Hearings to examine the Financial Stability Oversight Council's Annual Report to Congress.

[Gavel sounds.]

Good morning, and thank you, Secretary, for being with us today. Before I start my prepared comments, I will say that so often we have staff members who are able to move forward and move out, and so often they tell me that the best job they've ever had is working for my office, and then they leave. Ashaye Hawkins, one of my staffers that I just spoke to yesterday, has recently taken a job with Treasury, and he said he's so sad to go. I said, "Well, you can stay." He said, "No, I'm not that sad to stay." So welcome new members of your staff from my staff, and they're looking forward to working with you and working for you. As Chairman of the Banking Committee, I am committed to enacting pro-growth, pro-affordability policies. From the GENIUS Act to the Road to Housing, I am proud of the bipartisan work this committee has done to promote economic growth and affordability. As we build on that progress, it's important to remember that affordability is not an abstract concept. It's about whether families can afford a home, save for the future, and feel confident that hard work still pays off in America. Today, I want to focus on the gains we have made in affordability, growth, and how they fit together with financial stability. For many Americans, including families and small businesses at home in South Carolina, one of the fastest-growing states, I might add, in the country, these issues are not hypothetical. They shape everyday decisions about work, housing, and opportunity. Secretary Bessent, as you pointed out in your FSOC's 2025 report, economic growth and economic security are critical to financial stability. As a fellow Charlestonian, fellow South Carolinian, you understand firsthand how economic growth, population growth, and opportunity intersect at the community level. FSOC was created to identify and respond to systemic risk. But for far too long, FSOC has focused on a climate agenda that damaged financial stability and, as you pointed out, Secretary Bessent, treated nearly every single sector of the economy, financial market, and major financial institution as a potential financial stability vulnerability. Under your leadership, FSOC has rightly recognized that long-term economic growth and economic security are core components of financial stability. A system that slows growth, limits opportunity, or prices families out of basic financial services is not a stable system. It's a fragile one. Thank you for refocusing FSOC on household balance sheets and household financial resilience. When families have savings, access to affordable credit, and confidence in their financial future, they are better equipped to weather storms, weather economic shocks, and the system becomes more resilient. Strong households also strengthen local communities, and strong communities contribute to a more resilient national economy. That's why I'm interested on how FSOC balances systemic risk and its oversight with the need of economic growth, innovation, and affordability. Reassessing bank regulatory and supervisory frameworks to remove undue burdens isn't about weakening safeguards. It's about making sure the financial system works as intended for the people it serves. Coordination matters, too. Businesses should not be caught in the crossfire of conflicting rules, duplicative supervision, or regulatory whiplash. When regulators fail to coordinate, the consequences don't stay in Washington. They show up in higher costs, fewer choices, and less access at the kitchen table. Finally, I want to recognize Treasury's work implementing the GENIUS Act. This framework has the potential to expand dollar dominance, increase global demand for dollar-denominated assets like U.S. Treasuries, reduce systemic risk, and support economic growth and innovation. At the end of the day, affordability, growth, and financial stability must move forward together. For families and small businesses across the country, including back home in South Carolina, that means an economy that is growing, a financial system that is resilient, and policies that keep opportunity within reach. I am confident that our economy will continue to grow and our financial system will remain resilient. Thank you, Mr. Secretary, for being here, and I look forward to your testimony. Ranking Member Warren, you're now recognized for your opening statement.

Thank you, Mr. Chairman. So, Secretary Bessent, as one of President Trump's top economic advisors, you have a lot to answer for. Donald Trump campaigned on lowering costs on day one. Those were his words, over and over. But 381 days into his term, Trump's economic policies have driven prices up. Grocery prices are up, electricity prices are up, healthcare prices are up, the cost of building housing is up. President Trump's economic agenda is failing families, but boy, it is working great for Wall Street and Trump's billionaire buddies. There have been massive tax cuts for billionaires, big bank supervision has been cut to the bone, and sidelining the cops who go after white-collar crime. Meanwhile, middle-class families get the short end of the stick. Unemployment is growing and prices are up. But American families can't even get the basic respect of a straight answer from Team Trump. The President lies about prices being lower when every family who's walked into a grocery store knows that prices are up. Secretary Bessent tells workers that the Trump administration has created a blue-collar boom, while Donald Trump's own Labor Department reports that manufacturing jobs are down by 71,000 since Trump took office. American families aren't fooled when Secretary Bessent and President Trump try to tell them that the sky is not blue and that water is not wet. Hard-working people know in their pocketbooks just how big those lies are. They also know that Trump and his team don't have any plans to fix what is broken. Secretary Bessent is here today in his role as Chair of the Financial Stability Oversight Council. Congress created FSOC after the 2008 financial crash to protect families from large financial institutions that load up on debt and then turn around and crash our economy. Secretary Bessent could have used FSOC over the last year to tighten regulation so that we don't face more bank failures like the Silicon Valley Bank or First Republic Bank that crashed less than three years ago. Instead, he has helped to get rid of the guardrails so that banks can load up on even more risk. He's boosted profitability for giant banks and pay for CEOs while making it more likely that all of this ends in yet another taxpayer bailout. And what has he done for consumers? Secretary Bessent tried to shut down the Consumer Financial Protection Bureau, the agency that has returned more than $21 billion directly to Americans cheated by big banks and giant corporations. He's effectively told the banks they can cheat as many people as they want, and he and Donald Trump will look the other way. But it's not just about rolling back safeguards. Secretary Bessent is ignoring emerging risks in the economy. The private credit market looks like a ticking time bomb. Late last year, Moody's found that banks had $300 billion of exposure and that the risk posed by these shadowy holdings is growing. And as Jamie Dimon said, quote, "When you see one cockroach, there are probably more." But Secretary Bessent and FSOC have their eyes shut tight and have decided they don't see any cockroaches at all. Here's all you need to know about what's happening under President Trump's and Secretary Bessent's watch. Middle-class families are paying higher prices for just about everything, while it becomes harder and harder to get a raise or find a job. Meanwhile, Wall Street CEOs are getting the kid-glove treatment as Trump policies may be edging the economy closer and closer to another disastrous financial crash. Now, President Trump is so busy raking in cash from foreign governments and building his golden-encrusted ballroom that he's completely out of touch with how his economy is making life harder for millions of Americans. We are only one year into Donald Trump's second term, and if Trump and Bessent don't wake up and change course quickly, the economy may keep delivering for billionaires, but it's going to get even worse for American families. Thank you, Mr. Chairman.

Secretary Bessent.

Chairman Scott, Ranking Member Warren, and members of the committee, thank you for inviting me to discuss the Financial Stability Oversight Council's 2025 annual report. This report is the 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 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 all 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 played the role of 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, now discredited 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 under his administration. Besides undermining safety and soundness, regulation by reflex has driven excessive regulation. That can lead to economic stagnation, and economic stagnation is itself a 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 households, 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 our 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 critical infrastructure. To address this risk, the Council is supporting expanded information sharing, joint monitoring, and scenario-based exercises, and it is emphasizing 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 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 sector 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 are tuning out the white noise to concentrate on the issues that matter most for U.S. financial stability. With this overview, I look forward to taking your questions.

Thank you, Secretary. To all the members, we have essentially full attendance, and it looks like everyone wants to ask a question, so I will be pretty consistent on calling us to five minutes. I just want to make sure that you guys have a little time to prepare for that. Secretary, I'd love to give you a couple minutes to respond to some of the things the Ranking Member said, starting with the fact that two of the three largest bank failures in American history happened under President Biden, not President Trump. Correct?

Correct.

Number two, under President Biden, we saw devastation in household after household after household. He dug a big hole where the average family was losing at the end of his term over $1,000 a month in spending power. Accurate?

I would tell you workers suffered under policies championed by the Biden-Warren economy.

And President Trump has had to fill that hole. As a matter of fact, we've seen some of the strongest GDP growth that we've seen in decades.

We've seen strong GDP growth in spite of many, but not all, of the members on the right, or my right side of the room, voting for the longest government shutdown in history. Despite that, we have seen extremely strong economic growth.

And if you look at the success, and this doesn't get a lot of attention, but let's make sure that it gets more today. If you look at the success of the Working Families Tax Cut bill for those folks in blue-collar America, for the folks who are working every single day, sometimes two jobs, trying to make sure that their ends meet when they look at sitting down at the kitchen table wondering if anyone is paying attention in Washington to the suffering and the challenges around the country in their household. The answer today is absolutely, positively, unequivocally yes. We know that because in the Working Families Tax Cut bill, we saw tips. If you earn tips in America, your taxes went down significantly. Is that an accurate statement?

Yes, sir. No tax on tips, no tax on overtime, no tax on Social Security, deductibility of auto loans for American-made cars, and every Democrat voted against that and in favor of the largest tax hike in history.

On top of that, because we understand that raising children has never been more expensive, and frankly, if you looked at the attempt of my friends on the left on childcare, some of their proposals would have taken childcare from an average of $15,300 to $29,000 in some of the estimates given by their bill that they wanted to get passed under President Biden. We actually increased the child tax credit to $2,250, $2,200, right? $2,200. So when you compare the two economies and compare the two levels of leadership that we're seeing in great contrast, back-to-back leadership, there's no question that if you're looking for someone focusing on working-class Americans, undeniably, that would be the Trump economy and the Trump administration.

Mr. Chairman, during Joe Biden's tenure, CPI was 4.7 percent on an annualized basis. Cumulative CPI was 21.5 percent. There was a loss of real purchasing power for working families. Thus far, we have seen an increase in real wages. CPI for 2025 is 2.7 percent, and we have seen it fall for the past three months to 2.1, and there is an index called Truflation, which is observed inflation, not measured inflation, which comes with a lag, that just fell below 1 percent.

Wow. Only have a minute left, so I'm holding everyone to the same standard, including myself. So here's my final, not my last question, but getting close to the end. When inflation in 2021 hit 9 percent, bad or good for the American economy?

Terrible. Terrible for the American economy, terrible for the American people.

Number two, when President Trump has been able to keep inflation under 3 percent, still heading towards our goal of 2 percent, much, much better for our economy, and as a result, interest rates have been able to come down consistently.

Yes, we have seen the interest rates come down this year, and the 10-year U.S. Treasury had its best year since 2020, when the bond markets and our G7 colleagues actually had rate hikes, we had rate decreases.

Only have 10 seconds. At the end of the day, homeownership and affordability is more likely now in the Trump economy than it ever would have been under the Biden economy. Ranking Member.

Thank you, Mr. Chairman. So, for a solid year while you were running for President, Donald Trump promised pretty much every day that he was going to lower costs on day one, on day one, if he was elected. Those were his words, not mine. So, Secretary Bessent, you are one of the President's top economic advisors. Let's just start with a little truth-telling about the Trump economy one year in. Affordability is the top concern for Americans across the country. Donald Trump has called affordability, I want to get this right, a hoax. He's called it a scam. He's called it a con job. You are the Secretary of Treasury. You know the numbers. Is affordability a hoax, a scam, or a con job?

