Treasury Secretary Janet Yellen Testifies Before House Financial Services Committee

5 months ago

Treasury Secretary Janet Yellen testified before the House Financial Services Committee on Tuesday.

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Transcript

00:00:00I declare a recess of the committee at any time.

00:00:02The hearing is titled the Annual Testimony of the Secretary

00:00:05of the Treasury on the State

00:00:06of the International Financial System.

00:00:09Without objection, all members will have five legislative days

00:00:12within which to submit extraneous material

00:00:13to the Chair for inclusion in the record.

00:00:16I'll note at the outset that this hearing has a hard stop

00:00:18at 1 p.m., which we'll strictly observe.

00:00:22I now recognize myself for four minutes

00:00:23to give an opening statement.

00:00:25Secretary Yellen, I appreciate you being here today.

00:00:27From Europe to the Middle East to Asia,

00:00:30global unrest is creating additional challenges

00:00:33for the international financial system.

00:00:35There are also rising risks emerging

00:00:37from our own domestic failures here at home.

00:00:40The IMF recently warned that U.S. deficits

00:00:43and debt now present, quote, a growing risk to the U.S.

00:00:47and global economy and should be urgently addressed, end quote.

00:00:51In last year's negotiations surrounding the debt ceiling,

00:00:56House Republicans secured historic guardrails

00:00:58on federal spending with the Fiscal Responsibility Act.

00:01:02Unfortunately, the Biden administration has undermined

00:01:04this bypass in progress at every turn with reckless

00:01:08and expensive executive action.

00:01:11But government debt isn't just a challenge for America,

00:01:14nor is inflation a challenge of America alone,

00:01:20though it is distinctly worse than the rest of the globe.

00:01:24Total public debt globally is at a record high.

00:01:28Much of it is held by emerging market economies

00:01:31with poor creditworthiness and depressed interest rates

00:01:33that do not accurately reflect the default risk.

00:01:37This problem is exacerbated

00:01:38by opaque Chinese infrastructure lending

00:01:42through its Belt and Road Initiative.

00:01:44Communist China is now the largest creditor

00:01:47for the developing world.

00:01:49To add insult to injury, it remains one

00:01:52of the largest annual borrowers from the World Bank,

00:01:55despite assurances that these loans would be phased out.

00:01:59The Biden administration is failing to leverage U.S. standing

00:02:03at the international financial institutions to block financing

00:02:06for the Chinese Communist Party.

00:02:08At the same time, Treasury is proposing a multi-year process

00:02:12to stand up an entirely new bureaucracy

00:02:14to regulate private U.S. investment to China.

00:02:18To be sure, the recently proposed rulemaking is a step

00:02:21in the right direction and more responsible

00:02:24than other proposals that have been floated about this town.

00:02:28However, this approach will take years to implement.

00:02:32It lacks the urgency necessary

00:02:34to confront the generational threat posed by the CCP.

00:02:38We have an existing, time-tested sanctions regime

00:02:42that can have an immediate impact.

00:02:44And I urge you, Secretary Yellen,

00:02:46I urge the Biden administration to use it

00:02:48and use it forcefully.

00:02:50Any serious effort, whether legislative or administrative,

00:02:54to block global funding

00:02:55for the Chinese military-industrial complex must

00:02:59include the full-blocking sanctions

00:03:01in Congressman Andy Barr's Chinese Military

00:03:04and Surveillance Company Sanction Act.

00:03:06Treasury has also implemented its beneficial ownership

00:03:10reporting regime as the administration's principal effort

00:03:13to crack down on malign foreign actors

00:03:16in the U.S. financial system.

00:03:18There's bipartisan support in Congress

00:03:20for this reporting regime for two reasons.

00:03:22First, it was supposed to be narrowly targeted

00:03:25to strengthen our national security tools.

00:03:27Second, it was supposed to protect small businesses

00:03:31from duplicative reporting regimes.

00:03:34Thus far, Treasury has failed to adhere

00:03:36to congressional intent on both counts.

00:03:39America faces grave strategic challenges

00:03:42in Europe and the Middle East.

00:03:44The Biden administration has rightly provided historic,

00:03:46military, and financial support

00:03:49for Ukraine following Russia's invasion.

00:03:52Yet Treasury has undermined its own sanctions efforts

00:03:55by allowing Putin to continue funding his war machine

00:03:58through a glaring loophole in its so-called oil price cap.

00:04:04Similarly, this administration has wavered in both rhetoric

00:04:07and action after a promising initial response

00:04:10to Hamas's barbaric terrorist attacks on Israel last October.

00:04:16To begin to right the ship,

00:04:17Treasury must redouble its efforts to cut off funding

00:04:20for Iran and its proxies.

00:04:23If nonsensical and contradictory policies

00:04:26like these continue, allies will continue to question America's

00:04:29and specifically this administration's leadership

00:04:32on the global stage.

00:04:34I yield back.

00:04:35The chair will now recognize the ranking member

00:04:37of the full committee, the gentlewoman from California,

00:04:39for four minutes for an opening statement.

00:04:41Thank you, Mr. Chairman.

00:04:42Good morning.

00:04:43I'd like to welcome you, Madam Secretary,

00:04:45before the committee today and applaud the work,

00:04:50both your leadership and President Biden's leadership.

00:04:54The Biden-Harris administration is fighting every day for people

00:04:59by creating 15.7 million new jobs,

00:05:03doubling the average monthly number

00:05:05of jobs created during Biden's term when compared

00:05:09to Trump's first three years before the pandemic,

00:05:13increasing wages broadly, wealth and wages broadly,

00:05:18and steering our economy out of the throes

00:05:22of a pandemic made worse by the previous administration.

00:05:26I also applaud President Biden for never backing

00:05:30down in the face of opposition.

00:05:32When the Supreme Court blocked his plan to cancel student debt,

00:05:37President Biden sought other ways

00:05:39to help America's student loan borrowers.

00:05:42To date, the Biden administration has forgiven 144

00:05:47billion in federal student loans for nearly 4 million borrowers.

