliances. These tariffs will result in half a million fewer homes built at a time when we need more homes built, not less. Trump single-handedly made housing more expensive, and once again, you know it. As Axios has reported that you were planning to lift tariffs on housing production production goods. In addition, the unlawful campaign the Trump administration is waged with ICE and border patrol, terrorizing American communities, has also harmed home construction across America. So I ask you, Secretary Bessent, will you be the voice of reason in the administration and urge Trump to stop waging a war on American consumers and on housing affordability and putting the economy at risk? Yes or no? You don't have to explain.

Representative Waters, you seem confused as to the definition of inflation and a study from Wharton University has shown that the biggest reason for housing inflation...

Reclaiming my time. Reclaiming my time. Reclaiming my time.

...was the mass unfettered immigration you let in between 10 and 20 million immigrants...

Mr. Chair, will you tell him no? And when I ask...

Time does belong to the gentlewoman from California.

...took up the housing stock of working Americans and can you maintain some level of dignity?

Gentlewoman's time has expired.

No, my time has not expired.

Your time has expired. And the gentleman...

The gentleman took up my time. Mr. I think you should recognize that, Mr. Chair.

The gentlewoman's time has expired. The gentlewoman's time has expired. The chair recognizes the vice chairman of the committee, Mr. Huizenga of Michigan.

If you want to protect him, go right ahead, but I would not expect you to do that.

Thank you, Mr. Chairman. And I will grant very briefly anytime that you feel like you need to address anything.

Again, I think the ranking member does not understand...

Mr. Secretary, I'm sorry. The gentleman will suspend. There's a parliamentary inquiry from Mr. Sherman.

Mr. Chair, will you enforce the rules of this committee so that the time belongs to the questioner and prevent filibusters from taking time away? And if those filibusters by the witness do take time away, will you allocate additional time?

I will enforce the five-minute rule.

I want my time back.

The gentleman from Michigan is recognized.

I grant briefly anything that you need to feel you need to address.

I believe the ranking member does not understand the definition of generalized inflation versus one-time price increases. I would also note that housing, especially for working Americans, a Wharton study has shown that the mass unfettered immigration adding 10 to 20 million new people demanding housing, Congresswoman, is what caused a great deal of housing inflation for working Americans. So you and the Biden administration should be ashamed.

Which is also why we are seeing rents, there was just a recent media story on this, rents are going down partially because of that enforcement. So I, Mr. Secretary, supply and demand continues to work. I've got a number of issues I got to hit very briefly here on FSOC. I need to talk then Burma and 3 percent. You talked with the chairman about regulators using tailored market approach tools. How are you ensuring that FSOC's current work... ...continues to prioritize activity-based, transparent, analytically rigorous approach grounded in cost-benefit analysis and coordination with functional regulators when evaluating potential risks in non-bank financial markets.

That is done primarily for small banks through the Office of the Comptroller of the Currency and the FDIC. And those chairs are intent on tailoring the rules for small banks so that we do not have another 50 percent decrease in Main Street lending.

All right. Thank you. You outlined as part of the four goals, protecting number two was protecting from cyber attacks. We have seen a rise in those cyber attacks and scam centers in Burma. And I applaud you and Treasury for some of your work in that, including sanctioning North Korean individuals selling weapons to the Burmese military regime, as well as the Democratic Karen Benevolent Army, a Burmese army group that has organized these scam centers. However, last week it was reported that Iran was secretly shipping vast amounts of jet fuel in Burma. And I need to move through this quickly here, but that's why last year I introduced a bipartisan legislation that would specifically require the President to determine whether to impose stronger blocking sanctions on Myanmar Oil and Gas, Myanmar Economic Bank, and foreign persons operating in the jet fuel sector of the Burmese economy. I read recently that Treasury responded to Reuters' report by noting that Iran's quest for "new markets" is a sign that President Trump's policies are working, which I would agree. I'm also aware that Burma's military leaders have attempted to gain favor with the President, especially when it comes to lowering tariffs levied on his country. This is something that simply cannot happen. I represent a significant Rohingya population and know that the active bombing that is going on is unacceptable. And I believe we must continue to impose strict sanctions on the Burmese military rulers. What tools can Treasury use to punish both Iran and Burma for violating both U.S. and other Western country sanctions?

With respect to Iran, President Trump, upon entering office, instructed U.S. Treasury to implement a maximum pressure campaign. And we saw the fruits of that campaign in December as the Iranian economy has collapsed. We had a large bank collapse there. The central bank was forced to bail it out, created inflation, and the Iranian, the brave Iranian people have taken to the streets. We continuously monitor trade between two countries like that. The good news would be Iran has a significant shortage of dollars to buy whether it is weapons or goods for the people or to pad the Swiss bank accounts of the Iranian regime.

We've got to keep the pressure up on Iran, but also that pressure on the Burmese junta, please. Lastly, I'd be remiss if I did not thank you in public for your discussion of a desire to lower the deficits to 3 percent of the GDP. I've introduced, along with 14 of my colleagues from the bipartisan Fiscal Forum that I chair with Congressman Scott Peters out of California, that urges the House to achieve this 3 percent goal by 2030. A tangible, achievable goal that is desperately needed, and we're building consensus here in the House. I know you and the administration take the ticking debt bomb seriously, and I hope to continue this conversation with you. I don't know if you can in 10 seconds address...

I look forward to working with you on that. And I would note that the deficit to GDP calendar year 2024, 7 percent, highest not at war, not in recession. Calendar 2025, down to 5.4 percent.

Gentleman's time has expired. Thank you. Chair recognizes the gentleman from California, our ranking member of our Capital Markets Subcommittee, Mr. Sherman. You're recognized for five minutes.

I want to agree with the gentleman from Michigan that we need to impose those sanctions on the Myanmar regime and protect, of course, the Rohingya minority to the extent we can. FSOC has to define what is systemic. I for one think that we shouldn't be focusing on the assets, but rather the liabilities. We didn't have a problem in 2008 because the banks had too many assets. We had a problem because they had too many liabilities. So I don't see how most...

Congressman, that's incorrect. Ben Bernanke, then Fed Chair, said, "Could you please tell me what the assets are?"

I'm going to reclaim my time. Regardless of that, I'm going to ask you whether you're not going to ask you to agree with me, I'm going to ask you to agree with your predecessor, Secretary Mnuchin. During the first Trump administration, Secretary Mnuchin promulgated interpretive guidance that prioritized an activities-based approach to systemic risk regulation over an entity approach. Secretary Bessent, you have indicated that you want to kick off a review of FSOC's activities and processes. The FSOC Improvement Act, led by my colleague Dr. Foster, which I've co-sponsored as you know, would codify an activities-based approach to systemic risk regulation. Does the FSOC plan to revert to the 2019 guidance of the first Trump administration regarding the definition of a SIFI?

Yes, we prefer an activities-based approach rather than an institutional-based approach.

Thank you. I want to pick up on the ranking member's comments about whether tariffs cause inflation. You know, economists can say when the price of something goes up by 20 percent, that isn't inflation. It's a one-time price increase. But out in my district, when the price of something goes up by 20 percent, we call that unaffordability. And to say it's not inflation is sophistry. I'll point out that every time Democrats had environmental regulations that increased a company's cost, people in this room said, "That's going to cause inflation." Well, tariffs clearly have to be paid by companies, and if environmental costs are passed through, you can be sure tariffs are passed through. The ranking member asked the question, why a tariff on coffee and bananas? I think the answer is obvious: to make our tax system more regressive. To pay for the big, bad, beautiful bills, cuts in taxes for billionaires and to fund ICE. I used to head the largest sales tax agency in this country, and we knew the sales tax was regressive, but we knew it would be even more regressive if we imposed sales taxes on food. And that is what you do with a tariff on bananas and coffee. Mr. Secretary, we lived through the bailouts of 2008 when powerful men lose money, they now want a government bailout. Does the Treasury Department or the various components of the FOMC have the authority to bailout Bitcoin?

Could you please elaborate? What exactly does bailout Bitcoin mean?

Okay, could you instruct the banks of this country to buy Bitcoin, or change banking regulations so that they are encouraged to do so in terms of the reserves that they're otherwise required to have?

Again, within the context of asset diversification within banks, they could hold many assets.

They can, and there are different... but do you have the authority to order banks to buy Bitcoin, or to invest U.S. tax dollars in Bitcoin or Trump Coin?

I am Secretary of the Treasury. I do not have the authority to do that. And as Chair of FSOC, I do not have that authority.

So we're not going to see our tax dollars invested in crypto assets.

Why would a private bank be your tax dollars, Congressman?

Excuse me, I'm now asking about the money of our taxpayers, which you manage as Secretary of the Treasury. Is it going to be deployed into crypto assets?

We are retaining seized Bitcoin.

That's not exactly taxpayer money. You collect a lot of taxes this month...

No, that is an asset of the U.S. government.

It's an asset of the U.S. government. Are you going to invest...

And I will point out...

Mr. Secretary, reclaiming my time. Are you going to invest...

Gentleman from California.

...the assets seizure, that $1 billion of Bitcoin was seized, $500 million was retained, and that $500 million has become over $15 billion.

Gentleman's time has expired. The gentleman from Oklahoma, the chair of our Monetary Policy Task Force, Mr. Lucas. You're recognized for five minutes.

Thank you, Mr. Chairman. And thank you, Secretary, for being here today. You've said that the current deposit insurance framework is a vulnerability for the banking system, that there is a competitive imbalance that favors large banks, and that this increases the risk of bank runs and erodes depositor confidence. Can you talk more about a targeted expansion of deposit insurance for non-interest-bearing transaction accounts, and would that strengthen financial stability within the system?

Congressman Lucas, thank you for that very important question because it is my belief because there is the belief that big banks, the depositors will not lose money. During a financial crisis, as we saw in 2023, assets leave small banks. And much of that is what is known as the payroll account. So I think it is very important for small banks to have one non-interest-bearing account that can have a much higher level of insurance so that they are able to retain deposits during a stress period. This is one of the reasons that we have seen assets leave small banks, is one of the reasons that we have seen 50 percent of small banks disappear.

Continue along this line of inquiry, Mr. Secretary. A robust banking system with healthy banks of all sizes reduces systematic risk across the entire system. Why is it important that Congress act now on targeted deposit insurance reform, not only for Main Street, but also our financial stability?

Again, deposit volatility, which is what you're referring to, is deposits moving during a stress time, does not benefit anyone in the long run.

And one more question on this perspective. Congress should look at giving FDIC authority to raise the coverage level for non-interest-bearing transaction accounts to an appropriate amount that is data-driven and puts small institutions on a level playing field with larger banks. How would our banking system be safer with a narrow, targeted expansion such as the one I've suggested?

Again, it would permit the small and community banks to continue competing. It would get credit to our Main Street, and it would stem deposit flight during a period of stress, which is one of the biggest threats to financial stability.

Focusing on a slightly different subject. Sometimes something I've focused on as chairman of the Task Force on Treasury and Monetary Resilience has been strengthening market stability and liquidity. We saw occasional bouts of Treasury market volatility last year. How would reforms to banking regulations like the liquidity coverage ratio and stress tests incentivize market intermediation for banks and improve market stability?

Again, Congressman, wonderful question. That it brings more of our Treasury market onshore. And as you said, there were periods of stress last year. The market successfully navigated those. At the end of January, we had the third highest volume in the Treasury market and the bid-ask spreads, very important for the financial well-being of the American people who are invested in money market funds, in bond funds, in their retirement funds, stayed right in the center line, and we are at a five-year low in bond market volatility.

Thank you, Mr. Secretary. I yield back, Mr. Chairman. Thank you.

Gentleman yields back. Chair recognizes the gentleman from New York, the ranking member of our Foreign Affairs Committee, Mr. Meeks. You're recognized for five minutes.

Thank you, Mr. Chairman. Secretary Bessent, if I'm not mistaken, you were working in the financial service industry during the late 1980s, correct?

I was. Thank you.

And I'm wondering, do you recall or are you knowledgeable of the Keating Five scandal back then?

Yes, sir. And I will point out that I was...

No, no, no. I will point out that I have limited time. I have limited time.

Mr. Secretary, it's the gentleman from New York's time. I just asked a question.

So I just want to make sure that everyone knows, who doesn't know, that the Keating Five scandal involved five U.S. senators accused of pressuring the Federal Home Loan Bank Board to expedite and give more consideration to the case of Charles Keating Jr., who ran the California-based Lincoln Savings and Loan. It led to a 14-month investigation unveiling how five U.S. senators and staff ended up with more than $1 million in contributions, four trips to the Bahamas, and all-expenses-paid stays at resort hotels. Following the scandal, the industry saw sweeping regulatory changes that was launched by then President George H.W. Bush. Now, Mr. Secretary, I'm sure you can agree conflicts of interest and improper influence by U.S. elected officials over bank regulators weaken supervisory independence and ultimately impose massive losses on consumers and taxpayers. I think that we can all agree upon that. And as we know, the basic lessons from the post-Keating reforms still apply today when the Office of the Comptroller of Currency, the OCC, is deciding to get a bank charter. I think we can stimulate that. Now, Mr. Bessent, as our nation's Treasurer, I'm sure you also know that a foreign-linked investment firm tied to the UAE, the United Arab Emirates government, quietly bought about half of the Trump family's crypto company, World Liberty Financial. And at the very same time, the President of the United States was dealing with that country on foreign policy. Now, Eric Trump, the President's son and co-founder of World Liberty Financial, said, and I quote, "I'm not going to get into who the investors are, but I've got some pretty meaningful investors," end of quote. Lack of transparency. And it didn't end there. When Trump fans bought the tokens, they thought they were getting the deal of a century. But what they didn't know was that only Trump and his sons had the sole power to decide who can sell the token and when. Today, the price of the token has fallen over 50 percent, and the Trump fans who bought the token are now begging to get out. Now, I'm not making this up. I'm not making this up. You can see it for yourself on the World Liberty Financial discussion forum yourself, Mr. Secretary. So there is no longer, this is no longer just about a shady crypto deal or a possible gift when a foreign-linked investor is putting hundreds of millions of dollars into a company controlled by the President's family and, at the very same time, this President is conducting foreign policy with that country. You know what that cause or creates? It creates a national security concern. So I'm not going to ask much of you, Mr. Secretary. I just want to know whether you will commit today to pause and heighten the scrutiny of any bank charter or licensing application at the OCC connected to the World Liberty Financial until all of these conflicts of interest and foreign influence reviews are completed and shared with the United States Congress. All I need to know is will you halt it and do a complete investigation and scrutiny of this licensing application?

Congressman...

The answer is yes or no.

No, Congressman. The OCC is an independent entity. And I would note, Congressman, that in 2006...

So I take that as a no. I take that as a no.

...you traveled to Venezuela to lobby Hugo Chavez on behalf of your donor...

I take that as a no. I take that as a no. You do not want to answer that question.

...who was sentenced to 110 years for a $7 billion...

I take that as a no. I'm asking you to do your responsibility as Secretary of the Treasury.

...Ponzi scheme. And you traveled to Venezuela in 2006...

Mr. Meeks, time has expired. You cannot erase what you did in 2006.

He's the one that went past your time, Mr. Chairman. He did not answer my question and he wouldn't pass the time. Order, Mr. Meeks. He had six seconds left to try to answer your question and the time...