Senator, it may be a bit nuanced for you, but what President Trump is referring to is the media saying that the affordability crisis was generated by this administration when it was you and President Biden who destroyed the buying power of the American people. So there is an affordability crisis, and you were front and center in it.

So let me make sure that I understand. Donald Trump is not saying that affordability, what's happening to families right now, is a hoax?

He is saying that trying to lay the blame at this administration rather than the Biden-Warren economy is a hoax.

Okay, so it all happened before he got it. And everything that's happened since then, nothing is a hoax here. 21.5 percent cumulative inflation.

21.5 percent cumulative inflation.

Let me just ask about what's happened in the one year that Donald Trump has been President. Last week, President Trump said, quote, "We have the groceries going down." Did grocery prices drop in 2025?

Numerous prices have.

Did grocery prices drop in 2025?

Numerous grocery prices have gone down this year.

I'm sorry, I don't know if you can't hear me. Did grocery prices drop in 2025?

Numerous grocery prices have gone down, and in fact, we have seen inflation at 2.1 percent for the past three months.

Some. Okay. So do you, have you seen the Bureau of Labor Statistics, that is Donald Trump's own Bureau of Labor Statistics numbers, that report that grocery prices were 2.4 percent higher at the end of 2025 than they were at the end of 2024? Trump's own Department of Agriculture has projected that those prices would climb higher in 2026, and under Donald Trump, families are paying more and more for groceries. So if you're just going to insult people by denying the facts that are out there and tell people they're doing great when they're struggling, I think that's just another way to say you don't have a plan to bring down these prices. You're not willing to admit the failures of the Trump administration. Prices are indeed falling, falling, Senator. I will ask you a question in just a second here. It's not just groceries. The numbers from Trump's own economic agencies show that Americans are paying more for utility bills, more for healthcare, more for housing construction. Families aren't fooled by these lies. Mr. Secretary, you owe it to American families to own up what's going on. And Secretary Bessent, I have one more question for you while I have you here. You ran the search for Donald Trump's Fed Chair nominee, and Trump promised, quote, "Anyone that disagrees with me will never be Fed Chairman." Kevin Warsh got the nod last Friday, and then over the weekend, Donald Trump joked that he would sue Mr. Warsh if he failed to lower interest rates. At least I think it was a joke. But just in case, this should be an easy one, Mr. Secretary. Can you commit right here and now that Trump's Fed nominee, Kevin Warsh, will not be sued, will not be investigated by the Department of Justice if he doesn't cut interest rates exactly the way that Donald Trump wants?

That is up to the President. Can you commit that you will not hold up, can you commit that you will not hold up...

I'm sorry, you can't say that he won't be sued if he doesn't drop interest rates? And he won't be criminally investigated?

The President also made a joke about you that I won't repeat, Senator Warren. Oh, actually I will. He said he had reservations.

You know, if this was a joke, why not just say so? You can't commit...

It was a joke, and he made a joke about you too, Senator Warren. He got a lot of laughs. He got a lot of laughs.

Yeah. So I don't know if you want to respond to that. You know, I do want to respond. But what I can tell you is Mr. Warsh is highly qualified, and why don't you tell the nation what you told me, that you held up Chair Powell's renomination?

Secretary, we're going to move on to the next one. Senator Rounds, the floor is yours.

Thank you, Mr. Chairman. Mr. Secretary, first of all, thanks for being here and for your service to our nation. I'm going to come back in and talk a little on the technical side for just a minute. The FSOC's 2025 annual report recommends that its member agencies use the Council's Artificial Intelligence Working Group to identify regulatory impediments to the responsible adoption of AI by financial institutions. From your perspective, what are the biggest impediments today that prevent banks from adopting AI responsibly, especially for compliance, fraud detection, and risk management?

Well, as you know, AI is an exciting and new technology, and there's a great amount of learning to do here. So FSOC, Treasury, the regulatory agencies are working with our private partners to implement in a gradual way robust usage of AI. AI can be a great tool, but AI, we have to also think that AI can be a risk through state and non-state actors. So it is a public-private partnership, and we are pushing very hard across the agencies and at Treasury.

FSOC's report also recognizes that overly complex and subjective supervision, like reliance on vague concepts such as reputational risk, as you mentioned in your opening statement, restricts valuable activities. Given FSOC's push for clearer standards in responsible AI adoption, would a time-limited AI sandbox for financial institutions with clear guardrails help firms test AI tools in a controlled setting while regulators evaluate risks and benefits?

Senator, that is clearly one very interesting option, and we are considering that moving forward. We'd be happy to work with your staff on that.

I feel very passionate about that part of it. I would look forward to working with your team as well, sir. I'm also just curious. We've talked now, and the discussion will go on and on about how we really build the economy and so forth. But I think just for the American public, since they probably don't get an opportunity to just have a back-and-forth with the Secretary of the Treasury very often, let's talk a little bit about how we really reduce the price of getting a home for an American family. I think a lot of it has to do with bringing down the interest rates that charge in a 30-year mortgage. Can you share with us a little bit, we talked about Treasuries and you mentioned that the rate of Treasuries, the cost of Treasuries is coming down. Can you share a little bit about what it takes to bring down the price of Treasuries with regard to the growth of GDP, and when Treasury rates come down, what that does for an average American homebuyer who's looking at a 30-year mortgage?

Well, I'd be glad to, Senator, because President Trump is focused on Main Street and not Harvard Square. So a mortgage rate is two components. We could say that it is a derivative of the 10-year, but it's really a seven-and-a-half-year, and we have seen that decline, and then it is the spread between... ...the 10-year bond and the actual mortgage security, and we have seen that is at multi-year lows. So what we saw in January was the lowest mortgage rates in almost three years.

You know, we've got $37 trillion in debt. A lot of the folks back out there saying if you've got that much debt and you're paying interest on it, that competes with folks that want to loan you money on a mortgage. Can you talk about what it means to build GDP and how someone who is looking at laying out bonds and so forth as you build GDP, what that does and how that impacts a homeowner?

Yes, because two things, sir. We brought down the fiscal deficit for the calendar year, so from 2024 to 2025. At 2024, the deficit to GDP, which is a very important number, was 6.9, 7 percent, highest when we weren't at war or in a recession. We brought it down to 5.4. That was the combination of holding spending and growing the economy. And as we continue to do that, interest rates will naturally decline and it pushes out inflation. What we could see from an MIT study was that the Democrats' spending was responsible for almost half of the great inflation. The overspending, according to MIT, was responsible for that and penalized American homeowners. So by controlling the budget, growing in a responsible way, we will bring down mortgage rates. And I would say that building costs are now down in the year.

Thank you. Thank you, Mr. Chairman.

Yes, sir. Senator Reed.

Thank you, Mr. Chairman. Mr. Secretary, the President announced on January 9, in his words, quote, "Effective January 20, 2026, I, as President of the United States, am calling for a one-year cap on credit card interest rates of 10 percent." In remarks to the World Economic Forum in Davos, the President further said, quote, "The profit margin for credit card companies now exceeds 50 percent." He also indicated that Americans are paying 28, 30 percent interest rates. You are one of his top economic advisors, Mr. Secretary. Do you support interest rate caps to improve affordability on credit?

I wholeheartedly support President Trump's policy, and I think that what you've just said would be in direct contrast to what Senator Warren said about this administration favoring the big banks. But those are facts.

Well, I don't think my statement indicates at all what Senator Warren said or meant. I wanted an answer and you gave me one. But let's look at the current situation. We already have legislation that protects service members by putting a 36 percent cap, not just on credit cards, but all credit relationships. And it protects them from being exploited, and as in my youth, I was a company commander and saw it firsthand. Would it make sense as a first step to provide a 36 percent interest rate for all Americans, not just service members?

36 percent doesn't seem like much protection to me, Senator.

Well, it's better than some of the things that are being presented to service members without the rates. These new plans to buy commodities and sometimes the rates go to 500. And still today, you have entrepreneurs who are charging extraordinary rates, and particularly to vulnerable populations, which I know they don't congregate in Harvard Square, but they also don't hang out in New Haven either. So I think that would be a sound step, Mr. Secretary.

Senator, you haven't seen all of New Haven.

I haven't, but I've seen a lot of it. The parts that you might have missed. The situation at Fannie and Freddie is significant. We have significant federal interest financially in Fannie and Freddie. But under the director, Mr. Polti, these taxpayer-owned assets in the long run compliance with the law or with stock exchange listing standards. Polti has appointed himself as director of both boards, even though the law says, quote, "The director may not hold any office position or employment in Fannie or Freddie." A majority of the Fannie board has not been determined to be independent. The audit committee is no longer comprised entirely of independent members. And the committee has been, the governance has been stacked by political affiliates. These are all prohibited by law and regulation. So how will you bring them into compliance, Mr. Secretary?

That would be FHFA, not Treasury.

Excuse me. You are one of the largest, or the taxpayers are. You provided them, Treasury did, not you personally, a $200 billion bailout in 2008 and you have no interest in Fannie or Freddie?

I'm very interested in Fannie and Freddie, and I'm interested in its fulfilling its mission to the American people to keep mortgage rates low.

What about following the laws?

So again, you should ask Director Polti. I do not see, I don't think this creates a financial...

Well, all right, Mr. Secretary. You have nothing to do with Fannie and Freddie. Director Polti has said that you and him are, quote, "very aligned and we meet regularly about the conservatorship." By the way, it's in conservatorship because of Secretary Paulson, your predecessor. According to Fannie and Freddie's annual reports, the companies, quote, "continue to rely on financial support from Treasury pursuant to our senior preferred stock purchase agreement, under which taxpayers own one million preferred shares and a warrant to purchase up to 80 percent of their shares. Treasury staff manages those shares and warrants for the taxpayers." Your predecessor Hank Paulson placed these companies into conservatorship. So you have the premise or the power to place Fannie and Freddie into conservatorship. I would think that that gives you a little bit leverage talking to Mr. Polti about why he's not following the law. You're reneging on responsibilities, Mr. Secretary. And you're also having, being the senior person here, your behavior to some of my colleagues is absolutely childish. Thank you.

Thank you, Senator. Good to see you.

Senator Kennedy.

Hello, Mr. Secretary. I'm over here. How are you? Good. Mr. Secretary, as you're also head of the IRS, we've had some tough ice storms. Would you and your colleagues consider an extension on allowing, an extension to allow people to file taxes a little bit later?

Senator, I've been in touch with the Governor of the great state of Louisiana and he and I and my staff are working on it. It is traditional to grant extensions for events like this.

Good. If Canada came to the United States, let me preface this by saying I understand that tariffs have a number of purposes. But the foremost reason for tariffs is to try to stop other countries from taking advantage of us through either their tariffs or trade barriers. If Canada, for example, came to the United States and said, "We're going to zero tariffs in the United States. All of them are off on our end." Would you, Mr. President, speaking to our President, go to zero tariffs and then just let Canadian companies and American companies compete on a level playing field?