00:05:52This is what it looks like when we have a leader

00:05:54who puts the well-being of the American people above his need

00:05:59for revenge, from signing into law the American Rescue Plan

00:06:04and the bipartisan infrastructure law

00:06:07which is making the U.S. economy the strongest in the world,

00:06:11to taking on companies saddling Americans with illegal junk fees

00:06:16to cutting child poverty in half.

00:06:19Our economy is stronger because of President Biden.

00:06:23I also commend Secretary Yellen's work

00:06:26to stabilize the banking system after last year's regional bank

00:06:31failures, as well as deploying $12 billion for CDFIs

00:06:36and MDIs and $10 billion for small businesses

00:06:40through the Small Business Credit Initiative.

00:06:43I'm working on a bill to build on the successes

00:06:46of the effectiveness of SSBCI, and I look forward to working

00:06:51with you on that.

00:06:53And there's still more work to be done, especially on issues

00:06:57like housing, and President Biden has made housing a top

00:07:02priority of his administration.

00:07:05On the other hand, the MAGA operatives have made their

00:07:08priority loud and clear.

00:07:10They have conceived a 920-page plan to undermine our government,

00:07:16our social safety net, and our values as America.

00:07:20This Project 2025 is diabolical, so insidious, and so disturbing

00:07:26that everyone in this country needs to read it.

00:07:29They need to read it so they can understand the plan

00:07:32to take away their rights, their freedoms, their democracy,

00:07:36and turn this country into a cresto-fascist state.

00:07:40You can read this garbage at www.project2025org.

00:07:49Now, Project 2025 was written by former Trump White House staffers,

00:07:54Trump administration officials,

00:07:55and the ultra-right-wing Heritage Foundation.

00:07:59In addition to banning abortion and contraception,

00:08:03abolishing the Department of Education, taking over the

00:08:06Department of Justice so a Republican president can use the

00:08:10FBI to settle political scores just to hit a few

00:08:14of the lowlights, Project 2025 would also,

00:08:182025 would also gut agencies

00:08:22like the Consumer Financial Protection Bureau

00:08:25and the Federal Reserve

00:08:26and dangerously restructure the Treasury, the Department

00:08:30of Housing and Urban Development,

00:08:32and other agencies critical to the economy.

00:08:36Moreover, Project 2025 describes plans to withdraw

00:08:41from international financial institutions like the IMF

00:08:45and the World Bank, both

00:08:47of which have advanced U.S. democratic ideals all

00:08:50around the world.

00:08:52I yield back.

00:08:54The Chair now recognizes Mr. Lueckemeyer,

00:08:55Chairman of the Subcommittee on National Security,

00:08:58Illicit Finance, and International Financial

00:09:00Institutions for one minute.

00:09:03Thank you, Mr. Chairman, and welcome, Secretary Yellen.

00:09:06Since we heard from you during last year's annual testimony,

00:09:08the global debt crisis has only grown worse.

00:09:11Russia continues its war against Ukraine, and with the help

00:09:14from Iranian funding, Hamas perpetrated a heinous attack

00:09:19on Israel, our closest ally in the Middle East.

00:09:22Meanwhile, Communist China continues

00:09:23to threaten global economic security

00:09:26through unfair, even illegal, trade practices

00:09:28and threatens regional security

00:09:30with escalating aggressive actions

00:09:32against the Philippines and Taiwan.

00:09:34It is therefore bewildering, despite that behavior, why

00:09:37and how the CCP still receives over a billion dollars annually

00:09:40from World Bank commitments.

00:09:42Indeed, the global economic

00:09:43and security situation has deteriorated

00:09:45so dramatically during the three-and-a-half years

00:09:47of the Biden Administration that I can't help

00:09:49but ask what have they been doing

00:09:51that could account for this?

00:09:52In the international financial system,

00:09:54the Administration's weakness on Iran sanctions and on energy

00:09:57in general is one obvious culprit.

00:09:58At the IFIS, the continued push for the Green Agenda

00:10:02through the Evolution Roadmap is another, prioritizing climate

00:10:05over the needs of 700 million people

00:10:07who remain mired in extreme poverty.

00:10:08With that, Mr. Chairman, I yield back.

00:10:11The Chair now recognizes the Ranking Member

00:10:12of the Subcommittee on National Security, Illicit Finance,

00:10:14and International Financial Institutions,

00:10:16Mrs. Beatty, for one minute.

00:10:19Thank you, Mr. Chairman

00:10:20and Ranking Member Waters, and Secretary Yellen

00:10:22for being here today to testify.

00:10:25I'd like to echo the remarks made by Ranking Member Waters.

00:10:28Over the last three-and-a-half years,

00:10:30President Biden has helped restore the United States'

00:10:33leadership in a global economy.

00:10:35We are experiencing unprecedented levels

00:10:38of job creation, historically low unemployment,

00:10:41declining inflation, and growing wages and wealth,

00:10:45the rebuilding of an economy that works for everyone.

00:10:49I want to thank you, Secretary Yellen, for the work

00:10:52that you've done to restore our leadership

00:10:54at the international financial institutions

00:10:58and to protect our economy and the national security.

00:11:02I also want to thank Leader Hakeem Jeffries

00:11:05and the Democrats by governing and for governing

00:11:10by giving the votes necessary

00:11:12to pass the debt ceiling, although we are in the majority.

00:11:16I look forward to continuing to build

00:11:19on the historic work that you and President Biden

00:11:22and the administration has done.

00:11:24Thank you, and I yield back.

00:11:25Today, we welcome the testimony of the Honorable Janet Yellen,

00:11:28the 78th Secretary of the Department of Treasury.

00:11:32Secretary Yellen, thank you for being here.

00:11:34You'll be recognized for five minutes

00:11:36to give an oral presentation,

00:11:37and without objection, a written statement will be made part

00:11:40of the record.

00:11:41You are not, this is not foreign territory

00:11:44to you over the years,

00:11:46so we welcome you back before the committee.

00:11:48And I'll now recognize you for five minutes.

00:11:51Thank you.

00:11:53Chairman McHenry, Ranking Member Waters,

00:11:55and members of the committee, thank you for the invitation

00:11:59to testify in my capacity as Chair

00:12:03of the National Advisory Council on International Monetary

00:12:08and Financial Policies.