It was a yes or no. It was a yes or no answer. I asked him will he, and he was yes or no.

Gentleman, the chair recognizes the gentleman, Mr. Bessent. Stop covering for the President.

Yeah, well...

Stop being his flunky. [Gavel sounds.]

Gentlemen, gentlemen.

He's talking to me, I'm responding back to him.

Tell us about your 2006 trip to Venezuela. Why don't you...

Stop covering for the President. Don't be a flunky. Work for the American people.

...tell the American people about your 2006 trip to Venezuela, Mr. Meeks.

Work for the American people. Don't be a cover-up for a mob.

Maybe you're going to go to prison like Stanford, Mr. Meeks.

As long as he talks to me, I will... Gentleman from Brooklyn is not recognized. Mr. Bessent, please. I recognize the gentleman from Texas, Mr. Sessions. You're recognized for five minutes.

Mr. Chairman, thank you very much. Secretary, welcome to the Financial Services Committee. I'm delighted that you're here. Mr. Secretary, we've talked with you about a broad range of things, not necessarily related to FSOC and your chairmanship there. But I would like to, if I can, talk with you something about the word public confidence. And the word public confidence does have a lot to do with the financial stability of the country. There are reports in social media that have shown, and I don't want to put you in a position where you cannot answer this because of anything that you've learned at Minnesota with the $9 billion worth of fraud. But there are social media accounts that show people who are at a Minneapolis airport with baggage full of up to a million dollars cash attempting to exit the country. And I have engaged several people who have been, who have worked at Treasury to ask their opinion about that. That not the relationship between how they got the money, but just that it's going out of the country and following the law. Can you tell us or give this committee your viewpoints about people not using some other system, but taking cash up to a million dollars to our airports to leave the country?

Yes. So that is a DHS TSA function. We, having learned of this, we are attempting to integrate our FinCEN better with those forms. What we are trying to do at Treasury via FinCEN is to keep money from being wired out of the country through what are called money service businesses. So we have issued a geographic targeting order bringing down the amount of reporting to $300 and also asking on the form if someone is wiring money out of the country, are you receiving public benefits?

These are all very important issues. And as you did talk about, Department of Homeland Security does have a role in this. I would suggest to you that Treasury probably has a philosophy about the role of the American dollar in world economy. The stability that we have, the use of wanting to make sure that the dollar remains that dominant use. But I would tell you that I will be very interested if you have a working group on this of us making ourselves aware because it is an issue to people who simply see social media.

We look forward to working with you on that, Congressman.

Thank you, Secretary. Mr. Secretary, as you have alluded to and as the discussion here has been about banks, community banks, the ability that they have, you recognize because you spoke directly to it about the stress that they are placed under as opposed to bigger banks. Could you please talk to us about what you believe the role is of home ownership, which is increasingly a part of the political discussion and debate and discussions for members of Congress back home, of solving our home ownership problem and interest rates as they correspond to people being able to buy their own homes?

Good. Well, thank you. And I would note that I was also a banks and financial institutions analyst for 35 years and was instrumental in working with the government to bring down American Continental and Sunbelt Savings and Loans, which were the direct beneficiaries of the Keating Five. That bringing, getting small banks lending again, we need to get them back into the mortgage market. No one knows their communities like small banks. And that having moved into the larger system, the strength and breadth of the U.S. mortgage market is choice. And we have lost the choice in the small banks. And I think we need to get them back into the housing lending business. And we are seeing, it's a tragedy, that the average first-time home buyer is now 40 years old. 40 years old.

Well, I had a discussion last night with the realtors about their importance in this process too. So I'd like to once again make sure we see community banks and realtors and home builders all have an interest in this. I want to thank the gentleman.

I thank the gentleman from Texas. Before we move on, I want to remind everyone participating today to uphold the House's rule of decorum. And I'd like to remind everybody to respect the five-minute rule. And having been a witness before Congress before in my executive branch days, it is important to note that our members can spend their five minutes and never ask a question or not. It's their five minutes. So let's try to be mutually respectful of each other. And I now recognize the gentleman from Massachusetts, the ranking member of our Digital Assets, Financial Technology and Artificial Intelligence Subcommittee, Mr. Lynch, Massachusetts, five minutes.

Thank you, Mr. Chairman. Mr. Secretary, based on early reports, and this is an analysis done by Public Citizen and subsequent news reports, when the Trump administration came into office, they immediately took steps to either halt, dismiss, or roll back over 100 enforcement actions and investigations against corporations in its first two months in office, with a very heavy concentration on financial services, consumer protection, and cryptocurrency, totaling over $3.1 billion in potential penalties avoided. Now, as a member of the Financial Services Oversight Council, is that a concern that you have raised within the council, all these immediate dismissals of cases against financial services firms?

Well, I think the Biden administration had an extinction...

Sir, please be responsive to my question.

I am trying, sir. And this back-and-forth is just eating your time. That the Biden administration had an extinction policy for crypto assets.

This is when Trump came into office. I'm going to go to the next question because you're not, your answer's not... Mr. Chairman, the answers have to be responsive if we're going to have a serious hearing here.

Questions have to be serious.

Well, those are 100 dismissals of cases that the Trump administration came in and executed in their first weeks in office, like that. All of a sudden, all these crypto cases went away. The SEC was dropping cases. The Consumer Financial Protection Bureau dropping cases. And look, you're on FSOC with all the heads of these agencies. This should be a serious question to you. Trust should be a serious question and a serious issue for the financial services industry, especially as the Secretary of the Treasury. That's an important... no, this is my time. I haven't asked you any more questions, sir.

It's the gentleman from Massachusetts. I'm trying to get to my next question. Could you speak a little louder? I can't hear you. Yeah, okay. I might, I might. Mr. Secretary, let Mr. Lynch proceed with his time. Put four seconds back on the clock, please.

Thank you, Mr. Chairman.

Yes, Mr. Lynch.

I just want to do a comparison of the FSOC reports. Let's go back to 2024 and then we'll talk about the current report. In the previous report, the members of FSOC expressed serious concerns related to potential risk to financial stability regarding the lack of explainability and high complexity of AI and the approaches that have a potential to heighten financial instability, especially in the areas of bias and discrimination in credit decisions. That was in 2024. Your report in 2025 focuses on removing regulatory impediments. So in 2024, we were concerned about consumer protections, and now under your leadership, we're concerned with eliminating regulatory impediments. The dangers, and that was a report during a time where the chairman and I were co-chairs of an AI task force. Those dangers haven't gone away. In reality, those dangers are still as severe for the American consumer, but they are absent from FSOC's report. So it's obviously you've eliminated or dropped that priority as an issue for FSOC. So can you explain the change from protecting the consumer and now eliminating regulations? ...for AI to explain why they were denied. Is that a concern? I mean, we are talking about the trust within the financial services industry.

It could be a concern, but we don't view it as a priority for financial stability.

That's the truth. That's the truth. Okay, Mr. Chairman, I yield back. Thank you.

The gentleman from Massachusetts yields back. Recognize the gentlewoman from Missouri, Ms. Wagner, who chairs our Capital Markets Subcommittee. Recognized for five minutes.

I thank you, Mr. Chairman. And Secretary Bessent, I find your answers to be quite clear, substantive, and as always, well-informed. Thank you for being here. Early, sir, in your tenure as Treasury Secretary, you said, and you touched on it here today, and I quote, "For the last four decades, Wall Street has grown wealthier than ever before, and it can continue to grow and do well. But for the next four years, it's Main Street's turn. It's Main Street's turn to hire workers. It's Main Street's turn to drive investment. And it's Main Street's turn to restore the American dream." And as chair of the Capital Markets Committee, I could not agree more, sir. For too long, outdated securities laws have limited everyday Americans' ability to invest in innovative startups. At the same time, the number of companies listed on public markets continues to shrink. And as a result, everyday Americans in Missouri's 2nd Congressional District that I have the honor to represent have fewer opportunities to invest toward major life goals, including owning a home, paying for their children's education, or securing a dignified retirement. Main Street businesses across the Midwest and other regions of our country are overlooked as venture funding and capital-raising opportunities remain largely concentrated on the coast. That is why I have made it a priority to facilitate capital formation and empower entrepreneurs and small businesses across America. Just weeks ago, Mr. Secretary, December 11 to be exact, the House passed my INVEST Act, a bipartisan package of 22 bills focused on three goals: expanding access to capital for small businesses, increasing opportunities for everyday investors, and strengthening our public markets. Capital formation is the lifeblood of American economic growth and prosperity. Our capital markets are indeed the deepest and most liquid in the world, and the INVEST Act will ensure that they remain among the greatest strengths for decades to come. I look forward to continuing to work with you and the administration to advance these priorities and unleash the power of our capital markets. Secretary Bessent, in your view, what are the largest barriers to capital formation for small business?

Congresswoman, I look forward to working with you. And I think I would bifurcate that. Most small businesses are individuals. And for many individuals, we have learned that most of them, 38 percent of Americans, do not own equities. So with the Trump accounts, which will give every child a $1,000 seed finance, every American will be invested in a low-cost index fund. Every American will have a share of our great innovative economy. For small businesses, it is often, I would say, it is a duality of regulatory and access to finance. Americans are entrepreneurial. We want to get out and form businesses. And I believe that with the confidence of being able to do that, and what President Trump's agenda has done, businesses now have tax certainty with the one big beautiful bill that 100 percent deductibility of equipment, of factories, and of structures. We have energy certainty with our energy dominance. And we have regulatory certainty as we are pulling back the regulatory morass that was highly, highly harmful to both small and large business.

Absolutely. And as global competition for capital intensifies, the United States risks falling behind if our public markets also, I must say, remain costly or inaccessible for growing companies. How important is capital formation reform, like the reforms included in the INVEST Act, again, 22 bipartisan bills that we brought to the floor with the support of 87 Democrats? How important are these reforms to maintaining U.S. economic leadership and long-term growth? Quickly, sir.

Congresswoman, they're vital. And what we have seen, as you correctly outlined, is since the early 2000s, the number of public companies available for Americans and indeed international investors to invest in has greatly diminished, and it has developed into a network of private assets.

Thank you. My time has expired. I have others that I will put forward for the record, and I yield back.

Gentlewoman yields back. Chair recognizes the gentleman from Texas, Mr. Green, who's the ranking member of our Oversight and Investigations Subcommittee. Mr. Green, you're recognized for five minutes.

Thank you, Mr. Chairman. Mr. Secretary, I ask that you recall Liberation Day, the day that President Trump announced tariffs. I ask that you recall that when he made this announcement, there was a sharp decline in the stock market. In fact, when he made the announcement, the NASDAQ experienced a 6 percent decline, the S&P 500 a decline of 11 percent. I ask that you also remember that some days later, the President announced that he was going to pause those tariffs. And when he indicated that he would pause the tariffs, the market then moved up. Do you recall these things, Mr. Secretary?

I recall them very well, Congressman.

Thank you. And I ask that you also recall, please, Mr. Secretary, that hours before the President announced the pause, he indicated by way of Truth Social, he has a more than 50 percent ownership in Truth Social, "It's a great time to buy DJT." That was his announcement on Truth Social. And in so doing, Truth Social had a value that moved up. In fact, Truth Social, which the President has a majority ownership, went up by $415 million. Now, here's what's interesting in this scenario. When he made that announcement and said, "It's a great time to buy DJT," that happens to be the symbol for his stock, DJT. I ask you kindly, and as one professional to another, Mr. Treasury Secretary, do you think that this should be investigated, the President's stock being linked to his Truth Social message and that stock having gone up by some $415 million in a single day, in a single day, and this is a stock that was doing very poorly prior to that, hadn't had a lot of success? Do you think that this should be investigated?

No, sir.

Kindly explain to me why we would not investigate the President making such an announcement as it relates to his stock and then reaping some $415 million as a potential capital?

Well, all Americans benefited from the rebound in the markets that day, and in fact, the rebounds in the market after that was the fastest in market history.

Yes, it was. But here's what's interesting about your statement. You did not note, Mr. Secretary, that DJT had probably the sharpest increase on that day, $415 million, and that the President said, "Buy DJT," and that's what happened.

I'm unfamiliar with the exact text. Did he say, "Buy DJT"?

Yes, sir. He said, "Now is a good time to buy," and have a salutation, "DJT."

Yes, sir. DJT immediately following, "Now is a good time to buy." Well, those are his initials, as you've said.

They are his initials. But it's also, do you agree that those are the symbol, that's the symbol for his stock?

I believe it is.

Okay. And do you believe that such a thing done openly and notoriously should not be investigated? Is that what you're telling the American people?

Sir, I believe that anything that is widely disseminated is widely disseminated and available to everyone.

Well, it was available to everyone, but what he said related to his stock could relate to something else, but to his stock. And here's the point, Mr. Secretary. Here's the point. I believe that any other President making this kind of move, it's almost a hustle. I don't want to say that about the President. But making this kind of move would at least be investigated. If you're going to allow the President to do this openly and notoriously, $415 million, what you're doing is giving him a license to move markets at will, make announcements, and reap benefits. He is literally hustling the United States stock market. I yield back.

Gentleman's time is yielded back. Gentleman from Kentucky, Mr. Barr, chairman of our Financial Institutions Subcommittee, you're recognized for five minutes.

Thank you, Mr. Chairman. Mr. Secretary, you came here to testify about financial stability and threats to financial stability. I think what we're learning from this hearing, Mr. Secretary, is how much Trump Derangement Syndrome is a threat to emotional stability. There's been a lot of lectures directed at you today. Would you like to clarify anything or respond in any way to any of these lectures?

I would just like to say that financial stability analysis centered on identifying vulnerabilities in financial institutions or markets that might disrupt the provision of credit or liquidity, disrupt other sectors, and lead to significant losses across the financial stability. This is what FSOC is chartered to do.

Thank you. Secretary Bessent, I'd like to applaud President Trump and the Treasury Department for announcing Trump accounts. I do believe this will kickstart the American dream for children born between 2025 and 2028 with a $1,000 investment from the U.S. Treasury. And I'm personally grateful because my daughter Virginia was born in October and will be a beneficiary of these Trump accounts. Not only will this ensure that American children born in this timeframe will participate in the deepest, most liquid capital markets in the world, but it importantly will also teach this new generation about the power of compound interest and will help them develop financial literacy skills which will make them owners and investors and will improve their financial outcomes throughout their lives. Can you touch on the impact of these Trump accounts and how it will help this new generation achieve financial independence? And as you talk about that, you know, we have a mayor of New York that espouses socialism, members of Congress who espouse socialism. How will these Trump accounts impact this new generation of Americans' view of financial independence versus socialism?

Again, history would show that people who own a piece of the action do not want to bring down the system when you are part of the system. As I said, 38 percent of Americans, American households, do not participate in the equity market. Many do, many directly, many through 401(k)s. But over time, the goal here should be to have everyone own a piece of the American economic engine. We at Treasury, working with many people, are going to work on financial literacy. This will be one of the greatest real-time experiments in history. You are bringing Wall Street to Main Street, and Wall Street will work for Main Street instead of the other way around.

Well, on behalf of my three-month-old daughter Virginia and millions of American children, thank you to you and President Trump for bringing financial independence to the American people. I agree with you that economic stagnation is itself a threat to financial stability. That's why we're pushing this Main Street Access to Capital bill, which will provide for more de novo charters of community banks, the TIER Act, the Community Bank Regulatory Tailoring Act, which would modernize these statutory thresholds to remove the static nature of the thresholds and allow for more diversity and growth in financial institutions. Can you discuss how indexing these static regulatory thresholds will allow banks of all sizes to grow and how that will in turn help with financial stability?