Absolutely not. As we saw last week, when Prime Minister, two weeks ago, when Prime Minister Carney went to China, he lowered tariffs on Chinese EVs from 100 percent to 6 percent. U.S. has a 100 percent tariff on Chinese EVs. We couldn't let that, we couldn't let our northern border be used as a way for Chinese EVs to come into the U.S.

Right. Okay. I'm going to lead you a little bit because Senator Scott is a she-bear when it comes to time. The poverty rate according to the Census Bureau is 11 percent, isn't it, in America?

I'll take your word, Senator.

And that's the Census Bureau defines poverty, does it not?

Yes, sir.

Is it not true that the Census Bureau in defining poverty and determining that our poverty rate is 11 percent, or 36 million Americans, which makes us look bad, only will consider direct cash payments from the federal government to poor people, such as let's say SSI payments or TANF payments?

Correct.

Okay. And isn't it true that the Census Bureau in determining poverty doesn't include things, doesn't include non-cash payments? It doesn't include Medicaid or food stamps or housing subsidies or refundable tax credits. Isn't that true?

That is correct, Senator.

Yeah. Let me give you an example. Mom, two kids, poverty level for her and her kids is $27,000. Mom works part-time, she makes $11,000. According to our Census Bureau, she's poor, she's below the poverty line. But she also receives, she works, recall I said, makes $11,000 a year. She receives $4,100 in refundable earned income tax credits, $3,400 in refundable child tax credits, which means she gets a check, $9,200 in food stamps, $9,500 in housing subsidies, $900 in utility bill subsidies, $16,000 in Medicaid, $31,000 a year in free school lunches, and $6,000 in TANF payments. If you add that up, that's $64,100 a year according to math.

I'll believe your arithmetic, Senator.

Okay. But using the Census Bureau's definition of poor, they don't include all these payments. They just include her income and the TANF payment. Does that make sense to you?

No, sir, and you should bring that up with the Commerce Department.

I know, but you've got influence. I know how close you and the Commerce Secretary are. I'm hoping you could bring it up with somebody above.

The President says we're opposites and I'm tall.

I'm not going to comment on that. Would you talk to the President about this? If you include all cash and non-cash payments, the poverty rate in America is 1 percent.

That's a good point to end on. Thank you, Senator.

I told you he was a she-bear.

I'm not quite sure what the she-bear is. Senator Moreno and I will talk about the she-bear later. Let's go on to Senator Van Hollen.

Thank you, Mr. Chairman. Mr. Secretary, I think you would agree that the credibility of the Secretary of the Treasury is important, and I want to give you a chance to retract a statement that you made on national TV. Alex Preti was shot 10 times and killed by federal agents in Minneapolis. The administration, some in the administration called him a quote, "domestic terrorist." You suggested that Alex Preti was culpable in his own killing because he had a gun in his waistband holster, which he was licensed to carry. When asked, you said, quote, "I'm sorry this gentleman is dead, but," and you went on to say he had a weapon, suggesting that he was culpable in his own killing. So Mr. Secretary, today, would you like to retract that statement?

I would not. And would you like to express remorse over the death of Ashli Babbitt here in the Capitol?

Oh, I have expressed remorse over that. So I've done that. Mr. Secretary, Mr. Secretary, please don't. So you think, I just have other questions, but I actually would have expected you to take this opportunity to rephrase your response to that question. So you think the fact that he legally had a gun justified his killing?

I didn't say that at all.

You said do you think he was culpable, partly to blame in his own killing because he had a gun.

I did not say that.

I'm asking you a question now. Do you believe he was in any way culpable for his own killing because he legally carried a gun?

Again, this is an FSOC hearing.

Yeah, but you're the Secretary of the Treasury. Why don't we talk about financial stability and oversight? I'm happy to, Mr. Secretary, but your credibility is important. And in that response, you really, I think, let down the country because we expect honesty after that kind of terrible tragedy. Let me ask you about FSOC. I'm glad that you've all established a household resilience committee because people are being financially squeezed from every side. And I've got a whole bunch of quotes here from candidate Donald Trump on the campaign trail. "Starting the day I take office, I will rapidly drive down prices and we will make America affordable again." It's interesting he used that phrase since he's been making fun of the affordability phrase recently. But I listened to your exchange with Senator Warren, and the facts show very clearly that inflation has not been eliminated, has it? Right?

It is undesirable to completely eliminate inflation. What is desirable is to get back to the Fed's 2 percent target. And for the past three months, we've been at 2.1 percent, Senator. The 21.5 percent under the Biden administration...

Now look, Mr. Secretary, I know how you're playing games. You're doing the aggregate over the Biden administration, the last few months. No, the number 2.7 is your own number for last year, the year of the Trump administration. So let me ask you...

And you're being a deconstructionist saying day one.

Well, I'm just reading the President's own statements. I mean, if he's... Okay. I'm glad you all have the same talking points. Mr. Chairman, I would ask unanimous consent that these statements be placed in the record.

Without objection.

All right. Look, Mr. Secretary. You used to believe that tariffs would increase inflation and prices. Isn't that true?

I wrote that in a letter to my investors, but a year before, I also wrote that I thought Senator Warren would be the Democratic presidential nominee. So my predictions have been bad. So please.

Mr. Secretary, it was January 2024. You said that increased tariffs would raise prices, right?

No, I said they could, and I also said it would strengthen the dollar. And the opposite has happened. The prices have not gone up due to 150 years of data from the San Francisco Fed.

Mr. Secretary, you're again, you're cherry-picking numbers. It is a fact that prices continue to go up. I understand that that is desirable over the long term. I understand that you said just at this hearing that building costs are down. I just want to point out for the record that the National Association of Home Builders said on January 29, not very long ago, that costs are up. Construction costs account for about 65 percent of average home prices in 2024, and they say, and I'm quoting, "record high for construction costs since the inception of the series in 1998." Not the Biden administration, 1998. Thank you, Mr. Chairman.

Yes, sir. That 2024 number? Senator Hagerty.

This is a number from the home builders. I'm happy to share it with you.

Thank you.

Thank you, Mr. Chairman. Secretary Bessent, it's always great to have you here. There's not a day that goes by that I don't get someone complimenting on the great work that you and your team are doing at the Department of Treasury. If you'd like an extra moment to respond to Senator Van Hollen, I would be more than welcome to...

No, I think he speaks for himself.

Okay. Well, Secretary, over the years, excessive and misguided regulation have distorted markets and imposed undue cost on the American people. I'm particularly concerned about this dynamic in our banking system. As you and I wrote together in the Wall Street Journal, Dodd-Frank sought to end, quote, "too big to fail." But in fact, it created a regulatory environment in which community banks are, quote, "too small to succeed." Policy errors have entrenched the dominance of the largest banks and made it even more difficult for community banks, which lack the market-distorting perception of being too big to fail. For smaller banks, the result has been a bloodbath. The U.S. has lost 3,600 community banks since 2010, nearly a 50 percent decline in the community banks in our nation. Secretary, I've proposed bipartisan legislation to increase the deposit insurance limit for non-interest-bearing transaction accounts. This is not a wholesale increase in the deposit insurance limit, it's a narrow reform targeting only non-interest-bearing accounts, typically payroll accounts. How does this bill, this targeted expansion of coverage, fit into the administration's vision for supporting community banks?

Senator, as you know, I along with you am one of the great and another member of this committee are great advocates of this because what we have seen is depositors, investors believe that large banks have an implicit guarantee on all of their deposits during a time of crisis, during a stress event, as we saw in March of 2023, deposits flee from small banks because they do not are not believed to have that implicit guarantee. So if we can have a an account for which small businesses, normally their payroll accounts, can deposit funds with the surety that they will be returned, then it will stop that deposit beta, allow Main Street to flourish. What we have seen since the great financial crisis due to overregulation, 50, 50 percent of community and small banks have disappeared. And that is what is harming Main Street.

Well, thank you, Mr. Secretary, and I think that's precisely why the National Association of Community Banks have supported my legislation and the legislation you and I wrote about in the Wall Street Journal. Last year, Mr. Secretary, President Trump signed my bill, the GENIUS Act, into law. Private sector estimates suggest that stablecoin adoption may reach between $1 trillion and $3 trillion by the end of this decade. As you know, the GENIUS Act requires stablecoins to be backed by high-quality liquid assets such as U.S. Treasuries. How does the U.S. leadership in crypto and stablecoins fit into Treasury strategy for maintaining the dollar's role in the center of the global financial system?

Well, Senator, I want to congratulate you and your colleagues, both sides of the aisle, but thank you for your leadership on this. This can be an important source of funding for the U.S. government. As we push down the funding for the U.S. government, that helps everyday Americans, whether it is for mortgages or any other borrowing requirements, keeps taxes low. And we believe that with the U.S. having the safest, soundest, best practices, we can draw in new sources of funding via the stablecoin mechanism.

If you think about the impact of the passage of the GENIUS Act, it was a major statement in terms of keeping innovation onshore. And I'd just like to get your perspective in terms of the stability and clarity that we provided with the GENIUS Act and what that means for keeping innovative capacity here in America.

Well, it's innovative capacity in digital assets and remaining the leader in that is imperative. And what we don't want to have are central bank digital assets, which we are seeing in the rest of the world. And Senator, as you and I have often discussed, we are going to see a choice between American private sector assets with our best practices in regulation or between central bank digital assets, whether in Europe, whether in China, in the rest of the world. And I think the world is going to choose the U.S. dollar and the private sector well-regulated choice that U.S. stablecoins will provide.

Well, I couldn't agree more, and I think that underscores my sensitivity to not undoing ex post facto the good work that we did in GENIUS. I want to see us put in place international reciprocal regimes that work. I want to increase the demand for U.S. Treasuries as you do, and I'm going to encourage my colleagues to preserve the GENIUS Act given all the hard work that went into it. Thank you, Mr. Chairman.

Good. Thank you for your leadership, Senator.

Thank you, Mr. Secretary.

Senator Cortez Masto.

Thank you. Thank you, Mr. Chairman. It was a question, but I wanted to make sure it was right. Thank you, Ranking Member. Secretary, thank you for being here. I appreciate your opening comments and your report of the Financial Stability Oversight Council's 2025 annual report. You stated in your opening comments that the 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 destiny. So let's talk about building businesses under this administration. And this is nothing new to you because we've been talking and I've been talking to you about this for the last year. In Nevada, travel and tourism are the backbone of our economy. Tourism makes up nearly 30 percent of Nevada's economy, generating 24.4 billion in total wages. This administration's blanket tariffs and insulting rhetoric towards our closest allies are damaging of America's tourism economy. For instance, the U.S. saw 12 straight months of declining visitors from Canada last year, the top international market for Las Vegas. That's roughly a 20 percent decrease for my state. That is countless dollars, jobs that my state, we are losing, paychecks that won't go to Nevada residents, including the over 400,000 hospitality workers across the state who are dealing with this issue. So my question to you is, will you apologize for driving away visitors and hurting our working families?

Couple of things, Senator. One is the Canadian economy is doing poorly, so perhaps part of that, maybe we should deconstruct the why Canadian tourism is down.