00:12:10The United States built the international financial

00:12:14institutions 80 years ago with our allies and partners.

00:12:19Today, U.S. leadership at them is essential to our national

00:12:24and economic security.

00:12:26We work through the multilateral development banks

00:12:29to fight poverty and drive sustainable

00:12:32and inclusive growth, strengthening, developing,

00:12:36and emerging markets that are key trade

00:12:39and investment partners for the United States,

00:12:42and addressing global challenges such as climate change,

00:12:47pandemics, and conflict and fragility that threaten

00:12:51to undermine global economic growth.

00:12:54The International Monetary Fund provides crucial support

00:12:58to countries to help resolve debt problems,

00:13:02minimize negative spillovers to the global economy,

00:13:06strengthen governance, and restore growth.

00:13:09These institutions' strong balance sheets make U.S.

00:13:12contributions to them safe and highly cost-effective.

00:13:18They crowd in support from other partners,

00:13:21and the United States works as the largest

00:13:24or near-largest shareholder in all of them

00:13:27to make sure they use their funds well.

00:13:31These institutions are also the only realistic option

00:13:35for the United States to offer high-quality,

00:13:38transparent development financing at the scale needed

00:13:42to be a U.S.-led value proposition

00:13:47that competes with China's.

00:13:49We must show leadership

00:13:51and contribute strong financial support

00:13:54as it's only become more important

00:13:56to provide credible alternatives to lending options

00:14:01that can be opaque and coercive,

00:14:04potentially undermining borrower countries' sovereignty

00:14:08and long-term economic sustainability.

00:14:12Over the past year, we continue to push for evolution

00:14:16at the MDBs so that they're efficient, effective,

00:14:19and can better help countries address global challenges.

00:14:24Congress enabled a $250 million contribution

00:14:29to the World Bank's IDA crisis response

00:14:33window, demonstrating U.S. commitment

00:14:36to providing a critical lifeline for the world's poorest

00:14:41and most vulnerable countries.

00:14:43We made the largest pledge to the replenishment

00:14:47of the International Fund for Agriculture and Development,

00:14:51a strong partner in increasing food security.

00:14:55We also helped lead successful negotiations

00:14:58around capital increases and employment.

00:15:01We also made significant economic increases

00:15:05and important reforms for IDB Invest, the private-sector arm

00:15:11of the Inter-American Development Bank and a key partner

00:15:16in Latin America and the Caribbean,

00:15:19and also for the European Bank for Reconstruction

00:15:22and Development to enhance its lending capacity,

00:15:27including for continued support of Ukraine.

00:15:30Congress authorized our participation

00:15:33in these capital increases

00:15:35and in the African Development Bank's callable capital increase

00:15:40so that it can continue to lend at current levels to countries

00:15:45that otherwise would be forced to look elsewhere.

00:15:49The President's budget also requests a billion dollars

00:15:53that would enable us, would enable up to $36 billion

00:15:57in new lending capacity at the World Bank, as we continue

00:16:01to press international partners to join us in efforts

00:16:05that could expand lending headroom by $100 billion.

00:16:10At the IMF, I thank Congress for authorizing lending $21 billion

00:16:17to the Poverty Reduction and Growth Trust,

00:16:20making us the largest contributor

00:16:22and further showcasing our strong commitment

00:16:26to supporting low-income countries.

00:16:29We also led successful negotiations

00:16:32on the 16th General Quota Review

00:16:35so that the IMF is adequately resourced to continue

00:16:39to play its crucial role at the center

00:16:42of the global financial safety net

00:16:45and to preserve our quota share

00:16:47and veto solidifying U.S. influence

00:16:50at this vital institution.

00:16:53We request authorization to increase the U.S. quota

00:16:57to cement this significant achievement.

00:17:00Let me stop there.

00:17:00I'd be happy to take your questions.

00:17:03Thank you, Madam Secretary.

00:17:04I'll now recognize myself for five minutes

00:17:07for an opening statement.

00:17:09Let's start with the notice of proposed rulemaking

00:17:12on outbound investment.

00:17:14We've talked a good bit about this.

00:17:18As I said in my opening statement,

00:17:20I think it's a step in the right direction

00:17:22with the administration's done.

00:17:24I welcome it.

00:17:26But we have time-tested tools of sanctions

00:17:30that are clear, red light, green light, what's permissible,

00:17:34what's not permissible.

00:17:36So we have a notice of proposed rulemaking.

00:17:42And there is a line established that is

00:17:49about what is investable technology that's prohibited

00:17:54versus a reporting regime.

00:17:56And it's not clear.

00:17:58So I just want to have one question as an example.

00:18:03The difference between AI, artificial intelligence used

00:18:07for an MRI in a medical setting, to identify cancer,

00:18:13and a drone operator using location targets, imaging,

00:18:20to target in a weapons setting, how do you draw the distinction

00:18:25between those two different AIs?

00:18:31Well, we recognize that in artificial intelligence,

00:18:35it's widely used for many different purposes.

00:18:39And the regime that we've proposed is really oriented

00:18:44toward those uses that are clearly national security risks.

00:18:51We want to make sure that China and other countries

00:18:56of concern don't gain access to technologies and products

00:19:02that are critical for narrowing.

00:19:05Why not just name names and say don't invest in these companies?

00:19:09Isn't that the clearest route to stem the flow of capital going

00:19:13into Chinese technology?

00:19:15Let me give you another example.

00:19:17So the regulation says that AI that operates at either the 10

00:19:24to the 24th, 10 to the 25th,

00:19:27or 10 to the 26th computational operations would not be

00:19:33investable for Americans.

00:19:36What is the real world difference

00:19:37between these operational levels and the significance

00:19:40of one being used in a military capability setting?

00:19:46Well, we've tried to target technologies that are critical

00:19:55and can contribute to military intelligence

00:20:00or cyber capabilities in countries of concern.

00:20:04We want to make sure that what we're doing here is narrowly

00:20:10targeted at clear national security risks.

00:20:13Well, why not just use sanctions for that?

00:20:15Why not just use direct sanctions

00:20:18that say do not invest in these companies?

00:20:20Red light, green light, there's no complete clarity here.