So, Congressman, I've said very often that under the regulatory straitjacket that emerged that pushed lending outside the traditional banking system, small banks became too small to succeed. And I think we have to fix that and tailor it to the risk for people who know their communities, who are concentrated geographically. And if you are in Iowa, you are concentrated in farming. If you are in Florida, you are likely concentrated in real estate and tourism, and we need to make adjustments.

And that will promote diversity in the financial system, which in turn will help with financial stability. Final question, Secretary Bessent. At the end of last year, President Trump signed into law the NDAA, which included my legislation which will be overseen by the Treasury Department, the Comprehensive Outbound Investment National Security Act, also known as the FIGHT CHINA Act. The COINS Act will ensure that Americans are not unknowingly funding the military-industrial complex of our adversaries by codifying and enhancing the Trump administration's existing outbound investment security program. Can you discuss the Treasury Department's new obligations under this bill and how do you intend to implement it to prevent capital flows into Chinese military-industrial complex companies?

Well, I want to thank you for this important piece of legislation. It is another arrow in our quiver. And I can tell you, as I am the lead negotiator with China on the economic front, it is very useful for me to be able to say, "Well, I am happy to refer things to the Hill."

Gentleman's time has expired.

Great to work with you on that. I yield back.

Gentleman's time has expired. I recognize the ranking member of our Housing and Insurance Subcommittee, Mr. Cleaver of Missouri. You're recognized for five minutes.

Thank you, Mr. Chairman. Unfortunately, this is an embarrassing kind of a hearing. I've been on this committee 21 years. We've had all kinds of conflict. In fact, I was in here when the Federal Reserve Chair along with the Treasury Secretary and many others came in to tell us what was going to happen with the Asian markets when the Asian markets opened after the collapse of the economics of our nation. And I've learned that you can't make honey and sting at the same time. And the question is whether we came here today to sting or whether we came here to talk about issues that are of importance to the nation. I got a little grandson. I hope, well, he was in school today, I hope he wouldn't have seen this so far. What I would like to talk about is your opinion of the dual mandate, stable prices, maximum employment. I just would like to get your philosophy on that issue. Is that, the creators of the Federal Reserve, and then the mandate, was that a mistake?

The Federal Reserve Act of 1913, which created the Fed, and then we have morphed into the dual mandate. And the dual mandate is a very delicate balance between maximizing economic growth while maintaining low levels of inflation.

Well, so then you believe in, I'm assuming, the independence of the Federal Reserve.

I believe in the independence of the Federal Reserve, but I also believe in accountability.

I mean, can you explain how you put those two together?

Sure. I would welcome, we've seen these cost overruns. The Fed, the Fed, the Fed has a, the independence of the Fed is based on its trust with the American people. And the Federal Reserve lost the trust of American people when it allowed the greatest inflation of 49 years to ravage, ravage working people in this country.

Mr. Secretary, so the people in the country, there was a poll or something? I mean, you're speaking of the American people as if there's some human being that had an opinion. I mean, is the Fed either the Federal Reserve is independent or it's not. Isn't that right? Isn't the logic right?

The Federal Reserve should be independent for monetary policy, and every other program it undertakes impinges on the monetary policy independence, whether it is cost overruns on a building, whether it is intruding in climate, whether it is offering political opinion.

Mr. Secretary, so you would, being a member of the cabinet, you would advise the President of the United States to verbally and politically interfere with the decision-making of the Federal Reserve?

Well, it is his right, just as Senator Warren's right in September of '24 to say that they shouldn't cut 50 basis points, they should cut 75 basis points. It's the right of everyone in here because, again, there is no appropriation for the Fed. The Fed has magic money and prints all its own money.

Yeah, I understand how the system is financed, the Federal Reserve. But Elizabeth Warren is not the President of the United States. And I'm sure her comment was in newspapers and on the news. I'm asking about the arguably the most influential human being on planet Earth.

Well, I will refer you to President Biden's last State of the Union where he said, "I believe the Fed is going to be cutting interest rates."

Mr. Secretary, can you tell me, please, would you advise the President to force the independent Federal Reserve to cut interest rates?

Gentleman's time has expired, and I invite the Secretary to respond to the gentleman's question in writing. Gentleman from Texas, Mr. Williams, you're recognized. Mr. Williams is chair of the House Small Business Committee. You're recognized for five minutes.

Thank you, Mr. Chairman. Mr. Secretary, thank you for being here. I want to discuss the Main Street Capital Access Act, which strengthens local bank formation and allows community financial institutions to refocus on serving their customers, supporting small businesses, and improving affordability for Americans. The one-size-fits-all regulatory requirements are particularly harmful to community banks, which often lack the large compliance staffs and resources needed to absorb broad mandates. So to preserve competition and avoid consolidation in the banking sector, regulatory requirements must be tailored to the size and risk profile of each institution. You touched a little bit on that today. So a question would be, Mr. Secretary, can you speak to the importance of tailoring and right-sizing regulations for community banks and the communities they serve? And how does a one-size-fits-all regulatory approach undermine the community-based lending model?

Again, Congressman, as I said, a banker from my home state of South Carolina with about $200 million in assets, that would be a very small bank, was told by a regulator she should run her business like Bank of America. She has three compliance officers out of 17 employees. She knows everyone in her small community in South Carolina. So it is very important that we set the correct standards for the lending risk and for the business success because our Main Streets will only succeed when these banks succeed.

Well, 99 percent of the businesses are small. They need these banks.

Yes. And I've come under fire from the Wall Street Journal for they called me a populist because I said that it's Main Street's turn. And I will note that it's called the Wall Street Journal, not the Main Street Journal.

Thank you. Two of my bills are included in our committee's Main Street Act. The first, the Merger Process Review Act, directs the Inspector General of the NCUA and federal banking agencies to examine the agencies' merger review process to evaluate delay reduction, efficiency, and transparency. The second, the Merchant Banking Modernization Act, would permit banks to hold merchant banking investments for up to 15 years, providing regulatory certainty and aligning federal investment rules with real-world timelines of small and medium-sized business projects that often take more than a decade to plan. So a question would be, Mr. Secretary, can you tell us what the benefits would be brought by greater clarity in merger review process? And next, how would allowing banks to hold merchant banking investments for longer periods contribute to growth for small and medium businesses and the wider economy?

Again, regulatory certainty for any business, as you know as an advocate for small business, is important. And for small businesses who don't have legions of consultants, legions of lawyers, the regulatory certainty is important, and the ability to grow through acquisition is also important. And we just want the regulators to put down the framework and stick to the framework, not to regulate through supervision.

Thank you for that answer. And finally, in the 2025 FSOC annual report, you noted that financial stability and economic growth are closely linked. You also observed that many financial and regulatory supervisory policies fail to consider their cumulative impact on economic growth, with new regulatory costs often evaluated in isolation. I hear this concern frequently from small businesses and financial institutions in my district in Texas, where layer after layer of regulatory burden from prior administrations led to millions of dollars and countless hours spent on compliance instead of serving customers and supporting their local communities. And they're hiring compliance officers before they hire loan officers. Again, it affects Main Street. So how do layers of regulations affect small business growth and ultimately affect economic growth?

Again, it is a great retardant for economic growth. And I believe that if we were to go back and look at what's happened, Karen Petrou, a progressive, believes that this regulation of small banks has been a real problem. And she calls the Fed the engine of inequality. And a lot of the regulation, the burdensome regulation, has come out of the Federal Reserve, but also the FDIC and the OCC. And I think removing that can again get Main Street lending going again.

Thank you. I've got 34 seconds left. Would you like to have any of that?

I would like to add that under this administration, we are pushing for the financial system to, the regulated financial system to get back on an even, safe, sound, and smart level through deregulation, but not deregulation at any cost, but deregulation that will help the American small business, the American consumer, and those who would like to become homeowners.

Thank you for watching Main Street. I yield my time back.

Gentleman yields back. Chair recognizes the ranking member of our Financial Institutions Subcommittee, Dr. Foster from Chicago. You're recognized for five minutes.

Thank you, Mr. Chair, and to our witness. I mentioned in my opening remarks our recent letter to FSOC asking them to look seriously at the risks of the deflation of the AI circular investment bubble, which is something you obviously read about every time you open any financial journal anywhere these days. I understand there was a letter sent, a similar letter sent recently by the Senate Democrats that received a similarly dismissive response, basically recognizing that, yeah, this is part of what we're supposed to be doing, but provided zero specifics on what you're actually doing. So how many people do you have that are actually assigned to looking at the risks of this circular financing, these off-balance sheet entities, the securitization, the all of the parade of horribles that wrecked our economy last time and are looking to threaten it again? So how many people are actually working on this, and when can we expect to hear what they've concluded?

Again, we are constantly evaluating...

How many people? How many people? Could you answer my question? How many people are actually working on that problem?

Congressman, it is an all-agencies effort.

No answer. Okay. Understand you're not willing to give me a number on who's actually working on it. And when do you...

I could say 2,000, but that wouldn't be correct because some people may devote an hour a day, some people may devote 80 hours a week.

Right. When can we hear something specific? When can we expect to hear something specific?

So in the interest of getting back to you and a change in tone, I am happy to send you a reply.

Okay. I would appreciate something with a lot more detail than something we got from the under assistant acting whatever it was. All right. Also, last time we spoke, I asked you a simple question that I didn't get an answer to, which is, does this administration support a strong dollar policy or a weak dollar policy? And frankly, as far as I've been able to tell, you're just all over the map on this. So what, could you answer the question just simply, do you support a strong dollar policy or weak dollar policy, and how would you score your, whichever way you're trying to go, how are you doing?

We always support a strong dollar policy.

Okay. That's interesting because, as last time we spoke, I presented a couple of graphs which presented the historic fact, interesting fact, that every time you put a Republican in charge of, you know, in the presidency, that two things have happened: that the dollar has gotten weaker and that manufacturing employment has dropped. You know, and this has happened during every Republican President in our lifetime, and the reverse has happened every Democratic President, the dollar has strengthened, actually achieved your objective instead of just talking about it. And since the time of that, actually, I think this plot here was the one we had then when the dollar was only 8 percent. I think it's down about 10 and a half percent now, so you're continuing down the traditional path.

I'm sorry, which index are you using for the dollar?

DXY year on year. And I think it's, last time I glanced at it, it was roughly 10 and a half percent down.

And you have the President on there, but under President Clinton, it would be my belief that it was Speaker Gingrich and what he did...

I was just talking about the President who has control with the Clinton administration together.

I understand.

It's Dr. Foster's time.

Yeah. So, but you agree... ...it is a historic fact that during those presidencies manufacturing employment dropped and the dollar got weaker during Republicans without exception.

I haven't seen the data so I can't agree with you.

I presented it to you on a graph. It's my understanding actually that later on in that hearing after I'd left to attend a different hearing, that you said some rather negative things about the data and that as a finance professor that you would have I think given it an F was I believe your word. And so all right, so now I'm not a finance professor, I'm a manufacturer, okay? And but I understand that the first thing, the first rule of a manufacturer is you don't piss off your customers, which seems to be something that your administration just revels in doing, internationally especially. And so I think that this is, it's easy for me to understand why manufacturing employment has continued to drop, that ever since Liberation Day we have seen a continuous decline in manufacturing employment, which was one of your number one promises.

Congressman, as a manufacturer you would know that I can't snap my fingers and create factories. So there is a building process that is well underway. I could send you the chart on the factory groundbreaking.

Right, yes, I understand. And the fact that we have been historically a low-tariff nation is I believe responsible for the really extraordinary economic growth over the last decade of the United States compared to say the EU, which was a high-tariff regime. And now we are joining the EU in going down that road.

I believe that we've exported jobs to China, so you are touching on a lot of CCP talking points.

I think I as a manufacturer who's kept jobs in the Midwest, I think I have a little more credibility than a finance...

Gentleman's time has expired. Does the gentleman want something inserted in the record? Would you like that document inserted in the record? Without objection, be included in the record. Gentleman recognized from Georgia, Mr. Loudermilk, you're recognized for five minutes. Vice Chairman of our Financial Institutions Subcommittee.

No, thank you, Mr. Chairman. Good to see you again, Mr. Secretary. Thank you for being here. But before I get to my questions, I want to build on something that Mr. Lucas had talked about. This committee held a hearing in November about deposit insurance and we had an honest conversation about the need to maintain depositor confidence, the potential costs, and unintended consequences, and how we need more data before making reforms. This issue is just too important to mess up and I hope we can continue to talk about it in a thoughtful and data-driven way. And now onto my own questions here. Secretary Bessent, the Bank Secrecy Act or BSA reporting modernization is very long overdue and is required by the Anti-Money Laundering Act of 2020, otherwise known as AMLA. Increasing these outdated BSA reporting thresholds is in my opinion a critical component of this modernization effort. The Currency Transaction Report requires banks to report cash transactions that exceed $10,000. That threshold has remained the same since 1972. This low-value threshold has in recent years led financial institutions to file over 20 million reports on their customers annually. And as I brought up during our recent hearing, $10,000 in 1972 was enough to buy two brand new Corvettes, just to give illustration of how inflation has affected these CTR filings. The vast majority of these reports are filed on law-abiding citizens conducting innocent transactions. And I agree with something that you've stated, that banks need to be focused on their BSA reporting, or they need to focus their BSA programs on real illicit finance risk, and that focus on higher-value activities would also better serve our law enforcement and national security objectives. A few weeks ago we had a markup in this committee and passed my bill, the Financial Reporting Threshold Modernization Act, that would responsibly raise the CTR and SAR thresholds while ensuring these reports are still useful for law enforcement. As part of your commitment to implement AMLA, will you use your authority to modernize and streamline the outdated reporting rules and increase the thresholds?

Yes, Congressman, we are studying this carefully. We look forward to working with you on it. The other thing that we are trying to do is to use common sense for geographical targeting, that we can lower thresholds with a what's called a geographical targeting order for areas where we see disturbing trends like the southern border or in Hennepin and Farley Counties, St. Paul-Minneapolis.

Right. And I believe under the program those exemptions exist that give flexibility. You've talked about the importance of creating an effective BSA program that allow financial institutions to focus on high-risk activities other than just focused examinations on paperwork. How can you ensure that our financial institutions can focus on real illicit finance risks and do you plan to consult them and law enforcement throughout your process?

Yes, we have done a very iterative process, especially with the small banks, and we have had numerous visits at Treasury. Our FinCEN group has been out on the road regionally asking for best practices and we are working to incorporate to get the right mix of enforcement and common sense.

Well, that's good to hear because after spending almost 30 years in the IT sector, especially with data security, I've equated to the way the system is right now as looking for a needle in a haystack where the government's default is always, well, let's just make the haystack bigger, when I believe we should make the haystack smaller so it's easier to detect the fraudulent players. Do you believe that a modernized effective BSA regime would hinder or undermine law enforcement if we were to modernize it?

Again, if it were done in a very smart way that optimizes looking for criminal activity, not at all.

And that's really the direction I think we should be going. Eliminate the noise so we can focus on where the bad players actually are. Mr. Secretary, when can Congress expect to see the Treasury's proposed changes to the BSA program?