I'm talking about internationally. It's not just me, it's Florida, it's other states that are dealing with a decline in tourism. And this is my conversation with you for the last year that seems to be this administration keeps ignoring. It is a billion-trillion dollar industry to this country and you don't seem to think it is important. Let me talk about something else though. You mentioned how you're trying to help our my service industry. And I supported this, no tax on tips, because I think more people should keep money in their pocket. But if you're in a service industry and you don't have tourism coming and you don't have a job, doesn't really matter if your tips are taxed if you're not getting tips. There is a problem. You just have to come to my state, talk to my service industry, talk to the individuals to see. They are not feeling better, no matter how much you and this administration start talking about how wonderful this economy is, they're not seeing it. It is a problem. And all I'm asking, and I think some of my colleagues as well, let's fix it. There's affordability issue in this country and we need to address it working together. Let's solve this problem. Let's not come up with facts, let's not tell the American public something that they don't see in their own bank account. Let's just work together to figure it out. That's all I'm asking. I'm asking you to work with us. One final thing. It's not just my service industry, it is small businesses across the country who are being squeezed. We have seen it time and time again, the tourist, listen, the facts are there. You can debate with me the facts, but the truth of the matter is many of our small businesses are being squeezed right now, higher prices, absorbing higher costs. Some of them have had to shutter. The small businesses are the backbone of our industry. We've got to do a better job for them. I know my time is up. Thank you, Mr. Chairman.

Thank you, ma'am. Senator Tillis.

Thank you, Mr. Chairman. Mr. Bessent, thank you for being here. I'm going to give you a breather because I got a statement to make that I don't expect you to respond to. Mr. Chairman, I seek unanimous consent to put into the record the statement of various Banking Committee members with respect to the testimony of Chair Powell in his last hearing here. Without objection. Thank you. Mr. Chairman, that's a list of members who have indicated that they did not see criminal intent in his comments here before he was in the Banking Committee. The reason I brought this up is I had a reporter yesterday challenge me on why it was inappropriate for a sitting member to to question a pending investigation. I never do that. But I told the reporter I did it because I was actually a witness at the alleged scene of the crime. The entire case against Senator Powell is encapsulated in his answers to questions before this committee. And now including the Chair, we have witnesses at the alleged scene of the crime having, I mean, say we're disappointed with Chair Powell. I actually like Warsh as a potential chair, but we've all said that he was testifying and we didn't see a crime. And so I'm reminded, I don't know about you all, I watch Forensic Files, I've been watching it for years. And I'm kind of thinking about the scene would go like this. In spite of seven witnesses, eyewitnesses saying no crime was committed, the prosecutor thinks otherwise. And then you hear that music and you cut to commercial. So I do think it's fine for me, being a witness at the scene of the alleged crime, saying that we got a majority of people on this side of the aisle that didn't think a crime got committed either. If we do this sort of stuff, I believe that future hearings for the Treasury Secretary and other members will be a lot like... ...like that Chappelle skit on I plead the fifth. They're going to have they're going to be flanked with attorneys and anytime that they think that they're in the middle of a perjury trap, they're probably just going to say I'll submit it to the record after consultation with my attorneys. Is that really the way we want oversight to go in the future? I don't expect an answer to the question, but I did want to get that off my chest so I gave a more fulsome answer to that reporter who asked why it was that I was opining on an active investigation. Mr. Secretary, I'm thrilled that you're in the role you're in. I think you're a steady influence. I know that I've been public about criticizing certain President's advisors, you're certainly not one of them. But I do have a question. I actually ran into Senator Warren on the floor and I said, my goodness, Elizabeth, I call her Elizabeth when we're talking on the floor, I said, you have convinced President Trump to put artificial caps on credit card rates. Good on you. Now I'm going to do everything I can to kill it, but good on you. I think you even talked to the President about that, right? Mr. Secretary, what would happen if we put and well I don't know where you are on the policy, but what would happen to let's just say one area, asset-backed securities, if we imposed artificial 10 percent cap on credit card interest rates? And then if you have time in the minute, it's the only question I'm going to ask you. What would it likely do for credit card issuers who are still going to have to rate for risk in terms of de-banking or unbanking or reducing access to a credit? So if you could get to the first one which has to do with the asset-backed securities, if you have time you can go to the second one. Thank you.

Yes. I think we at Treasury are still examining what it would do to the asset security market. I think it would depend on the length, the President has called for one year. And we would also see if they were able to cut costs, Senator, because what's happened is we've seen a migration where credit card companies used to compete on APR or the interest rate to rewards and the rewards go mostly to the upper end. So again, the profitability of credit card companies doesn't have to be hit if they concentrate more on competing on rates than rewards.

More on the spread, but there's a lot of frothiness in there if we don't get it right. Thank you, Mr. Treasurer.

Thank you, sir. Senator Warner.

Thank you, Mr. Chairman. And boy, I didn't hear Senator Kennedy this morning, but Senator Tillis, you were like out-Kennedy-ing Kennedy today in terms of your presentation.

That's a high bar.

That's a high bar. Mr. Secretary, good to see you. No, no, Mr. Secretary, I got to get my in a House move, I reclaim my time.

Four minutes and 38 seconds. Please use them.

You actually have a total of four. All right, Mr. Secretary, I got a bunch of stuff. Let's one, one of the reasons I'd voted for you and encouraged others was your support for CDFIs. One of the things I'm really proud of, Senator Crapo and I have had an active bipartisan CDFI caucus and last October, oh my gosh, Senator Crapo got 105 Republican members of Congress, including eight Republicans on this committee, to say CDFIs, it's a good program. Yet the CDFI fund at $324 million in fiscal year 25, it's now February 26 and none of these funds have been released. And I know we've talked about this, Treasury I know works with OMB and some difficulties there. And we're hearing from CDFIs and how this is dramatically affecting. When can we expect those funds to get released?

Senator, I can't give you an answer. OMB will decide the terms and the timing of this CDFI apportionment.

Mr. Secretary, I got to tell you, you know, you're the Treasury Secretary, you run this program. You had 105 Republicans say we need to get the money out.

Senator, unlike the Federal Reserve, I can't print magic money.

Well you sure as heck could call the OMB director and say this is a program that you have legal authority over, it is important. Matter of fact, as as we talked about, President Trump in many ways, I know he's forgotten this, but in 2019 became the godfather of CDFIs when in the last Trump COVID package, he put $12 billion into this program. So I urge you, please, Mr. Secretary, pick up the phone and call, I know it would be difficult, I wouldn't want to talk to the OMB director either that much, but please talk to him and see if you can get those dollars released. It is so important and and I hope the eight of my Republican colleagues will at least say attaboy Warner on this one. Thank you, Mr. Chairman. I reserve my time back. I want to add, I know we've we're spending a lot I feel like I'm in crypto hell. I know Cynthia, welcome to it and God bless you and and and you know, I think and actually and I really appreciate what you did on the stablecoins bill and I think, you know, we got a lot of broad bipartisan support. At least many of us, I think all of my Republicans and many of my Democratic friends agree, we want these products built in America. Crypto's here to stay and we need clear rules of the road. And stablecoin was simple compared to market structure. But you have one of the things that we see in crypto and we are working our tail off. You can please I think the Chairman and I have spent and Cynthia and others have spent more time on this than anyway, I'm going to use up my time. But there are a lot of issues around national security that you have unique perspectives on with FinCEN, with the Secret Service. We sure as heck don't want to take away from prosecutors some of the tools they have to go against bad guys. You know, we've got to have some area to close down some of the gaps in DeFi. And again, there's bipartisan agreement on this, but boy we need I think we're starting to get some of the technical assistance. But if you can just make clear that this is a real problem and you know, we'll deal with yields and rewards, we'll deal with a host of other issues, but these national security issues around DeFi are real and we need to not create a set of rules that leaves huge exemptions and candidly takes away some of the prosecutorial powers that exist today.

Senator, I look forward to working with you on that. We've had problems and historically there's problems when the technology gets ahead of the legislation. So if we can work with you on the legislation for the it's for both OFAC and FinCEN, we we...

Well we'd love your technical assistance and I think, Mr. Chairman and Senator Lummis, that you will be invited to our next round robin on that and that may be later today or tomorrow or Monday. So...

Good. And if you could convince some of the there seems to be a nihilist group in the industry who would prefer no regulation over this very good regulation.

Amen, brother. So weigh in. I do. Weigh in early and often, Senator. Weigh in. One last comment, I know my time is up. No, last comment. Oh, ho. Hey, Senator, Senator. Agentic AI, we got to come back and talk about. Agentic AI, huge possibilities with AI, but we've got to be careful about that. Thank you, Mr. Chairman.

Unbelievable. Okay. Senator Lummis.

Thank you. I'm going to pursue this line of questioning. Thank you, Mr. Secretary, for being here. You've had a chance to travel the world since you took the oath of office. Is China trying to use digital assets and blockchain to build an alternative to American financial leadership?

We don't know that for sure. There are lots of rumors of Chinese digital assets, of Chinese digital assets that may be backed by something other than the RMB, perhaps gold-based. We haven't seen that. They have a very large sandbox in Hong Kong and HKMA is actively traveling the world looking at different mechanisms. So I would not be surprised.

Based on what you know now, what is your opinion about the importance of having clear rules of the road, market structure legislation in the United States?

Look, I I think that it's impossible to proceed without it. We have to get this clarity act across the finish line and any market participants who don't market participants who don't want it should move to El Salvador.

So as a industry, what is the benefit to having this industry embedded in the U.S. economy?

Well again, as as I said, that that there seem to be people who want to live in the the U.S. but not have rules for this important industry and we've got to bring safe safe, sound and smart practices and the oversight of the U.S. government, but also allow for the freedom that is that is crypto. And I think it's a balance that is being worked out. It was worked out in the Genius Act and I'm confident with leadership of people on both sides of the aisle that we can get clarity across the line this year.

Can you see a day when conventional banks and digital asset banking are offering the same types of products, giving each an advantage to offering a broader array of financial products to the American consumer?

I think that can happen over time and we've actually been working with small and community banks to discuss how they can be part of the digital asset revolution also.

Among the things that have challenged us in these last months is concern by community banks and big banks that the stablecoin bill, the Genius Act and market structure could cause a bleeding of deposits from small banks. What's your reaction to that concern?

Look, I've been a champion of these small banks and deposit volatility is very undesirable because it is the stability of those deposits that allows them to lend into their communities, ag, small business, real estate and we will continue to work to make sure that there is no deposit volatility associated with this.

Well as an ag borrower, I commend you on that because I have borrowed from community banks on our ag operation for decades and we're dependent on our community banking relationships in rural America to help sustain us and grow our businesses. So I I very much appreciate that. I want to switch to digital asset taxation for just a minute. So among the things that I'm exploring and the Senate Finance Committee has a package of bills that looks really good to me on digital asset taxation. But one of them that's kind of vexing that I could use some guidance on is the issue of de minimis with regard to especially Bitcoin and other digital assets that might be used as a means of exchange. So the issue is will it be a capital gain or will it be exempt from capital gains when it's used as a means of exchange to purchase things? And if it's going to be a subject to a capital gain, how do you calculate what the capital gain is if somebody has a blended portfolio of Bitcoin, some of which were purchased when it was $300, some of which were purchased today at 75,000 and some of which were purchased a year ago at over 100,000? How do you calculate the capital gain? Do you have some thoughts about that or who I could consult with in your shop?