00:20:24Why not just go with that approach?

00:20:26Well, sanctions usually are put in place

00:20:30after something has occurred that creates a problem.

00:20:37And these are very rapidly evolving areas.

00:20:41We know that there's a gap in our regulatory framework.

00:20:45And we want to make sure that American firms

00:20:49and persons are not contributing

00:20:52through their investment activities to enabling firms

00:20:58in China or other countries of concern.

00:21:01We're trying to get at the same thing.

00:21:03I'm saying clearly we have sanctions

00:21:06that we can proactively take on companies

00:21:08that are using this technology.

00:21:09And it's far clearer.

00:21:11And that is a far clearer way to stem the flow

00:21:14of U.S. investment capital into China.

00:21:16Let me switch to one additional topic,

00:21:19which is the beneficial ownership regime.

00:21:24As I said in my opening statement,

00:21:25we wanted clarity here.

00:21:27We didn't want redundancy.

00:21:29Why did the Treasury bifurcate the beneficial ownership rules

00:21:34and move forward without the third rule?

00:21:37And when can we expect Treasury

00:21:41to publish the customer due diligence

00:21:43or the CDD rescission rule?

00:21:45Right now you have two reporting regimes on small businesses.

00:21:49This is onerous.

00:21:51When are we going to clear the,

00:21:52when, what's the timeline to clear that up?

00:21:54So that's something we're working on revising

00:21:58to make sure it's consistent with the requirements

00:22:02of the Corporate Transparency Act.

00:22:04I believe that we're hoping to get something out this fall.

00:22:11We're engaging right now with other stakeholder agencies

00:22:16to discuss the substance of the proposal.

00:22:20And we want to have a notice that will enable the public

00:22:26to weigh in with their own comments.

00:22:28Well, right now, because of Rules 1 and 2 going live,

00:22:33every small business in America has a new reporting requirement

00:22:38that they are most likely unaware of.

00:22:41And this needs to be cleared up.

00:22:42We'll now recognize the Ranking Member of the full committee,

00:22:45Ms. Waters, for five minutes.

00:22:46Thank you very much, Mr. Chairman.

00:22:49Secretary Yellen, I don't have much of a question to ask you.

00:22:55I want to thank you, basically, for the work that you have done.

00:23:00You know, there's a lot of talk about helping small businesses

00:23:04and minority businesses, but under your leadership,

00:23:07working with the President of the United States,

00:23:10you've done a magnificent job.

00:23:12I want to thank you for the CDFIs,

00:23:15the Community Development Financial Institutions.

00:23:18An alternative to the big banks who don't give loans

00:23:22to small businesses.

00:23:23They don't want them in the bank.

00:23:25But because of CDFIs, people have a place to go

00:23:29to present their case and get loans.

00:23:32The other thing I want to thank you

00:23:33for is the Minority Business Development Agency,

00:23:38which you put $125 million into in order to teach and to train

00:23:45and to make sure that small businesses have the

00:23:48assistance that they need, the technical assistance

00:23:51to these businesses so that they have the legal, the accounting

00:23:55and business advice that they need to grow and prosper.

00:23:59And, of course, I want to thank you for the SSBCI.

00:24:03We put, in this committee, $10 billion

00:24:07to create 10 million loans.

00:24:09And I want you to know that it's making a difference.

00:24:13I want you to know the other side has not done any

00:24:17significant work for small and minority business.

00:24:20We're trying to close the wealth gap.

00:24:23I give you credit for your leadership,

00:24:26for your understanding.

00:24:28Well, I guess if I want to ask you a question,

00:24:31I want to ask you, do you think that these kind

00:24:34of efforts will help us to close that wealth gap?

00:24:38So I absolutely do.

00:24:40And I very much want to thank you for the strong endorsement

00:24:44that you've given Treasury's work.

00:24:47I know how important this is to you

00:24:50and it's important to the country.

00:24:52It has been our focus to use the funds

00:24:57that Congress has provided most effectively since day one

00:25:03of the Biden administration.

00:25:05And addressing the wealth gap, this is a top priority.

00:25:12At Treasury, we're trying to use every single tool that we have

00:25:17to make headway on this.

00:25:20As you know, this is something that is difficult to eradicate.

00:25:27But I think our efforts are making a difference.

00:25:30And as I've traveled around the country,

00:25:32I've often had the chance to visit businesses

00:25:36that are getting help from CDFIs in low-income or minority

00:25:41communities, and I have seen small businesses get the support

00:25:47they need through CDFIs or through SSBCI

00:25:53to develop and thrive.

00:25:56This is a clear focus of all the work the Biden administration

00:26:00has done.

00:26:01Well, and I think it's important for people to know,

00:26:05this is all over the country.

00:26:08And I'm trying to get my colleagues on the opposite side

00:26:12of the aisle to work with us so that rural communities

00:26:15and small communities and towns can have more access.

00:26:20The infrastructure is not there with nonprofits and others

00:26:25to work with what you're doing for all of us.

00:26:28And maybe there's something you can say or do

00:26:32to encourage those who have small towns in their areas

00:26:37that don't know about the programs.

00:26:39And when we take it to them to ask them, you know,

00:26:42don't you want to participate in the CDFIs?

00:26:46And don't you want some of the money that comes

00:26:48to your state with SSBCIs?

00:26:51What can we do to get them more interested so that more

00:26:55of this money can get into rural communities?

00:26:58I know you don't have time.

00:27:00This is not the proper place to educate them now.

00:27:03But perhaps you can volunteer to meet with some of my colleagues

00:27:07to get them interested from the opposite side of the aisle

00:27:10on how they can take advantage of what you're doing,

00:27:14what the president is doing, and what we're learning we can do

00:27:18to help equal the playing field

00:27:20so that we can have financial services working for everybody

00:27:24and that we can have women and minority-owned businesses,

00:27:28et cetera, that have been excluded

00:27:29for so long participating because of the work

00:27:33that you're doing.

00:27:34Well, thank you very much.

00:27:35And we would be glad to work with you or with others

00:27:40who are interested in bringing these benefits to low-income

00:27:46and rural communities.

00:27:48We do try to do significant outreach.

00:27:53And we're certainly prepared to do more.