Congressman, I will get back to you on that, but we are working with all deliberate speed.

Okay. And stand ready to help in any way that we can and we appreciate your efforts and your service. And Mr. Chairman, I yield back.

Gentleman from Georgia yields back. Chair recognizes the ranking member of the House Permanent Select Committee on Intelligence, Mr. Himes of Connecticut, you're recognized for five minutes.

Thank you, Mr. Chairman, and welcome, Mr. Secretary, over here. Good to have you with us today. Secretary, in February of last year during your tenure as acting director of the CFPB, you instructed the staff to suspend all rulemaking, litigation, communications, and enforcement actions. One of the rules that was in process at CFPB was a rule that would have capped credit card late fees at $8 for large issuers. I understand there's an agency process. Do you have a personal view as to the wisdom of an $8 cap on late fees?

I do not.

You have no view. Okay. The President recently proposed a 10 percent cap on credit card interest rates. That's caused a certain amount of interest in this institution because presumably it would require legal action. So as Treasury Secretary, what are the plus and minuses of that proposal? Do you have a personal view on the wisdom of that proposal?

The President is interested in affordability for the American people and I think his view is that banks have done very well and that by capping the rate for one year, it would give the American people the chance to recover from the horrible Biden inflation of 22 percent.

We were both in the finance business for a long time. Is there any possibility, any risk that such a cap would actually have a pretty restrictive effect on the availability of credit, especially to subprime borrowers?

Again, I think that would be very important to examine as it's being put in. But Congressman, what we've seen over time is credit cards used to compete on what was known as APR, the financing rate, and now they compete on rewards. And what we have seen is the APR, as you said, the subprime borrowers are paying higher APR and the upper-end borrowers are getting more rewards. So maybe there is a calculus here on how to diminish the rewards and cut the APR.

When you were asked a similar series of questions, you gave a similarly careful answer, but you said that there were bad actors in the, I think you were referring to credit card companies. Who are those bad actors?

I am not going to name them.

So you'll tell us that they exist, but you won't tell the Congress who they are so that we might undertake some oversight?

I think you have very large investigative committees.

Okay. Let me shift gears here. So many, many years ago working with my then colleagues John Carney and John Delaney, we put together a proposal for the removal from conservatorship of the GSEs. Last fall, as you'll undoubtedly recall, there was a roundtable held at Treasury around an issue that is really critical, which is housing and its affordability and the fact that we need to build a whole lot more housing. The conclusion from that roundtable as I understood it was really one theme, which is do no harm. Over the past year, the President and Director Polte, however, have tweeted a host of utterly chaotic proposals for the GSEs, including an immediate IPO, 50-year mortgages, ending special purpose credit programs, rapidly exiting the conservatorship, stripping away the GSEs' housing goals. I could go on and on and on. Mr. Polte seems to have appointed himself the indictor-inquisitor of people like Letitia James and Adam Schiff. And apart from making a political point here, I'm trying to point out that we have a crisis in this country around housing affordability. The HUD Secretary who was in here the other day using terms like, "I'm going to encourage the building of additional housing." So my question for you in my final minute, what should we be doing right now with respect to the GSEs so that the GSEs can create a lot less risk for the American people than they represent in the conservatorship, but so that they are a vibrant part of an expanding housing growth sector?

Good to know, Congressman. I would point out that the market is the ultimate arbiter and the spread between mortgages and Treasuries, despite your statement, is the lowest that it's been in many, many years.

Yeah, but that's because the mortgages are effectively guaranteed by the federal government. That's not surprising, that's trivial. But my question is what should we be doing right now?

But the spread is lower than it was this time last year and it was guaranteed last year.

Let me repeat my question, Mr. Secretary. You're an expert in the field. What should we be doing right now to assist in the production of additional housing?

That it is a very complicated question, but the most important thing that has happened is we now see mortgages touch a three-year low in January. So I think getting down the payments and again moving toward Fannie and Freddie eventually leaving conservatorship and our North Star has been that the spreads cannot widen in any transition.

Gentleman's time has expired. Thank the gentleman from Connecticut. Gentleman from Ohio, Mr. Davidson, who chairs our National Security Subcommittee, you're recognized for five minutes.

Thank you, Mr. Chairman. Mr. Secretary, thank you so much for your leadership at Treasury. Like the markets, I'm comforted and reassured by your leadership there. So thank you and I hope you keep continuing the excellence that you've delivered for this first year in the job. You know, the Export-Import Bank has played an increasingly important role in strengthening U.S. supply chains and certainly doing that has been a big focus of this administration with a whole host of policies. Given China's dominant position in many critical mineral supply chains and the bank's expanding use of financing tools to address these vulnerabilities, does the Export-Import Bank need additional capital or authorities to scale its support for supply chain resilience?

I believe that John DeCanovic would come to you. He is doing a fantastic job as the EXIM Bank is overall and it is the linchpin toward our move toward regaining our sovereignty with not only critical minerals but will be semiconductors, medicines, steel. So anytime EXIM Bank comes forward and asks for more money for national security, I cannot stress that enough. At FSOC we are talking about economic security and national security are the same.

Yeah, thank you for that and we'll be meeting this week frankly to talk about just that. So we need to reauthorize it and I think that's things that we want to take into consideration, what additional capital, what additional authority do they need. And that leads into the Defense Production Act. In the most recent NDAA, certain Defense Production Act authorities were shifted to the Department of Defense. Given that DPA authorities have historically been housed at Treasury to address supply chain vulnerabilities across the entire economy and not just defense needs, should the primary DPA authorities remain within Treasury to make sure we get a whole-of-economy approach?

Well, we are working well with DOD and I can tell you that the defense priorities are the same across the economy and it's really with it starts with critical minerals and I believe DOD is leading that along with EXIM Bank.

Thank you so much and as we work to reauthorize that and modernize it, this will be the first modernization since, you know, since COVID. And we've seen the expanding use and how the administration's made such a focus on our trade policy and reshoring. So I think the debate and reauthorization, modernization of Defense Production Act I think brings coherence to what has been a major focal point for the administration. So thanks for your leadership there. You know, lastly as Mr. Foster was trying to tout the benefits of communist money, I appreciate you calling him out on that and rejecting it. And frankly during the Biden administration, the Federal Reserve posted positions, they were literally recruiting developers to develop a central bank digital currency, including, you know, a quote "senior crypto architect" role dedicated to CBDC development. Are you aware of any ongoing government or Federal Reserve efforts to develop a U.S. central bank digital currency?

Within the administration, absolutely not. President Trump has made it clear that a central bank digital currency is anathema to the creation of the U.S. as a digital powerhouse. I can't speak for what goes on at the Fed, but I would assume that they would not be part of that either.

Yeah, I hope so because, you know, not only has the President been clear on that, he issued an executive order on it and said that we will not develop a central bank digital currency. And of course that applies to the whole executive branch. Does that mean it applies to the Federal Reserve?

Again, I would say that the Federal Reserve has been very cooperative in terms of the regulation and they're a bit of forward-thinking with the Genius Act, what's happening with stablecoins, how that fits within the financial and the payment system.

Yeah, and I think that approach clearly contrasts with what really China has been working on as essentially managed basically programmable money by the federal government. And frankly they're working on it with the Bank of International Settlement, with the European Central Bank, the Bank of England, Mark Carney seems to be a fan of it and they're all collaborating to basically develop communist money and impose it on their populations. And it seems like you have a different hope for the future. So as you lay that out, would love to work with you on the future of money. I really think it's going to shape the future of Western civilization.

I couldn't agree more with you, Congressman, and it's moving fast and the U.S. has to keep the lead.

All right. Thank you and I yield back.

Gentleman yields back. Chair recognizes the gentlewoman from Ohio, Mrs. Beatty, who is the ranking member of our National Security Subcommittee.

Thank you. Thank you, Mr. Chairman, ranking member, and to the witness. First, let me start by saying that I am certainly concerned about the direction of this country, this Treasury, this administration, and this President. I believe that our democracy is under attack as well as CFPB, the Federal Reserve, CDFIs, HUD, and the list goes on and on and on. So I'd like to start with a question on community development financial institutions or CDFIs as we refer to them, which you've played a key role in economic development. As a matter of fact, in your one-page testimony, you mention economic development or growth or security almost a dozen times. You also have stated promoting economic growth and economic security is essential to ensuring financial stability. Economic growth strengthens housing, business, financial institutions, so forth and so forth. Nationwide, CDFIs finance more than 45,000 affordable homes. However, applications for CDFI fund programs have been pending for almost 12 months or more and except for some CDFI funds for administrative costs, none of the FY 25 program funds have been allocated. Last fall, CDFI fund issued a supplemental application to CDFIs to ensure that they were in compliance with the executive orders issued by the administration, but funds still have not been dispersed. Now, my question to you, are there plans to place in place to release moneys to CDFIs so they can continue to finance affordable housing projects? That's a yes or no. If yes, when? If no, why not?

Treasury's been working to implement the CDFI funds programs as required by law. Upon apportionment of appropriated funds, Treasury will be...

Is this going to be a yes or no? Mr. Secretary. No, no, no, no. I have, I'm going to abide by the Chairman's rules, but I have some rules. You can say yes or no and then if you say yes, you may continue to give that support. If it's a no, then you tell me why not. Now we need to be clear. Yes, let's start with the yes or no. I'm trying to be respectful, but you're not going to, you're not going to do what you want to do on my time. Yes, or no, or you can say I'm not going to answer it. Now move on.

Number three.

Okay, so let the record show that he refuses to answer a question. No, no, no, no, no. No, we're not going to do that with me. We are not going to do that with me.

It's the gentlewoman's time from Ohio.

Wait, now, you opted for number three, so you get to hear my wrath that you refuse to answer a question under your authority and what this administration and yet you've talked about the value of housing and you're not releasing the funds and I want the record to be clear on that. So let me move on. Mr. Secretary, I've asked you as your predecessors, Democrats or Republicans, Jack Lew, Mnuchin, Janet Yellen, and you a year ago about putting Harriet Tubman on the $20 bill. We started this process in 2020. At that time, Jack Lew said it would take four years. I sent you a letter. Do you know what your response was to me?

I haven't seen the letter, ma'am.

Well, you answered the letter. So now I was given a chance to help you. You, you responded to my letter just recently because you know I drilled you on this. But now you responded to tell me in a few words, it's a complex process. So that's not really an answer. We know it's a complex process. Your Republican predecessor said the same thing, but he went on to support it. So it was supported by three people before you. It was scheduled for 2020. Then it got backlogged because it's a complex process to 2028. The last Republican said we would be on target to do this. So now, my question to you is why is it not on target and why are you not engaged in this process? Part one. Part two, do you know who is over the department or the Bureau of Engraving and Printing? Do you know who that person is?

Sorry?

Do you know who is over the Bureau of Engraving and Printing?

I am.

You run it? You run it? Be careful now. Do you run the...

Gentlelady's time has expired.

Then let me ask him to put in writing because he doesn't run it. It's appointed by him and it's Patricia Collins. So let the record show that he was incompetent in answering...

Gentlelady's time has expired and I invite the Secretary to respond to your detailed question about that you proposed on the bill in writing. And I now call on the gentleman from Tennessee, Mr. Rose, you're recognized for five minutes.

Thank you, Chairman Hill, and thank you, Ranking Member Waters, for holding this important hearing, and thank you, Secretary Bessent, for taking time from your schedule to be with us here today. If you would like, if you'd like to take a moment to address any of the issues that were just on the table.

There are numerous incidents with counterfeit bills and we are revamping the 50, which is the most counterfeited bill first. The Congresswoman does not seem to have an interest in safety and security of American money.

Thank you, Mr. Secretary. Secretary Bessent, I really enjoyed reading your recent Wall Street Journal op-ed with my friend Senator Bill Hagerty about strengthening Main Street banks. You make a compelling case that the current FDIC insurance limits contribute to an uneven playing field where deposits flow toward the largest institutions in times of stress. Could you elaborate on how raising deposit insurance coverage would help restore confidence in community and mid-sized banks, particularly in places like my home state of Tennessee, and ensure small businesses can keep their payroll and operations anchored in their local banks?

Again, Congressman, what happens during a stress period, the owners of the capital rightly move it to where they believe their deposits are insured. There is the belief that large institutions have a special exemption called moral hazard and I think by increasing the deposit accounts, especially for payroll accounts, that those deposits will not be forced to flee. When a local businessman calls up and says, "I have $2, $5, $7 million in your bank, I've known you, we've banked here for 50 or 100 years, but we're going to have to move," they usually, many times they don't come back.

Thank you, and I share that view. Secretary Bessent, do you believe that raising deposit insurance limits would directly translate into more lending capacity for small businesses and farms that rely on community banks, particularly in rural communities like those that I represent across Middle and East Tennessee?

Congressman Rose, in a fractional banking system, deposits finance lending. When deposits flow out, the ability to have capital to lend is greatly diminished.

Thank you, and again share that view. Mr. Secretary, the FSOC annual report highlights the Terrorism Risk Insurance Program and underscores that small insurers are significant participants in the terrorism risk market with their market share stable since 2017. In light of that, and given that the Terrorism Risk Insurance Act backstop has never been triggered in more than 20 years, do you see any clear evidence today of market failure or a pressing need for federal intervention that would justify continuing a permanent federal backstop at current levels in this market, rather than beginning a responsible transition to a more private terrorism insurance system?

Congressman, I have no data so I have no opinion, but I will get back to you on that.

Thank you, I'd appreciate. And how is, how does Treasury assess, if you could add to this or you can answer it now, taxpayer risk under TRIA today and do you believe that risk profile is consistent with what Congress originally envisioned as a temporary federal program?

I used to be an insurance analyst, but I haven't seen the actuarial table so I'm not going to comment.

Thank you. I was proud to vote with President Trump's one big beautiful bill and help create Trump accounts, which give kids a real foundation to build savings and wealth from day one. These accounts are a great way to help families in Tennessee and across the country start planning for their children's future. Can you update us on how implementation of the Trump accounts is going so far, whether Treasury has the resources it needs to stand this program up effectively, and whether credit unions and small community financial institutions will be allowed to participate in offering these accounts?

So I'll work backwards. Initially there will be one master custodian for the accounts. So initially the small banks will not be able to participate. Eventually the holders of the accounts will be able to migrate out to designated institutions. The uptake is going quite well. We had a big event this week to roll out the accounts. More than a million households representing more than a million children have signed up. I would tell everyone to look for the commercial right after the national anthem at the Super Bowl this weekend. I think we are prepared for a flood of signups and then they will go live on July 5th and the goal is the lowest possible fees on these index funds.

Thank you, and hopefully no singing as a part of that.

Gentleman's time has expired.

I yield back.

Gentleman from California, Mr. Vargas, who is the ranking member of our Monetary Policy Task Force, you're recognized for five minutes.