Look, it's a very complicated subject. We'd be very happy to have our Office of Tax Policy work with your team.

I'll be over. Thank you, Mr. Secretary.

Look forward to seeing you.

Senator Smith.

Thank you, Mr. Chair. Mr. Secretary, would you consider food and ag to be an important part of the U.S. economy?

Extremely.

Thank you. I agree with you on that. The U.S. food and ag sector is a massive economic force contributing over $9.5 trillion supporting over 24 million jobs. So Mr. Chair, what I'd like to do is to submit a letter for the record. This is a letter sent on Tuesday to the ag committees in both the House and the Senate. It's signed by 27 former and current leaders in the ag sector from all across the country. It's a very bipartisan letter, folks from corn, pork, milk, grains, renewable fuels, Farm Bureau, former USDA officials from both Democratic and Republican administrations.

Without objection.

Thank you. Secretary Bessent, as you no doubt know and as this letter points out, farm bankruptcies have doubled. Barely half of all farms are profitable this year. The U.S. is running an historic agriculture trade deficit, which is a sharp reversal from record surpluses and farmers are paying higher prices for everything from healthcare to farm inputs, grocery and utility bills. And I want to just read you a piece of this letter which says, consider the impact of the China trade war on soybeans alone. In 2018 when the China tariffs were initially proposed, whole U.S. soybean exports represented 47 percent of the world market today, it's down to just 24.4 percent. The letter goes on. So Secretary Bessent, my question for you is when can farmers expect this turbulence and this chaos to stop and input prices to begin to stabilize or at least come down for them?

Well Senator, as you know, input prices spiked under the Biden administration and...

Secretary Bessent, when can we expect...

Again, it's market-based and the as someone who until the end of last year was involved in the ag sector, I can tell you it was a record harvest. So it is a problem of abundance, but costs are up. We are working to bring the cost...

Input costs are up, I believe, Mr. Secretary, in large part because tariffs are driving those costs up and this is causing massive uncertainty and chaos in the farm sector, which is really hurting many, many farmers in my state and around the country.

Senator, it was very unfortunate that the Chinese decided to use our great farmers, soybean farmers, as pawn in trade negotiations. We have the administration's come out with a $12 billion package and we have guarantees from the Chinese, they bought $12 billion of soybeans just since October. They are committed to buying excuse me, not 12 billion, 12 million tons, they will buy 12 25 million tons for the next three years to stabilize the market.

But what is happening for farmers in Minnesota is this this constant on-again off-again, tariffs on, tariffs off. It is chaotic, it is confusing and it is destroying our markets. And so...

It has nothing to do with the tariffs on, tariffs off.

Well I think it has a lot to do and these farmers believe that it has a lot to do with Trump tariff policy. I want to just, Mr. Chair, if I may, I before I close, I want to link this conversation to some of the challenges that are happening in the ag sector and the larger economic challenges in Minnesota caused by the immigration action that is happening in Minnesota right now. Because the truth is that ag country is heavily impacted by this. This mass deportation plan is having a huge impact on the ability of farmers in my state to be able to get access to labor. And I'm talking about people who are here legally. And I know that my colleagues on both sides of the aisle that represent farm country understand you are hearing this from your farmers and ranchers as well. And it is having huge impacts on dairy and fruit and veggies. It is a major problem not just in the farm sector, but all across my state where just in Minneapolis alone, separate from agriculture, small businesses are losing an estimated $20 million a week because of customers just not being able to show up, being afraid, workers being unable to go to work because they they're afraid of going out. The bottom line here, colleagues, is that this mass deportation plan was supposed to go after the worst of the worst, but what's really happening is that these poorly trained and aggressive agents are breaking families apart, they are hurting children, they are separating from their families, they are targeting and detaining and arresting people that have done nothing wrong and that is morally reprehensible. And Mr. Secretary, it is reprehensible that you would blame Alex Preti, a U.S. citizen, for his own death shot in the back by these federal agents.

I never never blamed...

Senator, your time is up. Senator, your time is up.

Thank you, Mr. Chairman. I'd like to just respectfully respond to my colleague and give you an opportunity to actually respond as well, Mr. Secretary. When I look back over the last four years of the Biden administration, it was failed policies for our agriculture industry. Number one, President Biden walked away from the trade deals and the trade gains that President Trump had gotten for our ag industry. Number two, with record high inflation, it hit our farmers worse than anyone. Both the energy, the war on energy of the Biden administration, plus the amount and the payment of equipment, plus the fact that input costs had literally been frozen and the Biden administration failed to pass a farm bill, didn't even try. So here you had record high cost with energy, equipment, labor, inflation and then you cap what they can make. And I don't remember one person on the other side of the aisle saying, let's move a farm bill, let's help these people, let's drive down energy cost. And so so I would just like to say, Mr. Secretary, I feel like our ag industry is at the forefront of what we're looking at right now and I'd like to give you an opportunity to respond.

Well one of the things I'll respond to is that in my first meeting with my Chinese counterpart, the Vice Premier, I asked him under the phase one purchase agreements, they were actually exceeded in 2020, signed in January 2020, the agreement the level of the agreement was exceeded. Every time President Trump has spoken with Party Chair Xi, he suggested he buys more soybeans and slowly that the tapered off and we said why? He said Biden didn't enforce. Biden didn't enforce the purchase agreements.

Yeah, walked away from it. So speaking of something else we walked away from in the Biden administration was actually being tough on Iran when it came to sanctions. I appreciate the maximum pressure strategy that President Trump has gone back to. I'd like to ask you what more can we be doing as we see us place pressure on the Ayatollah who is no friend of the United States of America and as we see what he is doing to the citizens of his own country and the streets, what more can we be doing to make sure that we are placing the pressure that we need to on the greatest state sponsor of terrorism and that is the Ayatollah and Iran?

Well what we can do at Treasury and what we have to have done is created a dollar shortage in the country. At a speech at the Economic Club of New York in March, I outlined the strategy. It came to a swift and I would say grand culmination in December when one of the largest banks in Iran went under, there was a run on the bank, the Central Bank had to print money, the Iranian currency went into freefall, inflation exploded and hence we have seen the Iranian people out on the street. We will continue monitoring all the partners the all the Iranian partners. The good news, Senator, is that we have seen and we can see it with our FinCEN, we have seen the Iranian leadership wiring money out of the country like crazy. So the rats are leaving the ship and that is a good sign that they know the end may be near.

I want to switch quickly to regulatory tailoring. It is obviously my belief that proper tailoring actually ensures that supervision is grounded in economic reality rather than subject ideology. Can you speak a little bit to the work that you and FSOC agencies are doing to more properly calibrate our regulatory framework, whether it's capital rules or stress testing or even adjusting to outdated thresholds?

Again, we are looking at all the thresholds. One thing that happened, too big to fail became too small to succeed as Senator Hagerty said and we don't want to see more of our small banks go under. What we want to see before the great financial crisis and the successive regulation the on the system was we would see about 50 new banks formed every year, by definition small banks and we need to get back to doing that. We need to get back to small banks. I was talking to a community banker, 17 employees, three compliance people.

And last I've got 30 seconds, but there have been claims made by the other side of the aisle, even tweets put out, I can provide that for you if you need that, but some pretty serious accusations in saying I we have a tweet actually from the ranking member that that says and I want you to be able to correct the record if this is true, but essentially claims that the IRS has gutted enforcement and dismantled the DOJ or forced tax fraud investigators to actually stop doing their job. Does that have any legitimacy at all? Because I think that gives us all concern if that's the truth.

Complete complete sophistry. We've identified $10 billion in tax crimes, up 15 percent from 2024, $4.5 billion tax fraud, up 110 percent from last year.

Thank you.

Thank you. Senator Warnock.

Thank you, Chair Scott, and welcome, Secretary Bessent. President Trump promised that his administration would usher in a quote golden age of American manufacturing. In September 2024 at a rally in my home state of Georgia, Donald Trump said, quote, we're going to have a manufacturing boom. Secretary Bessent, we're now more than one year into the Trump administration. Yes or no, has there been a manufacturing boom in the United States?

There are the beginnings of a manufacturing boom. We have intentions, factory groundbreakings, sir.

So so your answer to that is yes, there's been a manufacturing boom?

That we are at the beginning of a manufacturing boom.

Okay, you and I could agree to disagree. But more importantly, manufacturers are telling us something different. Manufacturers are struggling because of the President's policies and that's what they keep telling us and the facts keep telling us. In fact, just this past Monday, the Wall Street Journal published this article entitled U.S. Manufacturing Is in Retreat and Trump's Tariffs Aren't Helping. I request consent to enter this article into the hearing record, Mr. Chairman.

Without objection.

Secretary Bessent, do you know how many manufacturing jobs the United States has lost since Liberation Day in April 2025 when the President first announced his tariffs?

Yes, Senator, because you were out of the room, but the it was already brought...

We do many things, sir. I don't need you to tell me where I was.

That's 72,000 and I will point out that the Wall Street Journal is not called the Main Street Journal and they care they care more about Wall Street than Main...

Sir, I'm not asking you to opine on the Wall Street Journal. I have three minutes. Just answer the questions that I'm actually asking. So 72,000 manufacturing jobs according to the Federal Reserve Bank of St. Louis. Thank you for answering the question. Manufacturers shed workers shed workers in each of the eight months after President Trump unveiled his tariffs on what he called Liberation Day. I would submit that it's a strange liberation and a curious freedom that leaves you unemployed. Even worse, smaller businesses are struggling to keep up with the tariff chaos. Big manufacturers may have the resources to shift suppliers and I need you to understand the spirit of my questions. I spend a lot of time talking to the people in Georgia who have given me the great honor of representing them in the United States Senate. And so this this is about them. And especially our small businesses. They don't have the ear of the President. They don't have access to Mar-a-Lago. And so they're not able to insulate their company from the worst of the tariffs. Secretary Bessent, small businesses without the same resources or unfettered access to the President, what should those businesses do for the relief if they can't get get into Mar-a-Lago?

Again, sir, small business confidence is up and we are seeing that the one big beautiful bill gives the full expensing for equipment, factories and ag structures.

They they are telling us that it's more expensive to make basic things. We are moving in the wrong direction. The facts don't lie. The President lies often, but the facts don't lie. In fact, if you're saying we're at the beginning, basically your answer to those small businesses is wait a little while? Is that is that the answer? That a year...

You asked about manufacturing.

That's right. I'm asking you and I am saying I'm asking you about this manufacturing boom, will we see something different a year from now?

Yes, we are going to see it. I was just in my home state, Senator Scott's state, South Carolina, that we are seeing a boom there and I believe Georgia has very good pro-business policies, I'm sure you will see a boom there also. The factory build intentions are quite high.