00:27:56We welcome the collaboration.

00:27:59Thank you.

00:27:59I yield back.

00:28:01General, this time has expired.

00:28:02I recognize myself for five minutes.

00:28:04Madam Secretary, it's great to have you before the committee.

00:28:07It's been more than two months

00:28:08since President Biden signed the REPO Act into law.

00:28:12And I'd like to see it swiftly and fully implemented

00:28:15by the president.

00:28:16I wrote to you in May, joined by Congresswoman Waters

00:28:20and Congressman Meeks to encourage the administration

00:28:23to do that.

00:28:24And while I support doing all we can

00:28:27to help Ukraine eject Putin, I have several concerns

00:28:31about the extraordinary revenue acceleration loan package

00:28:34announced by the G7 leaders last month.

00:28:37I question whether this plan can really work in practice.

00:28:40Under the REPO Act, the president already has the

00:28:43authority to go after Russian sovereign assets

00:28:45in the United States.

00:28:46And I believe these frozen assets should be

00:28:49legally seized, the ownership converted,

00:28:52and those funds deposited

00:28:53in the REPO contemplated trust fund.

00:28:56I think that's in the best interest of Ukraine, the U.S.,

00:28:59and our G7 allies, and I think it sends the right message

00:29:04that we're leading Congress

00:29:05on a bipartisan basis past this law.

00:29:08We want tough sanctions.

00:29:11We want Ukraine to have the arms they need,

00:29:13and we need the financial deterrence that REPO brings.

00:29:17As Margaret Thatcher told us years ago,

00:29:19this is no time to go wobbly.

00:29:21I'd like to know how we're implementing that law.

00:29:24Will you commit to meet the mandatory deadlines as required

00:29:27by Section 104 of the REPO Act starting July 23rd?

00:29:31Well, we will meet the requirements of the act,

00:29:35but let me say we were very pleased with the passage

00:29:39of the REPO Act.

00:29:40It provides Treasury and the administration

00:29:44with an important set of tools,

00:29:47and we think all options should be on the table.

00:29:50However, we also believe a strength of our response

00:29:54to Putin has been that we have a global alliance

00:29:58that has worked together in support of Ukraine,

00:30:03and so we have looked for an approach that our allies,

00:30:08particularly the G7 and the European Union,

00:30:12could be supportive of that would deliver significant

00:30:16revenues to Ukraine.

00:30:19And as I think you know, the G7 leaders in June did endorse.

00:30:25I do. I know, Madam Secretary.

00:30:27Let me reclaim my time just to use it effectively,

00:30:30and I thank you for your leadership, but the REPO Act,

00:30:33as Mr. Meeks and Ms. Waters and I point out,

00:30:35it does give more strength.

00:30:37We should be leading and use that full tool

00:30:39because we know the support is there in Europe

00:30:42if we'll provide that leadership.

00:30:45What's the total amount now

00:30:47that you've had this two months

00:30:48of frozen Russian central bank assets held

00:30:51in the Federal Reserve here in the United States?

00:30:55It's a relatively small amount.

00:30:57I understand that.

00:30:58Could you give us the amount, please, ma'am?

00:31:00I mean, it's on the order of $5 or $6 billion.

00:31:03All right.

00:31:04And so it's not most of the assets are held in Europe.

00:31:09I understand where the assets are held.

00:31:11Thank you.

00:31:11Let me switch subjects.

00:31:13FIT 21, I want to thank you.

00:31:15I want to thank Undersecretary Lange for the work you did

00:31:19on looking at our digital assets regulatory framework,

00:31:22which we worked on mightily over the last year

00:31:25on a bipartisan basis.

00:31:27I particularly want to thank the White House for the statement

00:31:31of administration policy, which says that you're eager to work

00:31:35with Congress on developing legislation for digital assets

00:31:37to ensure a comprehensive and balanced regulatory framework.

00:31:42You continue to commit for the balance of this Congress

00:31:44to work with the committee and in the Senate

00:31:47to achieve a regulatory framework for digital assets.

00:31:51Yes, very much so.

00:31:52I'm happy to make that commitment.

00:31:54And we have worked productively together.

00:31:58It would be nice to see this reach a good conclusion.

00:32:02On another topic related to digital assets, you know,

00:32:05the SEC and the CFTC are consistently taking opposite

00:32:10legal positions in federal court on digital assets.

00:32:14In your capacity as the Financial Stability Oversight

00:32:17Council leader, what are you doing to bring the CFTC

00:32:20and the SEC together and be on the same page about this matter?

00:32:26Well, I mean, it's not the job

00:32:28of the Financial Stability Oversight Council

00:32:31to adjudicate differences.

00:32:34No, but you're supposed to quarterback financial risk.

00:32:37Are you quarterbacking between the CFTC

00:32:39and the SEC on this dispute?

00:32:42Not really.

00:32:44Our view, we have done a report on the risks connected

00:32:49with cryptocurrency and digital assets.

00:32:52And our risks have to do with holes

00:32:55where there's a lack of authority.

00:32:59I agree. And you're working constructively with us.

00:33:01Thank you.

00:33:01In my time remaining, I'm going to submit some questions

00:33:04on the multilateral banks and what I think is a preference

00:33:07that China is seeking.

00:33:08And we need Treasury to push back on that.

00:33:11My time has expired.

00:33:12I recognize the gentlewoman from New York,

00:33:14Ms. Vazquez, for five minutes.

00:33:16Thank you, Mr. Chairman, and welcome, Secretary Yellen.

00:33:20Thank you for being here this morning.

00:33:22As you know, many working-class families

00:33:25and small businesses are concerned about inflation.

00:33:29You recently told Yahoo Finance that you expect inflation

00:33:33to come down, and as we get into next year,

00:33:36you believe inflation will get back to the 2% target

00:33:40and you do not see the basis for a U.S. recession.

00:33:45Can you explain your expectation and how the policies

00:33:48of the Biden-Harris administration have helped

00:33:51temper the rate of inflation

00:33:53and given you this sense of optimism?

00:33:57Well, I'm optimistic because I believe

00:34:00that the big inflationary impulse that we saw

00:34:04in 2022 largely was global

00:34:09and it largely reflected supply problems stemming

00:34:14from the pandemic and its impact around the world.