Thank you very much, Mr. Chairman, and ranking member, and to the witness. I have to confess that I'm very disappointed in today. I think a lot of our allies are losing faith in us. We hear it in our European allies certainly. We see it in the diminishment of our dollar. But we always seem to have faith in sort of the Fed Chairman and also the Treasury Secretary. They're always very serious people. They're always seen around the world as very serious people. I've been here for a long time now. I used to watch when a friend of mine, Sean Duffy, used to sit over there and scream at the top of his lungs at Jack Lew when he was Treasury Secretary. And the Treasury always answered in the most logical way, never flippant. Never libelous. He would never say something like, "Sure, my colleague here wants to see Harriet Tubman on the $20 bill. She didn't say anything about not wanting confidence and not wanting to have secure money." That was a very libelous comment that you made, a very flippant comment. It was very disappointing to hear. And then to hear the libelous comment that you made about the Fed, that we lost, we lost faith in the Fed, you said, in your testimony here today because of inflation and the cost overrun in the buildings. You know, mimicking basically the same thing that the President said about the Chairman. You didn't say it in the same words you said it... ...in a way that's a little more elegant, but means the same thing. Today you've been very performative in everything that you've done. That's very disappointing. I wanted to ask you about the independence of the Fed, because I think it is important. You did comment about that a little bit. But today I think has been pretty much a waste of time, but sadly, I think, I think it really does erode the faith in our country when a person as important as you give the answers that you gave today. So I'm not going to ask you any questions because I think it would be useless. But I was just going to say, Mr. Chairman, we've had some very good hearings recently. This was not one of them. This is not your finest day, and it's too bad because I think you're a very competent person. I disagree with some of your policies, but you're a very competent person. The President has put in some people in very important places that are sort of caricatures of incompetence. That's not you. Today was not your finest day. And with that, I yield back.

Gentleman from California yields back. Chair recognizes the gentleman from Wisconsin, Mr. Steil, who chairs our House Administration Committee and also chairs the subcommittee here on Digital Assets, Financial Technology, and Artificial Intelligence.

Thank you very much, Mr. Chairman. Mr. Secretary, thank you for being here. Thank you for your service and your leadership at Treasury. There's been a lot of energy in the room today. A handful of times that you made some great points, you've been cut off. And so I want to go back and give you an opportunity to elaborate on a couple of these points. At the beginning of the hearing today, Ranking Member Waters, you were in the process of mentioning that 10 to 20 million illegal immigrants came into the United States during the Biden administration, functionally with the blessing of Democrats in Congress. As you mentioned that and you were building into a comment about the impact that that would have on the price of housing in the United States, the Ranking Member said, "Can you shut up?" [End quote.] I think you were about to make actually a really good point about the impact that Biden's and the Democrats' open border policies had on the cost of housing. The time is now mine, and I'd actually love you to provide a little additional detail as to where you were headed there.

Good. Well, Congressman, thank you. And to answer Congressman Vargas, who is unable to stay for the whole or to hear my reply, that as you would have seen, that when approached, I am happy to have a conversation. Representative Green, who is known for some fiery moments, and I had a very respectful back and forth, and I enjoyed my conversation with him. And it is a shame that all conversations cannot be like that. Yes or no answers to me mean that the representative has talking points from his or her staff and is unable to discuss things in a logical and in-depth manner. In terms of your question, look, we have had 4.1 percent economic growth for the past three quarters. We are on track for 3 percent growth. And the economy is doing very well. The financial stability that we are seeing, whether it is through growth or economic security, we've been brought back from the edge.

We, President Trump and your leadership at Treasury, we have absolutely been brought back from the edge. In particular, as we think about the impact of housing, was Biden's open border policies directly related to some of the inflation that we've seen in housing? That's where you were previously cut off.

Yes. To come back to that, I would point to a study from the Wharton School that said supply and demand works, especially in low-end housing. That letting in 10, 20, we don't know how many illegal aliens that flooded into the housing market, they all need some place to live. So what we have seen is that the Wharton study says that for every 1 percent increase due to the illegal immigration, rents went up 1 percent. So if you got a 20 percent increase in population, then rents went up 20 percent based on their own study.

Economics 101. Supply and demand. And Democrats drove up demand by having a massive number of illegal immigrants coming into the United States.

And again, the Democrats didn't care what they did to working Americans. We're seeing a substantial, substantial drop in rents.

Let me, let me build another point you were making when you were cut off. You said that lumber's at a five-year low. Ranking Member Waters then said, [Quote] "You don't get to talk." [End quote.] Again, the time is mine. You get to talk. Lumber's at a five-year low. Supply and demand's in effect. What's the impact of that on the cost of housing?

Again, that facts can be, facts can be annoying for people who just want to make talking points. And the fact is we have not seen an increase in housing costs. The increase in housing costs came during the great inflation, up 21.5 percent for consumer prices for the CPI, up much more, up in the 30s for working Americans. So that's the cost to housing and regulation.

We're still recovering from the Democrats' terrible policies. Let me, let me get one final point in. I chair the Digital Assets Subcommittee. We passed and was signed into law the STABLE Act, setting forward legislation as it relates to stablecoin. Treasury's required to complete implementing regulations by July 18 of this year. Are you going to hit the deadline and are there any impediments preventing you from hitting that July 18 deadline?

I don't see any impediments at present. And if we're going to hit them, we will notify you and the committee.

I appreciate that. Appreciate your service at Treasury. Mr. Chairman, I yield back.

I thank the gentleman. Gentleman yields back. I recognize the gentleman from Illinois, Mr. Casten. You're now recognized for five minutes.

Thank you for being here today, Mr. Bessent. I appreciate your patience with us. Since the U.S. captured President Maduro, the Trump administration has been selling Venezuelan oil. Secretary Wright has said that's going to continue indefinitely. The President's January 9 executive order said that those funds are the sovereign property of Venezuela, but has directed you, the Treasury Secretary, to hold those assets in custody to facilitate disbursements transfers as directed by the Secretary of State. As I've gone through the 91 specific trusts that you have the statutory authority to oversee, none of those have any relationship to Venezuelan oil. So can you help us understand under what statutory authority, or what statutory authority is Treasury relying on to exercise the discretionary control over natural resources and sovereign assets of another country?

Treasury has no control over the...

I'm just asking you about what statutory authority you rely on.

Again, we are operating under an agreement between State and Energy that we are not involved with.

No, but the executive order said that the Treasury Secretary is holding those assets in custody. That's a specific language there and is facilitating disbursements. Under what authority are you acting?

I will get back to you with the executive authority, but it is under an agreement with State and...

Well, let me just clarify because my concern is that the executive order cites IEEPA. IEEPA specifically says that you have to be engaged in hostilities with a country for IEEPA to trigger that claim. Secretary Rubio said that we are not at war with Venezuela. I would agree. I'm glad we're not at war. So unless you disagree with Secretary Rubio, I'm unclear under what legal authority the United States has to control or disperse those assets.

I would believe that the IEEPA authority would act for a period of time for a transition.

Well, look, that's not true, but please provide in writing what you're doing there. Because I want to get to why I think that's material. Last week, Secretary Rubio also said that the $200 million in proceeds was sitting in a Qatari bank that was owned by Venezuela. He went on to say the Treasury has a written agreement with Venezuela's interim government to review the monthly budget request for payments from that account. I come back to where the authority comes. What statutory authority are you using to exercise custody indirectly through a third country and direct the release of funds from those offshore accounts?

The IEEPA.

That's not in IEEPA. You're managing... Okay, so if you're managing a third country, not in IEEPA, and please do provide us with the legal guidance because this matters. What controls are you putting to audit those flows? Because as you know, the Venezuelan government still has a lot of shady people. How are you controlling the dispersion of those flows so they don't go back to some of the shady characters that the President's concerned about in Venezuela? What is the audit process?

Again, we will be bringing in outside auditors for this and the Venezuelan government will be producing...

Do you have an agreement in place right now for those auditors?

Sorry?

Do you have an agreement for that audit in place right now?

Not at present.

Okay, because Secretary Rubio, when he was asked that question before the Senate, he said that the Treasury had handled the agreement that he would be providing to the Senate committee. Are you saying that Secretary Rubio was incorrect or that you're not aware of the agreement that Treasury directed according to Secretary Rubio?

I am saying I am not aware of the agreement.

Okay, so Secretary Rubio said he would provide that to the Senate committee. Can you please coordinate with Secretary Rubio and give us your word to provide us what Secretary Rubio is providing? Because he is alleging that that was done under your oversight.

With pleasure, Congressman. And just so you know, the goal here, it's been 30 days...

I want to just move, reclaim my time, just reclaim my time because the concern I have is that in this would be considered a fraudulent conveyance. I have a specific concern that we've entered into contracts with companies like Vitol who have pled guilty to bribery and all sorts of nefarious actors. If I was a company buying stolen goods and we didn't have statutory authority, I'm going to have a lot of creditors coming after me. One last thing, sir. I want to read you a quote. "Trump will pursue a weak dollar policy rather than implementing tariffs. Tariffs are inflationary and would strengthen the dollar." Do you recognize that quote?

I believe you're referring to a letter that I wrote and tariffs could be inflationary.

No, it says tariffs are inflationary.

Yep.

You know what? You had said to the Chairwoman... I'd like to introduce into the record a January 31, 2024 letter from "Scott Bessent and the Key Square team to your partners" where that quote comes from.

Without objection.

Do you want to correct what you said to the Ranking Member when you specifically said that you did not say tariffs are inflationary?

Well, I think she referenced a letter in the summer of something, not that particular...

No, I think you disparaged the New York Times.

Sorry?

You said tariffs are inflationary.

Sorry?

You said tariffs are inflationary. Do you want to correct what you said to the Ranking Member or did you lie?

I, if I was mistaken, I want to correct it. And I was also mistaken when I said that tariffs could be inflationary because they haven't been. We've seen inflation drop to 2.1 percent.

Gentleman's time has expired. Chair now recognizes the gentleman from South Carolina, Mr. Timmons. You're recognized for five minutes.

Thank you, Mr. Chairman. Mr. Secretary, it is great to see you again and thank you for being here. Your experience and leadership at Treasury are widely respected and appreciated as we work to make the U.S. economy more competitive in the global economy. And I know you were hearing some questions about tariffs. Is that the purpose of the last year, to renegotiate our trade agreements to make the U.S. economy more competitive in the global economy?

100 percent. There are numerous goals, but it is to make the U.S. economy more resilient. We are now seeing 4.1 percent growth for the past three quarters. So we are seeing inflation drop. So tariff inflation was the dog that didn't bark.

Well, I appreciate it. I think that the businesses that are trying to compete in the global economy are far better off because of the last year. There was some strain through the uncertainty, but most of that is behind us and I just really appreciate your hard work. Additionally, after several years of regulatory uncertainty and pervasive government overreach, it is encouraging to see serious leadership at Treasury focused on restoring balance to our financial system. That work matters not only to markets, but to families, small businesses, and communities across the country. You have called for fundamental reset of financial regulation and emphasized Treasury's role in promoting appropriately tailored regulation to support economic growth. I agree with that approach. While there has been progress on tailoring supervision, far less has been done to modernize regulatory tailoring itself, particularly the interagency thresholds that trigger enhanced prudential standards for category two through four banks. Those thresholds were set years ago and have not been updated to reflect inflation, economic growth, or changes in the financial system. As a result, banks that were never intended to be treated like G-SIBs are increasingly subject to requirements that do not match their risk profiles. Republicans on this committee raised this concern in a letter to the federal banking agencies last November. Mr. Secretary, my question is this: how are Treasury and the Financial Stability Oversight Council working to coordinate across the agencies to modernize and update these thresholds and to ensure that regulatory tailoring keeps pace with economic reality rather than falling further behind it?

Congressman, I believe there's a chance that the community banker who I referenced with $200 million in assets may have actually been from your district. So we are all hands on deck and we've seen 50 percent of these institutions disappear. And we are working as quickly as we can. Again, one size fits all for regulation is a disaster. And as potentially the woman, the bank president and owner from your district said, Bank of America's regulatory regime is not good for something in the Piedmont and Upcountry in South Carolina for a bank with $200 million assets.

I couldn't agree more. Tailoring should apply not only to prudential standards but also to supervision itself. For example, my bipartisan legislation, the SMART Act, would allow smaller, well-managed and well-capitalized institutions to combine certain consumer compliance and IT exams, reducing unnecessary burden while preserving strong oversight. Mr. Secretary, how can legislation like the SMART Act and other bipartisan efforts this committee has advanced help build on the principle of tailoring and restore a regulatory framework that truly works for Main Street without compromising safety and soundness?

Congressman, I think it may be very important to get this into a regulatory framework because what we've seen for too long, just as the bank examiner said to the $200 million banker, you should be more like Bank of America. We cannot have supervision or we cannot have regulation done through supervision. We need to have clear guidelines for tailoring for many banks. As I said earlier, are industry concentrated, geographic concentrated, and we have got to push this through or we are going to, they will be too small to succeed.

I couldn't agree with you more. Thank you for that. I want to close by discussing the trillions of dollars in foreign direct investment that you and President Trump have shepherded into the United States over the past year. In our home state of South Carolina alone, hundreds of billions of dollars in new investment have been announced that will create high-paying, highly skilled jobs for our communities. Nearly every week I am in Washington, I meet with a foreign manufacturer that is expanding its footprint in the Upstate. And I also want to thank you for your work to remove tariffs from coffee, which has been directly welcomed by manufacturers like Keurig in South Carolina that have benefited from this administration's commitment to fair and sensible trade policy. It's hard to believe that the largest coffee manufacturer in the world is in Spartanburg, South Carolina, but it is and we greatly appreciate your work to help make sure that they are competitive in the U.S. economy and in the global economy. And with that, Mr. Chairman, I yield back. Thank you.

And Congressman, I would just point out there's a lot of discussion on coffee prices...

Gentleman's time has expired.

...coffee prices experienced a global...

Gentleman's time has expired. Please, Mr. Secretary, if you'd respond in writing if you have more on that topic. Chair now recognizes the gentlewoman from Massachusetts, Ms. Pressley. You're recognized for five minutes.

Mr. Secretary, it took a year to get Secretary Turner before this committee, so I'm grateful for your return. And I want to pick up where we left off nine months ago. The average American spends over $20,000 on baby costs in the first year of having a baby. Essential products like car seats are more expensive because of Trump tariffs. You told me last time that they were under consideration, but nothing has changed since May of last year, much to the distress of families. There is still no exemption for tariffs on baby products. For the record, Mr. Secretary, how many tariff exemptions are there?

There are actually very few now.

You're right. Actually, I think there's some 30 pages of exemptions, totaling over 1,000, including for asbestos. Can you explain to families across America, working families struggling to make ends meet, why baby products that are required by law are not exempt from Trump's tariffs?

Again, Congressman, Congresswoman, the it is a matrix and many of these products unfortunately are made in China. And the every everything that goes to...

Mr. Secretary, reclaiming my time. This is an unacceptable answer. You've had nine months. You told me it was under consideration. You've had nine months to think about it. And while you've been thinking about it, working families have been struggling. When it is required by law that they have many of these essential baby costs. Your report from the Department of Treasury refers to them, car seats, as essential safety tools. So if you can acknowledge that, this is...

Well, I will acknowledge the gas to run the car is at a five-year low.

Well, listen, you've included asbestos in your exemptions. So you tell them you can do asbestos and not baby products that are required... Excuse me, it's my time. Mr. Secretary, Mr. Secretary, Mr. Secretary, parents with newborns don't want to hear your excuses. They need to keep their baby safe. They want to comply with the law. And they need action to lower costs. Period. So will you exempt baby products from tariffs? Yes or no?

Again, we will look at it. We will look at...

Yes or no, Mr. Secretary, respectfully.