I'll tell you what I see. I see as I talk to folks that it's more expensive to build things in America. I see that we've lost 72,000 jobs a year into this administration. We've lost manufacturing jobs every month since he called for Liberation Day. And meanwhile, folks who are working in these small businesses trying to make their lives work, they're seeing higher costs. They're seeing their costs go up for groceries, they're seeing their costs go up for electricity, they're seeing their costs go up for healthcare. And I think the American people are still waiting for a solution. So far we haven't seen one coming out of this Trump tariffs regime. The Baptist preacher is done and I have no time left. Thank you very much, Mr. Secretary.

Senator Ricketts.

Thank you very much, Chairman Scott and Ranking Member Warren for this hearing and Secretary Bessent, thanks very much for being here. Appreciate it.

Good to see you, Senator.

Good to see you. And I want to thank you and commend you for updating the 45Z clean fuel production credit. That is very important. So thank you very much for getting that out. Your guidance incorporates what we put in the Working Families Tax Cut, remember that's how we rebranded the one big beautiful bill, and supports Nebraska farmers and biofuel producers. So that's really, really important. It also ensures that feedstocks from faraway countries will not be allowed to get that credit, which means American taxpayer dollars will stay here in America. That was very important. So Secretary Bessent, appreciate that. Also want to just comment on one of my colleagues from the other side of the aisle talking about the ag economy. I would note that under the Biden administration, we had four years in a row of agriculture trade deficits because the Biden administration was the first administration going back to Jimmy Carter not to sign a major trade deal. ...and that is one of the reasons why we have such a hard problem or a hard time right now in the ag and in fact when talking about input prices under the Biden administration June of 2022 diesel hit 5.75 now it's at 3.52. So again we need to address the issues to help our farm economy out but a lot of the seeds of this was started in the Biden administration. I also want to thank you for presenting FSOC's 2025 annual report. In that one of the things that perhaps you've already touched upon and if I'm repeating myself please forgive me or repeating what's happened here forgive me but the Biden administration under the Biden administration then Secretary Yellen actually undid all the good work of the Trump administration in 2019's FSOC when they changed the activity-based designation guidance. Yellen replaced it with her own guidance that was a turning a last resort safeguard into a tool that could be weaponized and stifle innovation and restrict access to capital that would grow our economy. A little over two years ago I sent a letter to then Secretary Yellen about how the 2023 entity-based designation guidance was misguided, lacked evidentiary support, and increased the likelihood of market distortions. Secretary Bessent, do you agree with the characterizations of the 2023 guidance that could do all these things that could cause market distortions?

I believe in the activity-based guidance and we are moving back to that, Senator.

Great.

And Senator if I could just point out that FSOC under Secretary Yellen two weeks before the three of the largest bank failures in U.S. history many of them due to bond market portfolios identified climate as the biggest risk to financial stability not over-leveraged bond portfolios.

Seems like misplaced priorities given a financial service sector. Secretary Yellen rolled out her new guidance and then she stripped out the cost-benefit analysis of it. In your view does cost-benefit analysis matter in evaluating to use FSOC's SIFI designation authority?

Again sir without that why would you do it?

What is your view on the activity-based designation approach that was developed through the transparent and methodical process done in 2019?

We are re-adopting it and we believe it is fulsome, robust, and smart-minded.

Great. Thank you very much, Secretary. Thanks to President Trump's leadership and your steady hand at the Department of Treasury the United States economy is doing very well. I think the GDP growth in the last quarter third quarter was 4.4 percent annualized in 2025. Labor markets remain resilient. The unemployment rate is 1.2 percent below historical average. Inflation is down from the highs of the 40-year high in the Biden administration decreasing some 70 percent from the peak in the Biden administration. American markets are strong. We saw the largest tax cut in history signed into law allowing us to avoid a $4.2 trillion tax increase. We've got no tax on tips, no tax on overtime. 88 percent of seniors will not pay federal income tax. The average refund is supposed to be $1,000 higher this year and the average Nebraska family will avoid a $2,400 tax increase. Yet despite all this progress we're seeing consumer confidence is not really rebounding the way that the economy seems to be. In your opinion what more can we in the Senate be doing with regard to consumer confidence and making you know obviously we had 40-year high inflation under the Biden administration but what more can we be doing in the Senate to be able to help out with confidence of consumers?

Other than tell consumers to turn off MSNBC because a large part of it is a survey problem where Democrats vote very low, Republicans are more realistic and then we end up what we are seeing. Senator Kim's time. I appreciate your comments, Pete.

Appreciate your comments, Pete. Yeah thank you. And by the way for all members they are going to close the vote at 12:05 so...

Okay. Just let's go ahead and start.

Thank you, Chairman. Thank you, Secretary for coming on out here. Just the other week you took part in talks with Russia. I guess I just wanted to ask you just your view of this. Do you agree that Russia's invasion of Ukraine was illegal and a violation of sovereignty and law?

Senator I've been saying that since my confirmation.

That's right. Also would you say that Vladimir Putin is a war criminal?

I've also been saying that since my confirmation.

And now before you started Treasury regularly targeted hundreds of actors and networks who sent critical goods to Russia's war machine with rounds of sanctions every one or two months. The previous administration added about 297 China-based entities and individuals to our sanctions list under the Russia sanctions program. I want to ask you do you know how many you have added and designated as part of the Russia sanctions program since you came in as Treasury Secretary?

I do not but I do know that President Trump sanctioned Rosneft and Lukoil which was the major sanctions achievement and dwarfs everything else dwarfs everything else and has brought the Russians to the table for the talks that I was at last Saturday.

And you'll have bipartisan support for those sanctions but I'll just say that there is also bipartisan support on doing everything we can to crack down on Russia's war machine not just on the energy side. And so as I said the previous administration has added 297 China-based entities this administration has added zero. That is the number zero. So I just urge you...

Well the previous administration was extremely weak on sanctions and was on record as saying that they did not want to increase energy sanctions because they were worried about the midterms, worried about the failed election of Vice President Harris and in a display of cowardice on the way out the door...

I'm not asking you about that right now.

...but on the way out the door Jake Sullivan raised some of the energy some of the energy sanctions. President Trump took the most bold action. So we have done more...

I'm asking you here can you commit to this Congress that you will take action to sanction Russia's shadow fleet?

I will take it under consideration. We will see where the peace talks go.

I see how this administration has taken this maximalist approach adding pressure when it comes to Iran's shadow fleet talking about you know cutting off Venezuela's ships you know I think that there needs to be consistency here and again there is bipartisan support for this. I wanted to just switch gears. Would you agree that money laundering is a national security threat to this country?

Yes sir.

Now with Binance founder Zhao pleaded guilty to violating anti-money laundering laws and was sent to prison. Binance then injected billions of dollars into Trump's family business World Liberty Financial and Zhao asked for a pardon and received that. I just wanted to ask you is that a conflict of interest in your opinion?

I am unfamiliar with any of that. I wear many hats. The pardon hat is not one of them.

Well I'm just asking do you see it as a conflict of interest though?

Again the I'm not going to respond to that.

When you had the Russia talks was Jared Kushner a part of the Russia talks?

Yes.

What is his official role in the U.S. government right now?

I believe that he is a special envoy.

So you believe that he has an official position and that is not an unpaid volunteer position?

Sorry I believe that it is not an official position that he is designated as an interlocutor as we bring many people into the talk.

I just raise this because this is the problem that we're seeing right now when it comes to these conflicts of interest. You know we see the Trump family getting involved in different roles even though they don't have official positions. We see Pakistan now announcing that they're going to use Trump's family's company's crypto for cross-border transactions and trade. Does that not concern you?

Again I'd be especially interested to hear if you have any information of why Mr. Kushner is conflicted in the Russia talks.

Look what I'm saying is that if he wants to if he wants to participate in that he should go by the same financial disclosures and and getting rid of conflicts of interest that every other senior government official including yourself have to go through. And look I'm just saying that when we're seeing Trump pardoning the Binance founder Zhao when we see instead investigating Jerome Powell when we see that Trump is now suing the Treasury and the IRS for $10 billion he even said I am supposed to work out a settlement with myself that's what Trump said. Do you think that that is a conflict of interest?

That that is a Justice Department issue.

No it is suing your department.

The Justice Department represents Treasury. I would suggest you contact Justice.

I'll yield back.

Senator Cramer.

Thank you, Mr. Chairman. Thank you, Mr. Secretary for being here. And let me say I'm sorry you're no longer a North Dakota farmer. You were a good one and we were sorry to see you go. So I'm going to really shift gears here and talk about something that truly is bipartisan and that is the adoption tax credit. And I know you wake up every morning thinking about it but and I'm just going to ask you to look into it for me but during last year's working families tax cut the reconciliation package we took a version we we altered the the adoption tax credit a bit to include making it partially refundable up to $5,000. And previously up until 2011 there was a refundability of part of the credit. The adoption tax credit's always had this carry forward provision that allowed of course families to to carry over unused portions into the next tax liability. Our intent in the working families tax cuts was for the carry forward to be eligible for the $5,000 refund as well and the JCT actually included that in their score again which sort of validates the intent of Congress. However the IRS is interpreting the language to mean that the carry forward is not eligible affecting of course the adopted families from 2020 through 2024. What the IRS did is they interpret the effective date of December 31, 2024 the same way Congress intended but there's a big difference now between Congress's intent here and the IRS's interpretation of it. I don't believe it was the administration's intent to to make this what I believe to be a mistake when the President signed it into law. So I just wanted to bring it to your attention mostly to to highlight it and then to to see if you'd be willing to look into it for me.

Yes Senator I believe you're referring to the section 7402 and my my tax office is very very happy to work with your staff.

I look forward to that because this the underlying bill that created this language is very bipartisan. Our colleague my good friend Amy Klobuchar and I co-chair the adoption caucus or the the coalition and and work on these things closely together so we'd we'd love to work with you. Okay on another matter yesterday I know at in the House my friend and colleague Bill Huizenga Congressman Huizenga talked to you about the three percent budget resolution bill that he has. I'm leading that resolution over here in the in the Senate. The goal of it is to establish the goal of reducing the federal deficit to three percent of GDP. Now you referenced in your opening statement I noticed that the it's already been reduced somewhat to 5.4 percent. And and one of the ways we can grow out of a deficit or we can get out of a deficit or reduce a deficit is by growing out of it but I'd like to work on both sides of the ledger with you a little bit because you have said that we don't have a revenue problem we have a spending problem and I absolutely 100 percent agree. So maybe you could just speak for the remaining time although I would love to translate productivity sometimes as a result of of efficiency which might be a little bit of a workforce challenge but that's another whole longer story. But speak a little bit to that goal. Is three percent by 2030 which is what our resolution do is that is that realistic?