00:34:19And due to the work of the Biden administration and firms

00:34:23in the economy and the pandemic being resolved,

00:34:28many of those supply issues are now fully resolved.

00:34:32So much of the pressure has diminished.

00:34:35On top of that, we have a strong labor market

00:34:39that has attracted many new people into the labor market.

00:34:44Labor supply has surged,

00:34:47and although the labor market was initially very tight,

00:34:53now we have a strong labor market but one

00:34:56with fewer pressures

00:34:59that would create inflationary concern.

00:35:03So inflation is coming down.

00:35:05The measure the Fed focuses

00:35:08on is now running at 2.6% over the last year,

00:35:14and I believe that it will continue

00:35:20to come down over time.

00:35:22Rents and housing costs continue to leave it higher

00:35:32than we would ideally like.

00:35:34And it'll be a while before housing costs come

00:35:41down to a more normal level, but that process is in train.

00:35:46Thank you.

00:35:47And Madam Secretary, in his opening statement,

00:35:51Chairman McCambery mentioned the IMS warning

00:35:55about the U.S. debt burden.

00:35:58However, in the same Yahoo Finance interview,

00:36:01you were also critical of the tax cuts passed by Donald Trump

00:36:05and congressional Republicans,

00:36:07saying that that decision was responsible for many

00:36:12of the problems that we face now with our fiscal trajectory.

00:36:16Can you explain the fiscal problems that arose

00:36:19from Donald Trump's tax cuts

00:36:22and how the Biden administration is working

00:36:24to reduce these effects?

00:36:26Well, it was a tax cut that had a very large impact

00:36:31on the deficit and the national debt.

00:36:34So it was costly.

00:36:36It was regressive.

00:36:38It did not pay for itself.

00:36:40And in a way, it concealed its true cost

00:36:45by including delayed raisers, phase-outs, and sunsets,

00:36:50some of which Congress will have to deal with next year.

00:36:55We did not see an investment boom that was promised

00:36:59by the act, and President Biden believes it's important to be

00:37:05on a fiscally sustainable path.

00:37:07Thank you.

00:37:08I hope the other side is listening.

00:37:11Secretary Yellen, millions of businesses are required

00:37:15to report their beneficial ownership information

00:37:18to FinCEN by January 1st.

00:37:21Yet, according to several conversations I'm having

00:37:24with businesses in my district and across the country,

00:37:27many legitimate businesses are unaware this requirement exists.

00:37:33How is FinCEN and the Treasury Department working

00:37:36to increase awareness of this requirement,

00:37:39particularly amongst rural and underserved businesses

00:37:43in which English is not a primary language?

00:37:48Well, we, FinCEN, has a very active program of outreach

00:37:55and of education, and I believe that you participated,

00:38:02and I want to thank you for that,

00:38:04hosting an event designed to inform people

00:38:10and business owners about what the requirements are.

00:38:14There is, you know, other language.

00:38:18Madam Chair, if I could just make a suggestion.

00:38:22I would like to see a better coordination.

00:38:25Mr. Chairman, please give me just a second.

00:38:28To work closely with the Small Business Administration,

00:38:32we have a network of SBDCs across the country,

00:38:35over 1,000.

00:38:37This is an opportunity.

00:38:38The gentlewoman's time has expired.

00:38:39I will share that.

00:38:41I will share that.

00:38:41I yield back.

00:38:43The gentleman from South Carolina,

00:38:44Mr. Norman, is recognized for five minutes.

00:38:47Thank you, Mr. Chairman.

00:38:47Thanks, Secretary Yellen, for coming today.

00:38:51I think the chairman, Voight, when he was in the chair,

00:38:55mentioned about the beneficial ownership.

00:38:58How is your office going about educating the 32.6 million

00:39:04businesses that had never heard of FinCEN?

00:39:06You got a penalty of a quarter of a million dollars,

00:39:09plus two years imprisonment,

00:39:12on something that's been ruled unconstitutional

00:39:14by a court in Alabama.

00:39:16What are you doing to, one, inform the businesses

00:39:20who are the linchpin to this economy?

00:39:26And secondly, is any thought to extending the 12-month deadline

00:39:31to another year for two years?

00:39:35Well, as I mentioned, there is an extensive outreach

00:39:39and education program that's taking place across the country.

00:39:45People with FinCEN are hosting events, and we're happy to work

00:39:52with members of Congress to explain what this is

00:39:59about in different parts of the country.

00:40:02So if you have an interest in that, please just contact us.

00:40:06But there is an extensive outreach effort.

00:40:10It's a very simple process.

00:40:13Takes 15 or 20 minutes, I believe,

00:40:16for most firms to be able to file.

00:40:20There's a very user-friendly website

00:40:24where the information can be input.

00:40:27It's not a difficult process.

00:40:30And don't think, you know, we've seen a good response so far,

00:40:36and don't think it's going to be necessary

00:40:39to extend the time frame.

00:40:41It goes through the end of this year.

00:40:44What's the numbers that have already complied?

00:40:47I believe 2.7 million is the most recent number.

00:40:512.7 million out of 31 million.

00:40:55That's kind of a low percentage.

00:40:58Now, if the penalty is going to stay into place,

00:41:01you say this is simple, but for the businesses,

00:41:06these businesses are struggling.

00:41:07They're just trying to make ends meet

00:41:08with this Biden administration, what they're doing

00:41:10with inflation, what they're doing

00:41:11with the supply chain, all of the above.

00:41:14And to put another regulation on them at this point

00:41:16in time and not know, put me on your list

00:41:20for what FinCEN is doing.

00:41:23Okay. Your average plumber is not going to go on a website

00:41:26and try to find out how to comply

00:41:29with the beneficial ownership.

00:41:31So if you could, and I'll send you a letter after this

00:41:37if you could comply, and consider extending it.

00:41:39A quarter of a million dollars fine is ridiculous.

00:41:42So, you know, the fine is for willful violation,

00:41:46as I understand it.

00:41:47Define willful violation.

00:41:48The rules. And your plumber example is not somebody

00:41:52who is willfully violating the rules.