Congresswoman, I do not... I am the Treasury Secretary. I am not the USTR. I am not the President of the United States.

Reclaiming my time. Reclaiming my time. So you're asking the wrong person. Well, I'll take a commitment. Mr. Secretary, you are taking... Reclaiming my time, Mr. Secretary. And this is Financial Stability Oversight Council. Mr. Secretary, then I'll ask for your advocacy then. Because a no or a non-answer is unacceptable to the working families you claim to care so much about. Moving on, moving on, moving on, moving on.

Congresswoman, I'm agreeing with you.

Mr. Secretary, moving on.

You will have my advocacy.

Okay, thank you. Can you say that again for the record?

Sorry?

Can you say that again for the record? I will have your advocacy for an exemption?

I am one voice.

Okay. Have you been paying attention to the high rate of unemployment for Black workers? Are you aware of that? The high unemployment rate for Black workers?

It is traditionally higher than for all workers.

Well, listen, no. It is through the roof right now. There's hundreds of thousands of Black workers that have been pushed out of the workforce and the unemployment rates for Black workers and all workers are among the highest they've been since the COVID-19 pandemic. Black workers contribute over a trillion dollars to the U.S. economy, but the pushout of these workers from the workforce has led to a loss of $37 billion in the GDP, with Black women being among, just so y'all know, the most educated and most active in seeking work. Their pushout is a glaring warning sign for where our economy is headed because Black workers, Black women in particular, have always been the canary in the coal mine. So this is a problem for everyone. Black women are bearing the brunt, but everyone will feel this hurt. I have led letters to Fed Chair Powell calling for action to be taken. He is also a member of FSOC. So I want to ask you, Mr. Secretary, will you commit to analyzing Black unemployment rates specifically and its impacts on financial stability? Yes or no?

I will analyze Black unemployment rates.

Wonderful. And when will you get us a report and a plan of action? I was thinking March 6.

I can't commit to a date.

Okay. All right. Well, I think March 6 makes sense. That'd give you over a month, which is more than enough time to convene that working group and to report out your findings. I know you already have the infrastructure to do that. So at the end of the day, Black families, Black futures, and the lives and livelihoods of all who call this country home are depending on you to act. And with that, happy Black History Month. I yield back.

Thank you. And I was sorry to see you not run for Senate.

Gentlewoman yields back. Chair recognizes the chair of the Subcommittee on Oversight and Investigations, Mr. Meuser from Pennsylvania.

Secretary Bessent, thank you very much for being with us. And thank you when you state that Main Street, it's now Main Street's turn. I can assure you the people of Pennsylvania's 9th Congressional District greatly appreciate that. And your remarks are quite refreshing. The previous Treasury Secretary once when I asked what their growth, economic growth initiatives were, they implied that spending, federal spending was their primary if not only growth initiative. So clearly under your leadership and President Trump and the Republicans in Congress, passing the families tax cut delivered meaningful tax relief, billions to workers and small business owners, no tax on tips, regulatory reform, no tax on overtime, 100 percent depreciation. All of this is driving our savings, all of this is driving our economy for a booming GDP, Q3 and Q4 in the over 4 percent range. So things are going very well and we expect 2026 to be pretty exciting as well. Secretary, if there is anything that was asked that is still on your mind that you would like to respond to, why don't you go ahead and do so.

Again, this is supposed to be a financial stability oversight mission. And that we have taken this very seriously. And we believe that a lack of growth, one of the reasons I am sitting here and came out from behind my very quiet and nice private life, is because I was worried that the U.S. was becoming going to become like a European-style social democracy. And indeed what we are seeing in Europe in many countries is the death spiral of higher debt, raised taxes, lower growth. The U.S. will have reported likely despite the government shutdown, despite the longest government shutdown in history, 4.1 percent growth for the past three quarters. And so we have been successful at that. Europe last week celebrated 0.3 percent growth. So it's no comparison. And I think we are beginning to accelerate. And importantly, everything we are doing is to fix this terrible Biden inflation from the past four years, 21.5 percent, much more for working families, and we are bringing that down.

Your remarks and the President's remarks in Davos suggested that how you spiral down in your economy, which Europe has been doing, a not having closed borders or secure borders anyway, overreliance upon imports and driving the public sector rather than the private sector is a recipe for disaster. And so we appreciate you correcting the ship and moving Pennsylvania or Pennsylvania, the United States in the right direction. Just to get to some questions, Secretary. You've emphasized putting Main Street ahead of Wall Street when evaluating bank capital standards. How will modernizing the capital framework improve credit access and affordability for small businesses, homeowners, farmers, who ultimately in the end bear the costs for such excessive capital requirements?

Again, Congressman, the groups you just listed are the three most dependent on community and small banks. And we are determined to increase their lending capacity, to increase their proclivity to lend, and we want to do it on a safe, sound, and smart basis.

In the previous administration, we had regulators that imposed capital requirements well beyond the international peers, including the G-SIB surcharge, the CCAR, tier one leverage ratios. Are these frameworks being reviewed holistically to better support lending and economic growth?

Again, we are not going to let outside regulation determine what is best for the U.S. financial system. Thank you. The strength of the U.S. financial system is the depth and breadth, and we do not want to end up like Canada with five banks, Switzerland with one, France with three.

Absolutely, great. Your decisive action to confront what should concern all of us, certainly concerns us, is the rampant government benefits fraud uncovered in Minnesota. Can you walk us through how Treasury is using your authority to identify, disrupt, and recover fraud proceeds and how Minnesota is serving as a start for a broader national enforcement model?

Indeed, there is a substantial amount of waste, fraud, and abuse. And Americans and legislators on both sides of the aisle should be outraged. When you are there and you see empty daycare centers, senior centers, and I personally met with two centers for autistic children, and they are not getting their benefits. So we are using our regulations under FinCEN to follow the money, which is what we've done, whether it's Mexican drug cartels, whether it's the Mafia, or whether...

Gentleman's time has expired.

Thank you, Mr. Chairman. I yield back. Thank you, Secretary, very, very much for your great work.

Gentleman yields. Chair recognizes the gentleman from New Jersey, Mr. Gottheimer. You're recognized for five minutes.

Thank you, Mr. Chairman. Mr. Secretary, welcome. The 10-year Treasury is running around mid-4 percent range. Mortgage rates are still above 6 percent. That's keeping monthly payments high and pricing would-be buyers out of the market. The affordability crisis is increasing the homeownership gap in North Jersey, which I represent, and across the country. How can we get the 10-year down and help make homeownership more affordable? That's what I'm really focused on.

Well, the 10-year bond had its best year since 2020 last year. And we actually had a fiscal contraction in the budget. The rest of the G7 bond market went up in yield. So if we continue to...

So you see a path where this you hope you think will continue to see a tick down, especially the longer...

Well, I think we can do that. And that I believe that we have Oliver Wyman's numbers, not Treasury's. They say that what has been done with financial deregulation unleashes $2.5 trillion of lending capacity into the U.S. economy. So by creating more capacity, there is less of a competition for scarce funds. So we are decreasing scarcity.

Thank you. I have a strong belief that AI will revolutionize financial services and deliver meaningful gains for for customers and regulators and institutions if we do it right. FSOC's report strikes an encouraging balance, highlighting AI's potential to improve resilience and efficiency in financial markets while also noting that vendor concentration can create challenges. How is FSOC threading the needle to enable broad AI adoption while encouraging competition? And what can Congress help get this right so AI can flourish as a helpful tool for for Americans in the financial markets?

Good. I think it's important to work together because what we see many times in these very quick technology cycles is the technology gets ahead of the regulation. So working together to keep the regulation in sync with the technology, whether it's for the financial system or for anywhere else. And there's good news, as you said, it will change the interaction. The bad news is that it gives whether it's state actors or independent actors more tools.

Right. And what are you doing internally at Treasury? Obviously, you spend a lot of time on the security side of of on the Treasury piece of it. What are we doing about that?

Yes. So we we have both at Treasury and then bringing in our private sector partners regularly. We have done we do tabletop exercises in terms of what would happen if a malign actor got into the system. How can we reinforce that? As you may have read before I arrived, Treasury itself was... ...act.

Yes, I saw that.

By we believe a state actor. So again, increasing resilience, being aware, and working with our private sector partners for best practices.

Thank you. We're obviously seeing a combination of factors that historically make markets nervous, softer dollar with higher gold prices. Even if there are multiple drivers, those moves are often interpreted as investors seeking protection against policy uncertainty or concerns about U.S. fiscal and monetary credibility. They can be also be early signals that global capital is demanding a higher confidence premium to hold U.S. assets. Are markets starting to price in a sustained shift away from U.S. assets, do you believe? And what are the specific indicators you watch to see if we're seeing that pullback from foreign investors?

So what we see at Treasury is we saw record amount of foreign inflows despite the popular narrative. We saw record amount of foreign inflows into Treasury auctions last year. This year, many of the auctions have traded through the prevailing price before the auction. So we are still seeing very good flow. And we are still seeing massive flows into U.S. equities. And as several of the congressmen said, we are seeing very substantial foreign direct investment.

You know, one of the things I'm concerned about, this week Reuters reported Disney saw fewer international visitors at its U.S. parks. U.S. overall saw 6 percent fewer visitors despite global tourism revenue rising 6.5 percent. Canadian trips are down significantly, 22 percent year over year. Even at the great Jersey Shore, 2025 beach tag revenue was down. What is the administration's plan to calm volatility? And obviously tariff policy has been part of this so tourists can continue to choose the U.S.

Look, on some things there is nothing we can do. If the premier of British Columbia or Ontario wants to be especially hostile and tell people not to come to the U.S., that's a decision. I would say it's their loss. And as you said...

Do you think we'll see less volatility with the tariff policy kind of firming up or...

Less volatility in tourism?

Well, yeah, because it affects everything. People don't want to come...

Gentleman's time has expired.

Thank you, sir.

Thank you.

Chair recognizes the gentleman from Indiana, Mr. Stutzman. You're recognized for five minutes.

Thank you, Mr. Chairman. And thank you, Mr. Secretary, for being here today. I'm going to yield to the chairman just briefly for a couple of questions that he has.

Mr. Secretary, I appreciate members on the Republican side allowing you to clarify points on some key discussions back and forth, and we have had some good ones today. There was an exchange you had with my friend from Massachusetts, Mr. Lynch, about artificial intelligence. And in your capacity as chair of FSOC, our view here is that artificial intelligence offers great promise for better consumer service, fighting fraud, more accuracy in providing customer service, but also in providing a more robust compliance process with the rules in banking and the brokerage and securities industry. I wonder if you could talk from an FSOC point of view about a philosophy of overseeing artificial intelligence both in the financial services industry and among the supervisors of the financial services industry.

Yes. So again, we are working with our private sector partners to best practices. And Chairman, as you said, there are two pieces to this. There is service improvement, which we are for instance working on at the IRS. We hope to be able to use artificial intelligence there to get customer wait times down and service down. On the other side, both financial security, alerting everyone to the risk of what is going on. But this is a transformative change. And as I mentioned to the congressman, we look forward to working with you on legislation to make sure that the technology does not move too far ahead of the legislation.

Very helpful. And I yield back to my friend from Indiana.

All right. Thank you. And first of all, I just want to say thank you for being just a steady voice. Our economy is seeing tremendous growth. Is there volatility in places? Absolutely. We're still recovering. You know, we've heard a lot today from my colleagues across the aisle about tariffs and the effect on inflation in the U.S. economy. I just want to remind everybody during the Biden administration, grocery prices increased by over 23 percent. I'm in the food industry. We've seen it. That growth has accounted for nearly 91 percent of grocery price increases since January of 2021. In Biden's first year alone, grocery prices increased by 6.5 percent as compared to 1.9 percent during President Trump's first year in office. And that's nearly three and a half times faster. But yet my colleagues want to blame Trump's tariffs for the prior administration's uncontrolled and excessive spending. And I know that what the administration, what the Trump administration and you are doing is really, I mean, the America First policies are spot on. We've needed somebody in the White House to be fighting for America First. And so I just want to say thank you from folks in Northeast Indiana for your hard work to reset the table globally. And you know, we're a manufacturing, agricultural sector. We grow the food for the country. We manufacture medical devices and all these other things. And so I just want to say thanks for that.

Well, good. And congressman, just to tell you, I was with the president out in Iowa. And to combine two of your themes, manufacturing and the farm economy, we were with the CEO of John Deere, and he is building a new factory in Indiana. And the president, he's building one in Indiana, one in North Carolina. And the president said, "What made you do that?" And he said, "The tariffs. The tariffs."

Yeah. No, and it's, I mean, this really is putting manufacturing in a position to compete with China, whether it's a CNC shop, whether it's the, you know, the medical device industry. There's obviously some pieces there with regulatory environment, things like that, but it's really giving manufacturing a spot. One thing I would ask, and if I could maybe share with your office, I had a foundry owner in the office yesterday, and there are some definitions around foundries. And so I'd be happy to send that information over to your office to take a look at. It's an industry that's of course very important for America, and I know you all care very much about manufacturing and the steel industry. So I'll send that over.

Good. With pleasure.

Yeah. But anyway, my time's about to expire, but I do want to just say thanks because it's what people back home are really dealing with is this cost over the last five years. And for you to really reset the table, they're believing in, they believe in America. We just need to show them that we believe in America as well and that America can be great.

Good. Well, congressman, there's a level and a rate of change. The level is very difficult to get down. We're trying as hard as we can, but we've slowed the rate of change greatly.

Yeah. Thank you. I yield back.

Thank you. The gentlewoman from Michigan, Ms. Tlaib, is now recognized for five minutes.

Thank you. Mr. Secretary, a bank's leverage ratio is important, right?

Well, there are numerous leverage ratios, congresswoman. Which one are you referring to?

So for the record, if I may, Mr. Chair, I'm going to submit the Bank Capital Analysis semi-annual update for the record. May I?

Without objection, so ordered.

I want to talk about the way that we look at global systematic important banks, what they call, what do you guys call it, G-SIBs? Is that right?

That's correct.

That's what I'm talking about. They're banking organizations that could trigger a financial crisis if they failed, correct?

And they could trigger a financial crisis by not lending.

Yeah. So the leverage ratio is important when we look at it, right?

Again, I'm not sure which leverage ratio...

Okay. So I'm looking at here this chart. Okay. It says Tier 1 Capital. Does that help?

Tier 1, that's helpful.

Okay. So I know you can, it's kind of hard to see, but the green line is the community banks. You see how high that cushion is? That it's about what, almost 11 percent? I know you can't see it. It's fine. I was going to enlarge it for you.

I've looked at the paper. I'll take your word.

Yeah. So the largest bank capital analysis for the Federal Reserve Bank of Kansas City, it shows that last June the Tier 1 leverage ratio of community banks was at 10.83 percent. For the banks that pose the largest threat to global system, what they call G-SIBs, this is the big banks, the ones that take all the risks. You know this, right? Their supplementary leverage ratio was about 5.8 percent. That's a huge difference, right?

Correct.

Okay. I'm getting there, I promise. Do you think the largest, most complex banks are roughly half as risky in the threat that they pose to the financial system as a community bank in my district?

Well, I think, congresswoman, that what you're neglecting to think about is the composition of the assets and the capital. So the capital at the G-SIBs can be much more liquid, where the banks in your community are much more, as we're used to seeing in the movies.