So Senator my target is for something that begins with a three by the end of President Trump's term for as I said for calendar 2024 we were seven percent the highest when we weren't at war not in a recession. We're at 5.4 and what friends from the other side of the aisle don't the the tale of woe and gloom we have the past three quarters we've averaged 4.1 percent GDP growth and we had a fiscal contraction last year we the brought down the the spending which was one of the reasons our bond market did well so we're at 5.4 and as we move that down we will see the the economy improve and everyone could go to the Treasury website or the X account I'm old school they can go to the X account and they can see a study by MIT that shows that the budget deficit that was blown out in 21 and 22 created the great inflation of 22 so as we bring down government spending it will bring down rates and bring down inflation.

And at the yeah at the productivity growth levels we're at right now I mean who who knows how quickly we could get out.

I think we're in an exciting time that could be like we saw in the 90s.

I agree with you. We're at the beginning of the boom. I yield back two seconds.

We'll take them. Thank you, sir. Senator Gallego.

Thank you, Mr. Chair. Secretary Bessent, thank you again for being here today. You know we kind of touched on this earlier in addition to being Treasury Secretary you are serving as acting director of the IRS. So following up on Senator Kim's questioning so you are fully aware that the President is suing your agency for $10 billion.

Yes.

We would agree would you agree that $10 billion is a good sum of money?

Yes sir.

Where would that be cut from? Let's say for some reason he actually wins that lawsuit where would that $10 billion come from?

Again it would come from...

Process wise I'm not asking like your opinion whether it's right or wrong.

It would come from Treasury.

It would come from Treasury which comes from the general fund?

The Treasury general account.

So taxpayers.

Yes. Part of the 440,000 taxpayers whose returns were leaked.

If the now if the President they're not suing but if the President prevails in this lawsuit he's going to be able to pocket that money. My question is is the President has anyone in the President's office talked to you about this lawsuit in any regard?

They have not and the President has said he will donate the proceeds to charity. You may have missed that.

So no one at all has discussed this to you whatsoever?

No sir.

Have you received I'm I didn't ask any more questions. Have you received any advice from Treasury's legal division about how to handle this potential conflict?

This is a Justice Department matter. They represent Treasury in it.

Have someone from the Department of Justice actually come and talk to you saying that this is their purview and you need to stay out of it or what have they who has discussed to you what is your role in this?

Our general counsel who's sitting behind me has told me that it is a Justice Department matter. The Justice Department defends Treasury's and Treasury in matters like this.

Okay so you have it has been discussed with you. Do you have any final say at all in the process of this or is the DOJ just going to instruct you to cut a check and or settle and you have no independence to actually make a decision whether or not the President deserves $10 billion?

Again that is a DOJ matter.

And so the DOJ will entirely make that decision if and whether or not the President should receive $10 billion. You have no say at all.

Correct.

So you will just have to write the check if you were told to write the check.

Correct.

And you would write the check willingly if you're told by a DOJ to the President?

I will follow the law, Senator.

Okay. I mean I think for many of us this is very simple and I think if this had been happening in any other country this would look absolutely like a total shakedown of the American taxpayer. Are you also aware that President Trump has filed a claim seeking $230 million from the Justice Department for investigations conducted during his previous candidacy?

I'm unaware of the cumulative number.

Okay. So if the President wins or settles these claims that money will come also from the Treasury judgment fund which you do control. Have you recused yourself from any decisions about paying the President on these claims?

Again I'll follow the law and I'm not involved with any of this. It stems from Justice.

So you even though the Treasury judgment fund is called the Treasury judgment fund do you have no control over the Treasury judgment fund?

We act as paymaster.

So you will sign it then? If you're a paymaster you'd be the person whose signature is to the Treasury judgment fund.

I would assume it would be a wire transfer.

I would yes I'm assuming we're not that old school. But that being said so you have no say in this whatsoever. You will only basically follow what the DOJ says but you're the person that actually is the final person that pushes send essentially on the wire transfer.

Yes.

And even if you feel or that it is unjust the fact that this President is going to be basically plundering U.S. taxpayer dollars you will still hit that send button.

Even if I believe that 6103 the IRS tax code was violated and 440,000 taxpayers were leaked by Mr. Littlejohn.

So back to this other thing. So now do you do believe though I mean do you understand why some of us see a problem with that? And let me ask the simple just a very simple question. Do you work for the President of the United States?

I work for the American people.

So can the President fire you?

He can.

He can fire you, correct?

Yes.

So isn't it a conflict of interest that you're going to be making these decisions and the President has full power over you?

I think you're confused, Senator. I am not part of the decision.

Well you're certainly the person that sends send on the wire transfer and I think that's why there's a lot of people that actually who do not trust and do not trust the President's action look out as Bessent's interest. Well I guess you're saying I'm I'm controlling the time here. I'm controlling that you're not obeying the law. You're plundering U.S. taxpayer dollars. Obeying the law. Plundering U.S. taxpayer dollars. Obeying the law. Plundering U.S. taxpayer dollars. Plundering. Thank you I yield back.

Thank you. Senator McCormick is now recognized.

Thank you. Mr. Secretary welcome. In Pennsylvania we're fortunate to have abundant energy resources as you know when you attended our summit a skilled workforce and some world-class universities. The pro-growth policies of President Trump have enabled the Commonwealth to capitalize on this optimism an investor conference and it's attracted billions in investment and spur growth. The working families tax cuts are set to deliver more than $600 billion a new relief to the middle class. And still there's more to be done. Permitting reform for example would unlock billions perhaps trillions of dollars that sits on the sideline right now. And so Secretary Bessent, would you talk for a minute about permitting reform and how important those reforms are to unlock additional growth beyond the fantastic growth we've seen so far?

Well as I've often said Senator the President's economic program is a three-legged stool trade, tax, and dereg and permitting reform is a very important part of the deregulatory agenda. And as we've seen more supply also pushes down inflation and increases economic growth. I think it is the the deregulatory agenda is the most unsung part of the President's agenda.

Yeah I couldn't agree more with that and you know there's going to be a big push I think from the Senate there's already been legislation in the House and Mr. Secretary looking forward to your support for a permitting reform package which I think could really stimulate further the the President's agenda. Second question though working families tax cuts have also created Trump accounts. A new tool creative sort of really remarkable moment to support families and build wealth for the next generation. Can you talk just for a minute about the motivation for the program and what what do you think this is going to be able to accomplish?

Senator 38 percent of American households do not own have any exposure to the U.S. equity market so for the next four years as a $1,000 seed investment is made to all newborns it will bring them into the system and set them on on a path there can be contributions from family members from employers from philanthropies through from philanthropists and we believe that over 20 states will do this so it is going to over time allow all families to have a share of the great American innovation and growth economy.

You know as as people I meet in Pennsylvania hear about this and understand what it means for their for their kids their families I mean the it's a really incredible step and I hope it's something we can really formalize and make part of not just this great administration but future ones.

Well I think too Senator and thank you for your leadership on this that I I have been a long-time advocate of financial literacy and I think that this will be a real-time experiment in financial literacy as the families as the children are able to look at their accounts on their phone and be part of this growth. I think that it will become very real and engaging for them.

Yeah I agree. Final question as you know that the trajectory of U.S. debt is unsustainable. Net interest payments alone count account for 14 percent of total government spending and higher debt levels combined with high interest rates put upward pressure on the cost to service our debt. Further 10 trillion of government debt will mature over the next year and roll over which is a third little less than a third I guess of debt outstanding. Can you discuss briefly the conditions in the U.S. Treasury market and the trends you're monitoring as we as we enter this period?

Senator thus far the market has been very resilient. We've had some of our best auctions in a long time this year. We're seeing very good foreign demand but as you said the trajectory we have to get it back under control as I talked earlier we need to get back to something with a three in front of it in terms of deficit to GDP. Reason I came out from behind my desk was I was worried that many people especially as Vice President Harris was campaigning wanted to go into a European style social democracy low growth raise taxes growth lower more taxes unsustainable debt. So that's why at FSOC we are focused on growth as a desirable but also a lack of growth as a financial stability risk.

I don't have time for a final question but I will just say I want to compliment you and the administration and OFAC in particular for the maximum pressure campaign on Iran and what that means for supporting freedom in Iran. So thank you for that. Thank you your team.

Thank you.

Senator Blunt Rochester is now recognized.

Thank you Ranking Warren and Mr. Secretary for your presentation of the 2025 annual report. Mr. Secretary in your testimony you talked about avoiding quote regulation by reflex and focusing on growth instead of reacting to every potential risk. You say FSOC is quote tuning out the white noise to concentrate on the issues that matter most. From my constituent calls and emails and conversations I know for most families they don't experience economic policy as white noise they experience it through higher rent, higher medical bills, higher grocery prices and just worrying that the next bill or price increase will push them over the edge. And it's why the Financial Stability Oversight Council's job is so important and why it can't wait until markets break. Its job is to spot problems early before families pay the price. Housing related risks have been showing up for decades. On this committee we've worked on the road to housing in a bipartisan way and my first policy agenda actually as a Senator was focused on housing. So today I want to understand what Treasury has actually done with these warnings. Secretary Bessent in 2024 FSOC issued a report warning of weaknesses in non-bank mortgage servicers companies that now handle most U.S. mortgages. Last year on January 31, 2025 GAO also warned that trouble at these firms could disrupt federally backed mortgage markets. So in light of the these warnings by FSOC and GAO what has Treasury done in response to address the risks in the housing market?

Well that that was the the Yellen Treasury and they said that everything was a risk the Senator that's why we are more focused but we are very focused on the mortgage market through Fannie and Freddie and through the non-agency actors.

So is Treasury's position that that this was overstated this risk was overstated or...

As I said in my as I said in my statement if everything is a risk nothing is a risk.

But I'm I'm specifically asking on the issue of housing...

Yes I I believe and again part part of housing is being able to have tight spreads in the mortgage market and we're at multi-year lows in the spreads versus Treasuries which tells me the mortgage market's very healthy and we had the lowest mortgage rate in the past three years in January.

Okay so the mortgage you're saying it's healthy. I know foreclosures are up 21 percent mortgage delinquencies are four-year high I know all of that but separately your 2025 annual report notes that FSOC created a household resilience working group to identify early warning signs of household financial stress. It's my understanding that this working group was just created in December. Has it met yet and what is expected what does it expect it to produce?

Again it's exactly as it seems it will be meeting monthly. It did not meet last month and we want to look at the household balance sheets and understand again the question I got on consumer sentiment the is it sentiment or is it reality where where are the pressure points because we do want to help working Americans and spot problems early.

So do you know what that like what are the outcomes what is it expected to produce or could you share that?

Well as it hasn't started yet I Senator I would look forward to sharing the the work product with you as we move through the year.

I I would hope there is a plan because I know usually if you set up a group there's a mission for the working group there's a plan a set of expectations so look forward to hearing from you on on that. If you were to you know I you mentioned in your testimony parallel prosperity and you mentioned Main Street and Wall Street. If you were to rate how Wall Street is doing on a scale of one to 10 10 being it's doing well and Main Street on a scale of one to 10 could you would you rate them? Well I'm not going to speculate but I will tell you the Wall Street Journal not the Main Street Journal criticized me for being a populist on my advocacy of of Main Street and look Main Street got killed during the Biden administration Wall Street did not and we are trying to level trying to level that. So I I only have 10 seconds and in my 10 seconds I just want to say two things. Number one this is now your watch so I know there's been a lot of bringing up the Biden administration this is now your watch a year later and number two families are truly truly hurting in this very present moment so I look forward to working with you and finding out about particularly housing because it's one of the number one issues in this country across the dais. Thank you and I yield back.