00:41:55FinCEN is not going to go after, prioritize going

00:42:00after small businesses who are unaware.

00:42:02Secretary Yellen, you realize that's in the print.

00:42:05The fine, you realize the fine is in the, is printed.

00:42:10For willful.

00:42:11How do you define willful?

00:42:12Willful. Well, someone who knows they have an obligation

00:42:16and fails to.

00:42:17Does that apply to the plumber

00:42:18who doesn't know what FinCEN is?

00:42:20In the example I used, does that contractor, that plumber,

00:42:24that welder, if he has a business, is it willful

00:42:29if he just doesn't comply?

00:42:32Well, there is a massive education and outreach effort,

00:42:38and I would not regard, personally,

00:42:41I wouldn't regard that as willful.

00:42:44Okay. If you could clarify that then.

00:42:48In print, not talking.

00:42:50I think that would mean a whole lot.

00:42:52Now, another subject, the, I'm in South Carolina.

00:42:55The Chinese are buying up farmland all over this country.

00:43:01What's the role of the Secretary of Agriculture?

00:43:03What's your role in, I guess,

00:43:06allowing this to take place, if any?

00:43:09Well, CFIUS has the ability to ban land purchases,

00:43:17or in some cases, even insist on divestiture

00:43:23of activities taking place in the vicinity.

00:43:28Are they doing that now?

00:43:29Define, how are they banning it?

00:43:31It's taking place now.

00:43:32They're doing it through separate entities, LLCs.

00:43:35Tell me, walk me through, and I've only got 12 seconds.

00:43:38I'll write you a letter, if you could define

00:43:40for me what banning means, and how specifically you're stopping it.

00:43:43We work closely with the Defense Department.

00:43:46This is national security oriented,

00:43:49and yesterday we issued a new proposed rule

00:43:55that adds 50 additional military bases to the existing ones,

00:44:02and changes some of the parameters of some,

00:44:06it follows a thorough Department of Defense review.

00:44:10The gentleman's time has expired.

00:44:11The gentleman from California is recognized.

00:44:13Mr. Sherman, five minutes.

00:44:15Madam Secretary, I want to commend you

00:44:17and the entire Biden economic team.

00:44:20Over the last couple of years,

00:44:22we've seen the greatest decline in the inflation rate

00:44:25at any time this century, and at the same time,

00:44:29we've kept unemployment at historically low levels.

00:44:32I want to thank you and the entire team for that effort.

00:44:36I want to compliment you for the direct file system

00:44:40that has allowed millions of taxpayers to be able

00:44:42to file their tax returns in an electronic form

00:44:46without paying 130 bucks to TurboTax,

00:44:49and quote your good words before the Senate,

00:44:53where you said one day, information that taxpayers receive

00:44:57on the W-2 forms and the 1099s could be used

00:45:01to pre-populate the program, and I look forward

00:45:05to the day when the majority

00:45:07of Americans can file their tax return in less

00:45:09than two minutes simply by seeing the W-2 form

00:45:13and the other, the 1099 information.

00:45:16They already achieve that in about a dozen countries

00:45:18in Europe.

00:45:19The gentleman from Arkansas mentioned the Repo Act.

00:45:24Those assets should be used to go to Ukraine,

00:45:27but there are Americans who have claims against those assets,

00:45:32judgments against those assets,

00:45:34and I hope that we wouldn't send all the money to Ukraine

00:45:38and then tell the Americans with claims

00:45:40that they're out of luck.

00:45:45The anti-money laundering laws are important.

00:45:50I want to bring to your attention that Florida

00:45:52and now Tennessee have laws designed to,

00:45:56and it's perhaps a good purpose of these laws,

00:45:59to say that you shouldn't be denying financial services

00:46:02because of your political opinions or religious beliefs,

00:46:05but I hope that you will work with those states

00:46:08and preempt those laws as necessary

00:46:11to protect the Bank Secrecy Act.

00:46:13We shouldn't be in a circumstance

00:46:15where you lose your account

00:46:17because you have all these suspicious activity reports

00:46:19and the bank can't tell you

00:46:21about the suspicious activity reports, and all

00:46:25of a sudden you think it's because, you know,

00:46:27of your political beliefs.

00:46:30In the past, when you've come here, I've talked to you

00:46:34about how China has incentives for its domestic taxpayers

00:46:39to invest in Chinese companies, but denies those

00:46:41for investments in the United States, but we have incentives

00:46:44for Americans to invest, we call it capital gains allowance,

00:46:48and we provide those to those who invest in China,

00:46:51but I want to focus instead on India.

00:46:54India has cut its corporate tax rate from 40% to 22%,

00:46:59but they have excluded branches of foreign companies.

00:47:04So many U.S. companies can just form a subsidiary

00:47:07and take advantage of that 22% rate,

00:47:10but American financial institutions have branches,

00:47:14as a technical matter, they can't form a subsidiary,

00:47:17and I hope, can I count on you to bring this

00:47:20up with the Indian Ministry of Finance

00:47:23that American companies should have the same tax rate

00:47:27as Indian companies in India?

00:47:29Well, I'd be glad to have my staff discuss this with you

00:47:33in greater detail and to understand the issue.

00:47:36I look forward to that.

00:47:37I want to commend you for sanctioning individuals

00:47:40who use sexual violence as a weapon of war in Sudan,

00:47:44the Democratic Republic of Congo in Sudan, South Sudan,

00:47:49but the greatest use of sexual violence

00:47:53in war this century is the 100,000 Tigrayan women

00:47:59who have been subjected to sexual violence

00:48:01in northern Ethiopia.

00:48:03Can you commit to applying the same standards that you did

00:48:08for Sudan, the DRC, and South Sudan to individuals,

00:48:13particularly in the Ethiopian and Eritrean military

00:48:18who have carried out this campaign

00:48:20of sexual violence against Tigrayan women?

00:48:22Can I count on you to use the same standards?

00:48:24So this is really a determination that has

00:48:27to be made by the State Department rather than Treasury,

00:48:31but certainly human rights violations have been a concern.

00:48:38And finally, the Russian Central Bank has urged the use of crypto

00:48:44to evade Western sanctions.