Well, let me explain to the public why community, yeah, I understand. Community banks though lend out equivalent about 75 percent of their deposits to real economy. Some people refer to as Main Street, but we call it the real economy, people, families, communities. The larger, largest banks only lend about 40 percent of their deposits into our real economy. Instead they rapidly expand their loans to hedge funds and private equity that you're calling liquid, they can liquidate, right? Is that what you're saying? Is that what you're saying?

No. I'm also saying they hold a much higher...

Yeah, but the big banks are the ones who keep failing, right?

What's that?

The big banks are the ones who keep failing.

No. Many small banks fail.

Well, that's because they're getting pushed out and we're not actually supporting community banks.

Well, as I've said, I think more than 100 times today, I support community banks and what they want to see is...

I understand. You can say it, but you've got to do something about it. But listen. So Trump's record, I know, Mr. Secretary, but this is pretty bad.

So...

Because the fact that community banks in my district have almost twice as much capital percentage-wise compared to banks that pose the largest threat to our financial system, you know that shows that just how much playing field's tilted towards Wall Street. You understand that, right? That's where the risk is. The big banks do far less for our real economy, for everyday people. And that's what I'm trying to say because Trump's regulators recently, you know, finalized a rule to modify the supplementary leverage ratio that applied to the largest banks. Many former regulators and experts have warned that such step will actually undermine the safety and soundness of our largest banks. The final rule resulted in a reduction of about $219 billion, about 28 percent, in capital at the bank subsidiaries of global systematic important banks, G-SIBs. A lot of my residents don't know this. But the thing is they end up having to pay the cost when they fail. And so I'm just trying to stress to my colleagues how important it is because Secretary, last November, didn't regulators reduce it again, the capital requirement, right? Yes or no? It did.

Again, congresswoman, I want to be polite and not say it's naive the road you're going down. But much of the excess capital has been invested in the U.S. Treasury market and keeping those yields low helps the borrowers who want a mortgage or a small business or an ag loan.

But are you paying attention how much they are lending versus community banks?

Yes, we pay very close...

It's really low.

I've been a financial analyst for over 40 years.

Do you agree it's low?

Sorry?

It's still very low.

It's not relative to the historical level.

Mr. Secretary, if you came to my district, you can go to Detroit or the suburbs, they will tell you the big banks do not loan to them. And if they do, it's predatory, it's not supportive. It's the local community banks that support them in owning homeownership and small business.

Gentlelady's time has expired.

Congresswoman, you and I are in complete agreement.

Gentlelady's time has expired. The gentlewoman from California, Mrs. Kim, is now recognized for five minutes.

Except on the capital ratio.

Thank you very much. Secretary Bessent, it's really great to see you before our committee again. I want to thank you so much for working very closely with me on delivering the historic SALT relief to the tune of $40,000 because with that, my constituents in Orange, Riverside, and San Bernardino counties will finally be able to see the relief as they file their tax returns. The four times increase in the SALT deduction coupled with other provisions of the Working Families Tax Cuts Act will result in supercharged tax returns, helping more American families get back on their feet after the years of failed Bidenomics. Last year, you noted that Treasury would revisit the 2023 guidance and analytic framework. And you also highlighted that FSOC has other tools such as issuing recommendations to member agencies that are more tailored and precise than designation power. So Secretary Bessent, can we expect a new proposal for non-bank guidance that will be released sometime 2026?

We should expect that.

Thank you. You know, I look forward to seeing that proposal when it's finally released and hope there will be a public comment period to ensure stakeholders can weigh in and help shape that guidance.

Good. And the congresswoman, the other thing that I would point out is we've had a lot of talk about affordability today, and you were a great advocate for the one big beautiful bill. And what we're seeing, unfortunately, in states like yours, that the state revenue authorities are not going to mirror the no tax on tips, no tax on overtime, no tax on Social Security, deductibility of auto loans, which is very unfortunate. So to the extent that anyone in the California delegation, whether Democrat, Republican, the New York delegation, should push their states to follow through for working Americans.

You can count on me on that. You know, let me shift gears now. I want to focus on the Community Development Financial Institution Fund. I was really happy and relieved to see the staff at the fund were restored after the conclusion of the Schumer shutdown late last year. I know that you share my view that the fund's work is critical to serving communities that typically do not receive the traditional banking services. So can I ask you how you are planning to make the fund more effective and efficient as we move forward?

Well, what we want to do is focus on community revitalization, not unrelated and ill-advised social policies. And we want to drive reforms, new restrictions on the use of funds, and we want to focus on the program's statutory intent.

Sure.

Making the lives better for people in their communities.

Sure. You know, CDFI Fund, as you know, has bipartisan support, and I think it would also has a bicameral support. So I look forward to continuing to work with you on the future of this critical, critical program. But I also want to talk to you and thank you for being willing to come to California and investigate all the fraud, waste, and abuse. Unfortunately, Gavin Newsom has tried, you know, he tried to hide all those, you know, fraud and waste under the carpet, allowing more than $32 million of unemployment fraud that went unchecked. The state has also watched $13 million stolen from California students because of the AI-generated ghost students enrolled in community colleges. So you know, I suspect this is just the tip of the iceberg in California's fraud, waste, and abuse. And I've been talking a lot about this. Unfortunately, sadly, the state that I love and I live and I represent a district from California has become fraud capital of the world. So sad. But that's why we need your team in California. And is there anything that you can share to that end, how your investigation into California fraud is proceeding?

There's nothing I can share right now, but I have spoken to Dr. Mehmet Oz at HHS, and he is laser-focused on the healthcare fraud that's going on in California, which seems to be substantial.

Yes. I also sent a letter to Gavin Newsom to that end, and I was glad to see Dr. Oz sending a letter demanding. So now state of California is now in the process of returning $1.6 billion to the federal government. So thank you for that, and I look forward to continuing to work with you. Thank you for joining us.

Thank you.

The gentleman from New York, Mr. Torres, is now recognized for five minutes.

Thank you, Mr. Chair. Mr. Secretary, does the president have the constitutional authority to remove the chair of the Federal Reserve or a member of the Board of Governors solely because of a policy disagreement?

I'm not a lawyer, and I don't have an opinion.

You have no opinion on whether the president can remove a board member at will?

Well, I believe if the board member has committed for malfeasance...

No, just in general. I'm not asking about a particular case. I'm asking about the president's general authority. Let me ask it differently. Do you believe that the unitary executive theory applies to the Federal Reserve?

Again, I think we'll have to wait and see what the Supreme Court says.

But what is your opinion?

I'm not a lawyer.

What is the administration's opinion?

There are varying opinions in the administration.

What's the prevailing opinion? The official opinion?

Again, we'll have to see.

Do you consider the Federal Reserve an executive agency or a legislative agency?

I consider it an independent agency.

So neither executive nor legislative?

So we'll see.

Therefore independent of presidential control. So it sounds like you do have... Okay. Thank you for establishing the independence of the Federal Reserve.

But I do believe that the Federal Reserve has to maintain credibility and be like Caesar's wife, beyond reproach.

And undermining the independence of the Federal Reserve is a threat to that credibility. So I know you're no fan of the New York Times, but let me proceed. Let me reclaim my time.

Printing over a billion, a million...

The Wall Street Journal, which is hardly a leftist publication, published an article with the following headline: "Trump claims factory construction is up, contradicting U.S. data." The article then goes on to note, "President Trump claimed that the U.S. factory construction is up by 41 percent, a number that doesn't appear to be supported by the government's own data." One of the stated policy objectives of the Trump tariffs is to bring back manufacturing jobs. Yet since the so-called Liberation Day tariffs of April 2025, we've seen the net loss of manufacturing jobs. Do you know how many net manufacturing jobs have been lost since April 2025 under your watch?

Well, a couple of things. Manufacturing operates with very long lead...

What's the number? Is there a number?

I believe it's about 67,000.

It's 70,000. 70,000 jobs lost despite the stated objective. Let me proceed. I'm going to reclaim my time. I'm going to reclaim my time. Let me reclaim my time.

But again, you cannot flip the switch on construction.

The Purchasing Managers' Index measures whether manufacturing is expanding or contracting. A PMI above 50 means expansion, below 50 means contraction. Since the so-called Liberation Day tariffs of April 2025, has the PMI been mostly above 50 or below 50?

We just had the biggest increase in over a decade and we are well above 50 now.

Has it been mostly above 50 since April 2025?

Again, long and variable lead times in manufacturing that you may represent...

Let me ask it differently. Since April 2025, for how many months has the PMI been below 50?

Where are we now? Where are we now?

January went up. But what about April to December?

Again, where are we now?

It was below 50 for nine consecutive months.

Where are we now?

So the score is 9 to 1. Nine months of manufacturing contraction versus one month of expansion.

I look forward to seeing you next year.

So one of the stated policy objectives, and we'll keep score, okay. One of the stated policy objectives of the Trump tariffs is to bring back domestic production. Does the Trump administration regret imposing tariffs on goods that cannot be produced domestically at scale in the United States? Do you realize in hindsight that that was foolish?

Do you realize that we use the leverage to bring down tariffs from other countries, to take down non-tariff barriers?

Tariffs on bananas gave you leverage?

So yes, with Colombia, with Brazil. I think, congressman, you're being very naive with negotiating strategy.

I mean, we were promised reindustrialization. A tariff on bananas did not lead to domestic banana production. It simply made bananas more expensive for American businesses and consumers. The same is true of coffee.

But it has led to other countries negotiating in a more fulsome manner.

Are you willing to commit to no longer imposing tariffs on any product that has neither a domestic substitute nor a national security rationale?

That would be the definition of foolish in a negotiation.

So you're not willing, you're willing to impose, you're willing to impose tariffs that make more expensive goods that we cannot domestically produce here in the United States.

Again, again...

And that have no national security... What is the national security nexus of bananas and coffee?

Again, why would you do that? There are numerous things when you negotiate with Indonesia, there are things that are only made in Indonesia. But the Indonesians brought down their tariff barriers or non-tariff barriers.

I get it. We have to make bananas great again. I get it. Thank you, Mr. Secretary.

Yep.

The gentleman from New York, Mr. Garbarino, is now recognized for five minutes.

Thank you, Mr. Chairman. Thank you, Secretary, for being here today. First off, let me yield, I was one of the people you were in negotiations with over SALT last year, and I really appreciate the hard work and the commitment and getting helping us get it across the finish line. And a lot of my constituents are going to see a big benefit.

And as congressman, I can tell you as also the IRS chairman, that the second largest refunds are going to come from your constituent or go to your constituents because of the SALT deduction.

It's going to be great. And like myself, the rest of my constituents I think are going to plow that money back into the economy with some purchases when they get their refund this year. So thank you for all the hard work you did there with us. Last year, you oversaw Treasury's efforts to implement President Trump's executive order to phase out paper checks, eliminating a costly and inefficient and more fraud-prone process. Part of the EO directed the Treasury Department to work with financial institutions, consumer groups, and other stakeholders to address financial access for unbanked and underbanked populations. Secretary, can you share more on the workstream and particularly how Treasury plans to incorporate digital technologies or payment solutions to increase financial access for unbanked Americans?

Again, we are trying to bring them into the financial system. And we are trying to, one of the ways is over these individuals' phones. And what we see, especially for the cohort you described, is they are especially susceptible to theft of the paper checks. They may not have fixed addresses. The fixed addresses or the mailboxes may not be secure. Someone from the New York delegation in Staten Island brought this to my attention for her district.

I appreciate that. And I really do think the administration has made serious strides to modernize our financial system through these initiatives. Are there other ways Treasury is looking to safeguard against fraud and improper transactions that you're working on?

Well, again, as we've done in Minnesota, we've found a substantial amount of waste, fraud, and abuse. And we want to know with our geographic targeting order, we have pushed down the threshold for reporting for money service businesses, which these are non-banks, to $300. And we want to know if you are wiring money out of the country that are you on public benefits? Because one of two things must be true: you're receiving more public benefits than you need so you can wire it back home, or you have stolen the money.

Is there anything that Treasury's working on, any other payment modernizations that you are all working on right now?

We're constantly working on payment modernizations. We're working with the Fed to modernize their FedNow. We are looking at ways on digital assets also.

Great. I'm going to switch gears a little bit here. Myself as any other member has constituents that will face emergencies, you know, you can't plan for those. Whether it's a natural disaster, medical emergency, unexpected, your refrigerator stops working at home. So they have to, and a lot of people don't have savings accounts, so they often have to rely on short-term credit to cover basic expenses that arise from these emergencies. Would you agree, Secretary, that access to credit can be a critical lifeline for millions of Americans, particularly middle and lower-income households?

Yes.

What actions is the administration taking to promote affordable and responsible access to credit for American households?

Again, we believe by some of the financial deregulation that we have done, especially for community banks, this will lead to more credit for communities rather than the money coming from a distant credit card agency.

I appreciate that answer, Mr. Secretary. And last, as chairman of the Homeland Security Committee, cybersecurity is one of my top priorities. Secretary, can you describe what the administration is doing to strengthen cybersecurity across the federal financial regulatory agencies, particularly in light of last year's breaches at OCC and CFPB that had information leak?

So the Treasury, we're committed to making risk-informed resources. We constantly work on emerging threats. And we are in close collaboration with our financial sector partners both as a push and a pull. We recently had a group of them into Treasury for a very large conference on best practices, sharing with each other, sharing with us. And we've used that as a convener and then our convening ability. And then also...

Gentleman's time has expired.

...we've identified it as a financial stability concern.

I appreciate it. My time has expired. Thank you.

Chair recognizes the gentlewoman from Texas, Ms. Garcia. You're recognized for five minutes.

Thank you, Mr. Chairman. And Mr. Secretary, earlier in response to someone else's question, you talked a little bit toward the end, but I'm not sure that there was time for follow-up about I think you said 10 to 20 million immigrants that have that are responsible for the driving up the housing cost. Is that what you said?

I'm referring to a Wharton report. Yes.

A Wharton... Do you know what they based it on? What data, what information they looked at?

Yes. Survey by survey, community by community. You could go, if you'd like, I will have my people post it on the Treasury X account as we speak.

Well, thanks for the cooperation because I'm just completely baffled. The average new home sale is about $500,000, and you're saying that it's driving up the housing crisis when DHS is over there trying to pick up and deport people because quote-unquote they were a drain on society, they're dependent on public benefits. So if you're on public benefits, how do you afford a $500,000 house?

Well, let me clarify your confusion because...

I'm not confused, sir. Don't be demeaning to me, all right? Because I'm going to object and ask the chairman to make you answer questions.

Anyway, I am trying to explain to you that it is rental income and rental properties, the value of...

So you really think that people... Have you been to the rental income, rental places of immigrants? I have people in my district that are in rental houses that I wouldn't rent to anybody. They're not expensive. They're probably $500 or $600 a month. You think people that can barely afford housing like that, that that's a housing that we're talking about when we talk about the housing crisis?

The properties push up the price of... ...C properties. Inflation in C properties pushes up the price of B properties. Inflation in the price of B properties pushes up A properties. So it moves up the stack. And if you think that somehow the laws of supply and demand do not apply to housing, I would say you're incorrect.

No, well, I'm not incorrect because...

...and as with...