Senator Moreno.

Thank you, Mr. Secretary. And also thank you for being so accessible. You look at your predecessor almost invisible you go out and you're on TV you're on the media to make sure that the American people and you're communicating with us on a regular basis. That's a refreshing... ...change. I just have a question on your many TV appearances. I've noticed that you said that if the Democrats win, they'll do it again. Can you clarify what that means?

Yes, is we saw a spending surge during the Biden administration, a blowout spending. And again, the deficit to GDP numbers blowing out, which according to MIT studies, the spending was responsible for the inflation surge. And at the same time, we saw mass unfettered immigration, 10, 15, 20, 20 million illegal aliens coming into the country and depressing wages, taking low-end housing. And a study from Wharton showed that much of the low-end housing inflation, especially in rents, came from the 20 million new arrivals. The law of supply and demand applies both for housing and for depressing wages. So I would say when I talk about that, there will be blowout spending, which will lead to inflation, and then the border will be reopened.

So clearly, this deportation effort, especially the self-deportations, is going to lead to lower housing prices, and we've already seen it, correct?

We have. In rental properties are ranked A through D, and in D and C properties, we are seeing a substantial decrease. But what we are also seeing is because of the supply that is coming on, we are seeing a decrease in rents nationwide. As I said earlier, Trueflation, an agency that puts out, uses a basket of gathered real-time inflation measures, is now below 1 percent.

Yeah, and speaking of that, so let's talk about that real quick because there's things that obviously federal policy impacts. And so an underlying cost to a lot of these key basket of goods is the price of gasoline. What's happened in the last 12 months?

Well, price of gasoline is down substantially nationwide, and we expect it to continue going down. Also diesel, which is an input for farmers, for truckers. So energy feeds into everything, whether it is food cost, whether it is manufacturing. And again, more supply and being on the side of the energy industry has resulted in lower prices.

And the same thing can be said about the question you got at the beginning of this testimony about groceries. Eggs is an underlying ingredient in a lot of foods. What's happened to the price of eggs in the last 12 months?

Well, the price of eggs is down substantially. The president had to wear that for a few months, and then the price of eggs collapsed thanks to a lot of measures taken by Ag under his direction. But of course, we don't hear about egg prices anymore. I will say in my hometown, Senator Scott's hometown, I've noticed that the egg surcharge has gone off the menu in the diner we both like.

Right. So but there's some things that the federal government can't control, and we had a conversation about electricity prices. What state would you surmise, I'm not trying to quiz you here, but what would you surmise, which state has the highest cost of kilowatt-hour in the country?

Well, California has the highest cost in everything, the highest taxes, the highest homelessness, but...

Believe it or not, Massachusetts wins this one at 31 cents per kilowatt-hour. Ohio's at 17. And so a lot of that, wouldn't you agree, Mr. Secretary, that a lot of that is state policies, the policies initiated by those states?

A huge amount of state policy. And whether it's Kathy Hochul, governor of New York, blocking pipeline, whether the state of New York, sitting next to the Marcellus Shale, will not allow gas in and the pipelines to New England or down from Canada. New England has made the decision to deindustrialize. Even when I was a college student, Connecticut was a hotbed of small manufacturing.

Well, and again, let me just say from an Ohio perspective, we're happy to provide low-cost energy to New England. Would you be surprised to know that Massachusetts also has twice the core inflation as the national average?

I wouldn't, and seeing the statistics for how many people are leaving the state, I understand why.

So in conclusion, you'd like to see states do more of the things that states like Ohio do and less like the things that states like Massachusetts do. And the last thing we want to do is take those policies and make them national. Would you agree?

I agree, sir.

Senator Alsobrooks.

First, I wanted to thank Chair Scott and Ranking Member Warren for holding today's hearing. Certainly want to say to you, Secretary Bessent, thank you for being here today to discuss our economy, which is very much on the minds of Marylanders. Before I get to my questions, I want to make a quick comment on market structure legislation. Mr. Secretary, I speak for many of my colleagues when I say that we really want to get to a good bipartisan bill. We want to get it done, and I've appreciated working with your team both during the Genius Act and market structure process and really appreciate their attention to the issue of stablecoin paying yield and interest. I am confident, feel really good that we are going to get a bipartisan compromise that protects innovation and our community banks, and I really encourage your continued work on that issue. Now, the 2025 FSOC report confirms that 60 percent of small business loans and 80 percent of agricultural loans come from community and regional banks. And I am very proud to be partnering with Senator Hagerty. He and I have a piece of legislation to increase stability for businesses and their customers by expanding the deposit insurance available for business checking accounts. And so I join many Maryland business owners, credit unions, and small banks who believe a targeted expansion of deposit insurance could strengthen confidence in our financial system. The first question everyone wants answered about changes to deposit insurance, and it's a valid one, is who pays for it? I'm committed to working across the aisle to make sure that we get this right. And I asked your colleague, FDIC Chairman Travis Hill, about cost and benefits in October. And Chairman Hill testified that a targeted expansion of deposit insurance would likely not increase deposit insurance premiums on small banks and that any increased premiums on large banks would be small or immaterial. Do you agree with Chairman Hill? And more broadly, will you explain to the committee why a targeted expansion of deposit insurance could strengthen our banking system and boost business and consumer confidence?

Senator, I want to thank you for your partnership on Genius, on clarity. I am hopeful that we can get that across the line this spring. And I've been an outspoken advocate for small banks because they are Main Street. We've seen 50 percent of our small banks disappear since the great financial crisis, and I believe that is one reason Main Street has lagged. And a large part of that is overregulation. But another part of this is moral hazard, that during times of financial stress, like in March 2023, there's deposit volatility. Deposits flee banks because they believe that whether it's the three largest, the seven largest banks, that there is no risk of loss. But if they stay with the community banks, and I've met with personally more than 200 community bankers, spoken to a thousand, but the 200 I've met with tell me they could have clients for 50 or families have had them for 100 years, and the money goes to Wells Fargo and doesn't come back because exactly what you said, because there wasn't one business checking account, normally a payroll account, they say, I just can't lose this money. So we want and once Wells Fargo gets it, they don't want to give it back, they offer. So and as you get a decrease in deposits through the fractional banking system, then there is a reverse multiplier for lending. So the banks, lower deposits, less lending available for Main Street. So I think that you and Senator Hagerty, Senator Hagerty and I coauthored a piece in the Wall Street Journal, I think this is an extremely important piece of legislation. I would encourage your colleagues to pass it, and anything else I can do to advocate for it, please let me know.

Thank you. Now, one other question here. Mr. Secretary, I want to thank you for your public support for community development financial institutions. And that said, I also echo Senator Warner's concerns about the congressionally appropriated funds being released. Maryland CDFIs include banks and credit unions that provide crucial funding for businesses, housing, and access to capital in underserved communities. So I want to specifically mention two CDFIs serving in Maryland that regularly participate in the Bank Enterprise Award program, which allows them to provide credit and financial services in some of the most distressed neighborhoods in Maryland. The White House Office of Management and Budget has withheld the notice of funding availability for the BEA program since March of 2025, and that's 11 months. And so if the notice is not published, CDFI banks cannot apply for funding. So in March, you said CDFIs are a key component in supporting Main Street America. Do you still stand by this statement?

I am eagerly awaiting to have the to have it released from OMB so that we can move it forward. As soon as it is released, we will follow our statutory duty and release to CDFIs. I'm also very happy to see CDFIs getting back to a core mission of prosperity and resilience for their communities.

Thank you so much, Mr. Secretary.

Secretary Bessent, thank you for your leadership and your service to our country. You've talked many times about the ongoing burdens and effects of illegal immigration in our country as a result of the open border policies of the Biden administration. Last year, you said, quote, "If you're here illegally, there's no place for you in our financial system." And you also announced that the Treasury Department would propose regulations to cut off federal benefits and tax credits to illegal aliens. And I wondered if you could give us a status update on those rules. How can we protect hardworking Americans from illegals who exploit our U.S. financial and credit system, and what are we doing about it?

Yes, sir. So we have moved forward on that. We have through the regulators had them double down on the KYC, know your client, and to make sure that everyone within the regulated banking system is is legal. The other thing we have found out, and we saw it in Minneapolis as a hotbed of waste, fraud, and abuse, is outside of the banking system in money service businesses that a lot of money being wired out of the country, we don't know where. So this is a vulnerability we've spotted in our system, and we are cracking down on that. We've also cracked down at the southern border because we found that lots of cartels are using or money laundering there. And we've done that in a targeted basis rather than increasing cost to all banks.

Is it your sense that it's working?

Yes, sir.

And what else can we do?

Look, we are considering a re-underwriting of the clients. We and again, many people are familiar with what is called a suspicious activity report, a SAR. We find that many of those come in after the horse has left the barn. So we are encouraging banks to be more proactive, know your client, and re-underwrite.

Can you give us maybe an education a little bit about how why all this matters? How does it affect my dad, retired factory worker in Fort Wayne, Indiana, the the cost of illegal immigration in our financial system and the credit system? Just give us a lesson on why it matters.

Well, again, it creates instability, and it also creates, we've seen, I cited it earlier today, we've seen there's a Wharton study that shows that it increases rents for working Americans. It takes jobs. So we could think that if we look at household resilience for working Americans, they they got clobbered because law of supply and demand applies for low-wage earners as you increase the workforce by 10, 15, 20 million in a very compressed period, then you are going to see the wage decreases.

Secretary, I I wish that my parents would have had access to Trump accounts when I was born and set something like that up for me and my brothers. I mean, what a game changer that can be to help babies today, young kids today achieve the American dream who grow up on the other side of the tracks and have something have an option like a Trump account. I I praise you and President Trump in this administration for what you have done to work with Congress to create Trump accounts. One gentleman, Brad Gerstner, who is a native Hoosier like me, he grew up a very a very humble background and made it big, and now he's giving back and funding Trump accounts for Hoosier kids who are born today. And I know it's going to make a big difference for the next generation of kids. One thing I worry about, though, are politicians down the road who want to regulate those accounts or they want to put restrictions or or rules that prevent those accounts from growing. What can we do to protect protect this great vision today to make sure that politicians later don't ruin it?

Well, I think it's two things. Mission creep, that we are committed to the lowest cost index funds, that it does not become something for social engineering, that it is return-based, low-cost, broadly diversified so that everyone owns a share of the U.S. economy. And Senator, I think the more that people become invested in these, the smaller the chance for meddling is because I think they will be adamant.

Thank you for your leadership. I yield back.

Thank you. So for senators who wish to submit questions for the hearing record, those questions are due one week from today, Thursday, February 12. Secretary Bessent, you have 45 days from that day to submit your responses to questions for the record. Thank you. Committee's adjourned. [Gavel sounds.]