...you know, the only thing that we might say about immigrants is that we don't have new housing because they can't... there's a shortage of labor supply because they build the houses, and you're all more focused on deporting them than having them stay here and build. Mr. Chairman, I'd like to introduce three items to the record: Construction workforce shortages are leading cause of project delays, as immigrant enforcement affects nearly one-third of firms. Second, how the ICE crackdown is impacting Minnesota's economy. And third, the price of cruelty: how Trump's mass deportation agenda endangers all.

Without objection, they'll be put in the record.

Thank you. Do you have any idea how much we're spending on ICE every single day for enforcement?

Again, Representative, this is the Financial Stability Oversight Commission.

But you're in the Treasury. You're in the Treasury. You're supposed to follow the money. In response to questions on this side, you're always talking about, well, we follow the money. Well, have you followed the money? How much are they spending every single day in Minnesota and other states where they occupy cities, terrorize communities, and try to break up our country?

Again, President Trump has secured the border. He was elected on a mandate...

Well, then let them stay at the border.

...and he is enforcing...

Well, I disagree with you and I think you're...

You disagree that he was elected?

I think you're confused. But let me ask you about something else. Maybe you'll answer this one. You also recently announced the formation of a new FSOC Household Resilience Working Group that will focus on American households' financial condition. American households across the country, especially in my district, which is a working-class district, Texas 29, have experienced firsthand the destabilizing effects of climate disasters. Property insurance companies are leaving Texas, California, Florida, and many other states because of growing climate risks. I myself have felt the impact. My constituents feel it. Mr. Secretary, what, if anything, are you all doing to address the risk to households of mortgages and other forms of credit becoming unavailable in certain regions of the country due to climate change?

Again, Congresswoman, are you familiar with KLW 24?

No.

It was the base for everything that was done with climate and with all the climate proposed climate legislation, and it has been discredited. So everything that FSOC previously did based on climate has been discredited.

Who discredited it?

The...

Who discredited it?

Nature magazine. Nature magazine has retracted the economic commitment of climate change more than 18 months after first learning that the paper was fatally flawed, with authors acknowledging that its errors are too substantial for correction.

I'm sorry, I'm not familiar with Nature magazine. We're relying on a Nature magazine to determine public policy?

Unfortunately, that's what...

Gentlewoman's time has expired. I'll invite the Secretary to respond more...

Mr. Chairman, I'd like that response in writing. Thank you.

Yes, gentlewoman, we'll have those answers to you in writing. The gentleman from Wisconsin, Mr. Fitzgerald, you're recognized for five minutes.

Mr. Secretary, thanks for being here today. Appreciate all the work that you've done and certainly look forward to working with you in the future. I did have just a couple of questions, though. In many ways, the GSEs are far less risky than they were before the financial crisis. And one of the reasons has been that the GSEs... that credit risk transfer, the CRT piece, those programs. However, some industry experts are concerned that the CRT program has been significantly diminished and focused on capital arbitrage instead of the real risk reduction. Can you just kind of in general discuss the importance of the CRT with regard to the GSE and ensuring that they're transferring a significant amount of credit risk to the private market and really are then avoiding the risk that the taxpayers take on?

Good. So the CRT, or the credit risk transfer, is very important at FSOC and the attendant agencies, the members. We closely monitor to make sure that there is no daisy chain effect... ...that the quality of the risk transfer is at least as high as the entity from which it was bought. What we saw in the GFC was a complexity can create a daisy chain. So what we want is transparency. But I think CRTs are very important, but they cannot be opaque.

Very good. You originally called for kind of a fundamental reset of financial regulation, and then you emphasized kind of the Treasury's active role in promoting just more efficient, effective, and appropriately tailored regulation. While we've seen progress in tailoring the supervision, can you just tell us kind of overall how you've tried to move the entire department kind of in that direction?

Again, as FSOC, I have convening power. And so that would be what you're describing would be done by the Federal Reserve regulation, the regulatory body. Vice Chair Miki Bowman has done an excellent job. The Comptroller of the Currency and the FDIC, we have tried to get them aligned in what they are doing and for tailoring and to understand that the reason 50 percent of small and community banks have disappeared over the past 15 years has been because of a one-size-fits-all regulatory strategy, which clearly it does not.

Very good. Keep up the good work, and thank you for being here today. And I yield back, Chairman.

Thank you. Gentleman from Wisconsin yields back. Chair now recognizes the gentlewoman from Georgia, Ms. Williams, you're recognized for five minutes.

Thank you, Chairman Hill and Ranking Member Waters, for having this conversation today. And thank you, Mr. Secretary, for joining us. Mr. Secretary, you noted in your introductory letter to the 2025 FSOC report that the Council has formed a new Household Resilience Working Group that will focus on American households' financial condition. Well, Mr. Secretary, as the Congresswoman for Atlanta, I'm here to make sure that that includes all families. As you noted, financially resilient households can better withstand shocks, maintain essential consumption, and avoid costly debt cycles. Discrimination in lending or in investment impacts growth opportunities for Black-owned small businesses, which means discrimination is, in fact, a threat to American financial stability. Atlanta has the largest racial wealth gap in the country. Supporting entrepreneurship and access to capital within the Black community can help close that gap, Mr. Secretary, but I need your help. Small businesses like those in the Fighting Fifth are critical to building and maintaining household wealth. Per Brookings, from 2017 to 2022, the number of Black-owned businesses surged, representing over half of all new employer businesses. In 2022, Black-owned firms with at least one employee added $212 billion with a B in revenue to the economy and paid over $61 billion in salaries. More broadly, over the last 10 years, minority business entities comprised approximately 50 percent of new businesses started in the United States and created 4.7 million jobs. According to the U.S. Census, there are over 9.2 million minority-owned companies in the U.S., employing 8.7 million workers and generating more than $1.8 trillion in annual revenue. However, Mr. Secretary, there are significant barriers blocking sustainability and growth of Black entrepreneurship. That's why I launched a Small Business Advisory Council in my district to hear directly from small business owners in my district. Because access to capital, as we heard in all of the conversation, continues to be one of the biggest challenges that these small business owners face. The first major hurdle for Black entrepreneurs in starting their business is a lack of startup funds, equity, and collateral, a result of the racial wealth gap. During the Biden administration, the Minority Business Development Agency delivered $7.1 million in funding to Georgians through its business centers and capital readiness programs. But President Trump signed an executive order continuing the reduction of the federal bureaucracy, directing the destruction of the Minority Business Development Agency. Mr. Secretary, what steps has FSOC taken to assess the impact of discriminatory lending and investment practices on Black small business owners and the stability and growth of the economy overall? And how does FSOC factor discriminatory investment practices into its assessment of threats to our economy?

Again, we do not view that as a financial stability concern, but I do view it as a concern. And as I've repeatedly said, that we would be willing to work with you on tailoring for banks in your community to give them more lending power. Because what we have seen is that with 50 percent of the small banks that have disappeared, I don't have empirical data, but I can tell you that my strong hunch would be that many of those would have been minority banks. So we would like to see more de novo banks, whether they are in Black communities in Atlanta, whether they are in Latino communities, whether they are in Asian communities.

So, Mr. Secretary, you don't think dismantling the Minority Business Development Agency had any impact on the U.S. economy at all?

Again, very difficult to tell in a complicated multivariate economy what impacts, whether it's good or bad, for the aggregate versus the individual.

Mr. Secretary, I'm here to simply be the voice of the people that sent me here, and I welcome you to join me in Atlanta, and I would love to introduce you to some of these small business owners that have been greatly impacted by this dismantling. Also, in the 2025 FSOC report, placed a premium on deregulation and demonstrates the administration's optimism about the use of AI to make financial institutions more efficient. As you noted, AI used properly could provide numerous benefits to financial institutions by enabling them to provide innovative services cheaper, faster to a broader set of customers and under varied economic conditions. For example, currently, some lending institutions are using AI to evaluate a customer's creditworthiness through alternative data, such as cash flow history. And I see my time is about to expire, but my question is: Mr. Secretary, what proactive steps does FSOC recommend regulators take to combat lending discrimination, which may become compounded through the use of AI as banking institutions increasingly use AI to make lending decisions?

Gentlewoman's time has expired. We invite the Secretary to respond to your question in writing.

Thank you. Pleasure.

We thank you both. Now recognize the gentleman from New York, Mr. Lawler, you're recognized for five minutes.

Thank you, Chairman. And first, Mr. Secretary, thank you for being here and thank you for your leadership in helping get the Working Families Tax Cut bill across the finish line, and in particular, thank you for negotiating over the issue of SALT, the state and local tax deduction. That was a big win for the American people. A core goal of U.S. stablecoin policy is to keep dollar-denominated stablecoins issued, regulated, and supervised here in the United States rather than offshore. Today, a substantial and growing share of the dollar stablecoin market operates outside the U.S. as foreign jurisdictions move quickly to establish legal regimes that encourage dollar stablecoin issuance in their markets. Foreign-issued stablecoins already compete globally by offering consumers economic value and incentives to use and hold them. And countries like China are actively using economic incentives to drive adoption of their digital currencies. As Treasury implements stablecoin legislation, do you agree that U.S. rules should preserve enough flexibility for American issuers to remain competitive so dollar activity stays onshore, transparent, and under U.S. oversight?

Congressman, and again, I think as you know, I used to have a house in your district. Given the tax regime in New York, I'm not sorry that I'm no longer there. I hope it will come back to beautiful part of the world. With stablecoins, I would say what we want is U.S. best practices. The stablecoins can go around the world, and indeed we are seeing the... I believe we will see the adoption, especially in emerging economies or maybe any other individuals who want to hold the U.S. dollar. But I think it is paramount, as was done with the Genius Act, to put in U.S. best practices.

Agree. Different topic: Fraud scams by bad actors are estimated to affect 15 percent of American homes, representing about 20 million American households in total. And given that losses to these scams often amount to $575, consumers face meaningful financial harm even from a single incident. At the same time, 37 percent of all U.S. households cannot cover an emergency expense of over $400 with cash or savings. And a fraud loss can be devastating to the average American. These losses can lead to missed debt payments and damage to credit scores, which in some cases prevent homeownership. We've seen a renewed focus on fraud by this administration with the announcement of things like the Scam Center Strike Force, and I'd like to strongly encourage the administration to adopt an all-of-government approach to combating fraud and scams. Secretary Bessent, what role do you think Treasury should play in fighting scams and fraud, and does FSOC... does the FSOC committee have any initiatives planned for the coming year?

Yes, sir. So Treasury through FinCEN was part of the group who took down the big scam center in Asia. We were very focused on places like Laos, like Burma, like North Korea, and even Iran. And the other side of that, Congressman, is that it's used to use for nefarious... once the money's stolen, not only has a U.S. citizen been hurt, but it's used for nefarious purposes. So we are constantly monitoring that, and we are working with our partners because, as you said, AI can be both a benefit... can be both a blessing and a curse. So we think properly managed and rolling it out using private sector partners, we can cut down on that shocking number. I was not aware 15 percent of Americans are subject to it. But we've also got to be very careful because it will make malign actors more... more able to pull off bigger scams.

Yeah. Well, and kind of continuing on that front, there's been a growing concentration of cloud and AI model providers and the risk that results if a small number of firms control critical financial sector infrastructure. How is FSOC assessing the financial stability implications of this concentration, particularly in scenarios of an outage, cyber incident, or foreign-based remote access vulnerability? And I had introduced legislation that we passed recently through committee, the Remote Access Security Act, ended up passing the House with a strong bipartisan support. What steps is FSOC taking to ensure that financial institution reliance on third-party AI and cloud providers does not expose the system to remote access risks?

You'll need to answer that question in writing, Mr. Secretary. The gentleman's time has expired. Pursuant to the agreement with the committee and the Treasury Secretary, we'll have one more questioner because the Secretary has a hard stop at 1:30 p.m. And so the Chair recognizes the gentleman from San Jose, California, Mr. Liccardo, you're recognized for five minutes.

Thank you, Mr. Chair. And thank you, Mr. Secretary, for testifying before us today. I know in addition to your many responsibilities, FinCEN comes under your duties as well in managing. And FinCEN has been very outspoken in this administration and other administrations in expressing concerns about alternative remittance systems, also known as, I think, informal value transfer systems. Is that fair?

Yes, sir.

And the many concerns, I know, with these alternative systems, including lack of documentation, anonymity, their informality make them very attractive to money laundering. Is that true?

Yes, sir.

And in fact, in particular, Chinese money laundering organizations have been very effective at utilizing these systems to acquire access to U.S. currency in various ways for nefarious means.

We were very focused on Chinese money laundering organizations, which originally began as a way for Chinese citizens to get money out of the country. As China clamped down on the leakage, they morphed into partners with the Mexican drug cartels. So we are very focused on all of that.

I appreciate that and I support that. I understand there has been some research, including published by the General... the Government Accountability Office, I'm sorry, a GAO report in 2016 and other studies as well, that have found that fines and obstacles to remittances are not very effective at stopping the flow of remittances through... in the aggregate, but in fact tend to push these remittances away from legitimate companies and remittance systems into these alternative systems. Are you familiar with some of that literature?

I'm familiar with that thinking.

This administration last year through H.R. 1 imposed a tax on remittances in Section 4475. You're familiar with that, is that right?

I am.

And as you know, many residents in the United States depend enormously on these remittances, in many cases to keep their families alive in foreign countries because it's pretty darn difficult to immigrate to the United States these days. You're familiar with the importance to so many residents in the United States to be able to have access to remittances.

I'm familiar with the difficulty coming into U.S. illegally since January 20th of last year. Yes, sir.

And quite simply, legally as well. I have residents in my district who have been waiting 20 years to get a green card, and they've been going through all the legal channels. So there are many obstacles, it's fair to say.

I don't know the specific instances of your concern.

I invite you to my district and you can meet the nearly 40 percent of my residents who were born in a foreign country that make Silicon Valley the extraordinary place that it is, and they'll tell you their tales of woe in trying to get through this system. In January, you indicated, quote, "We will strongly push to prevent anyone receiving federal government support funds from sending money overseas." Is that right?

100 percent.

In reaction, a policy analyst at the Cato Institute said, quote, that these kinds of actions are building, quote, "building a legacy of financial surveillance and control." Do you recall that?

I don't read the Cato Institute, but I do believe in financial surveillance for the remittances that should not be remitted, and we should also know where the money's going.

And if you agree that imposing taxes and obstacles to using legitimate systems may compel people to use some of these informal mechanisms, don't you agree that undercuts our objectives in addressing money laundering, the illicit activity in these alternative systems?

I disagree with taxes.

But your administration and you supported that tax last year.

I disagree with your assessment that taxes can be a hindrance.

Don't you agree that taxes can alter behavior in various ways? When people understand something costs more, they may choose a different path.

I would say that they would choose the safest path.

Well, they may. They may choose a less safe path if it just costs more to use the safe path. Don't you agree?

I believe that anyone who has a... has legitimate income, is in the U.S. legally, and is sending money home through gains where they have paid taxes, would choose the safest path.

Mr. Secretary, unfortunately, the data doesn't show what you suggest. It shows the opposite. And we're encouraging money laundering through these kinds of actions. These obstacles and these taxes are not helping American consumers.

Gentleman's time has expired. Appreciate the gentleman from California. I want to thank Treasury Secretary Bessent today for his testimony. Without objection, all members will have five legislative days to submit additional written questions for the witness to the Chair. Questions will be forwarded to the witness for his response. Mr. Secretary, please respond no later than March 11th to our questions. This hearing is adjourned.