00:48:48A stable coin offers no particular advantage

00:48:52in that it's stable.

00:48:53You can't make money by holding it,

00:48:55and it usually doesn't pay interest,

00:48:57certainly not the interest you get on money market funds.

00:49:00Its sole advantage is evading our sanctions

00:49:03and other laws, including tax laws.

00:49:05And I hope that in enforcing our sanctions

00:49:08on Russia you will not facilitate

00:49:10that by facilitating stable coin.

00:49:13We are very attentive to the use of cryptocurrencies

00:49:18and stable coins.

00:49:20We don't think it's a very substantial thing

00:49:26that Russia is doing, but as our sanctions bite more

00:49:30and more, it becomes a concern.

00:49:34Gentleman's time has expired.

00:49:35The gentleman from New York, Mr. Gavarino,

00:49:37is recognized for five minutes.

00:49:39Thank you, Mr. Chairman.

00:49:40Thank you, Madam Secretary, for being here today.

00:49:43Back in September, the CFPB announced

00:49:45that it is considering a Fair Credit Reporting Act brief

00:49:48that includes a broad and novel definition of data broker.

00:49:51Of what? As I mentioned to Director Tropra,

00:49:55I'm very concerned that this proposal may not recognize how

00:49:58consumer data is used for identity verification

00:50:00and fraud prevention.

00:50:01Use of data for these purposes is not the same as using

00:50:03for credit eligibility purposes,

00:50:05and therefore shouldn't be subject to the FCRA.

00:50:09Further, the companies that provide identity

00:50:11and fraud prevention technology

00:50:12to finance institutions should not be regulated under the FCRA

00:50:17as they already fall under the Bank Secrecy Act,

00:50:20USA Patriot Act, and the Graham-Leach-Biley Act.

00:50:24It would be a serious mistake

00:50:25to limit our fraud prevention tools in the system.

00:50:28Given that the Bureau's proposal may severely impact the ability

00:50:32to prevent fraud and conduct identity verification,

00:50:36has the CFPB spoken to anyone at FinCEN

00:50:38or Treasury regarding its brief proposal?

00:50:42I'd have to ask.

00:50:44I don't know what contact there's been.

00:50:47I have not talked to Director Tropra about this,

00:50:51but my staff may well have done so.

00:50:54If they haven't, will you commit to engaging

00:50:57with the Bureau on this?

00:50:59Certainly, I'm happy to look into it.

00:51:01All right.

00:51:01Wouldn't it make sense, though, for the Bureau

00:51:04to minimize its impact on the Bank Secrecy Act compliance

00:51:07and other law enforcement and privacy statutes?

00:51:11If it has that impact, it would make sense.

00:51:14All right.

00:51:14I appreciate that.

00:51:14Thank you very much.

00:51:17Over the last two decades,

00:51:20China has unleashed a global lending spree,

00:51:21mainly through its Belt and Road Initiative,

00:51:23showering mostly developing countries with hundreds

00:51:25of billions of dollars in an effort to expand its influence

00:51:28and become a political and economic superpower.

00:51:31China's opaque loans differ from most other loans

00:51:33to developing countries by advanced nations

00:51:35or institutions like the World Bank.

00:51:37They usually carry higher interest rates

00:51:38and shorter maturities requiring financing every couple

00:51:41of years and frequently using national assets as collateral.

00:51:45As more countries are on the cusp of default,

00:51:47raising interest rates are only going

00:51:48to make it more expensive to pay off debt denominated in dollars

00:51:52and other key currencies.

00:51:54Secretary, what should the role

00:51:55of international financial institutions be

00:51:57in addressing the needs of those

00:51:59that have outstanding Chinese debt and are currently

00:52:01in desperate need of relief from Beijing?

00:52:03We're working extremely hard to relieve the debt burdens

00:52:10of low-income countries that clearly need

00:52:13to restructure their debt and are trying to do

00:52:17so in the context of an IMF program.

00:52:20And as you say, China is often the holdout

00:52:24and the most difficult lender to deal with.

00:52:28We have been addressing that in all that we do.

00:52:33It's a topic I've raised in all of my bilateral meetings

00:52:39with my Chinese counterparts.

00:52:43We've raised this with the IMF and World Bank.

00:52:47A sovereign debt roundtable has been created to deal with some

00:52:53of the issues that China continues to raise

00:52:57in multiple debt restructurings.

00:52:59And while I still have serious concerns,

00:53:03some progress has been made in the context

00:53:07of common framework debt restructurings.

00:53:11So Zambia, Ghana, for example,

00:53:15are countries where progress has been made.

00:53:18China's come to the table.

00:53:20But there is more to do, clearly.

00:53:23You've said that, you've spoken to World Bank and IMF

00:53:25about this, estimates peg China's lending

00:53:27to developing world at a trillion dollars,

00:53:29which makes them bigger, a bigger lender

00:53:31than the World Bank and IMF.

00:53:34But China is still considering emerging and developing economy

00:53:37under the eyes of the IMF.

00:53:39Do you believe that the U.S. should now use its influence

00:53:42in international organizations to change China's status

00:53:45as a developing country, specifically at the IMF?

00:53:49I guess I need to look at that.

00:53:51I'm not prepared to give you an answer on that.

00:53:55All right, well, again, it's my understanding

00:53:57that the IMF has them, considers China an emerging

00:53:59and developing economy, which allows them better terms

00:54:04under certain loans.

00:54:05And if they're giving out a trillion dollars a year

00:54:07to other countries, I think we should look into it.

00:54:09We oppose in the World Bank and all of the MDBs any lending

00:54:14to China whatsoever, given China's income level

00:54:18and extensive lending around the world.

00:54:21And we've pushed and they have reduced very substantially the

00:54:27lending that they do.

00:54:28We vote against all of it.

00:54:30Thank you.

00:54:30I just want to say this statement.

00:54:32International banks play an important role

00:54:34in our nation's economy, particularly in New York.

00:54:36I recognize that Basel III endgame is not

00:54:38in your current jurisdiction, but financial impact

00:54:40of these rules cannot be understated.

00:54:42I would encourage you as Treasury Secretary to talk

00:54:44with banking regulators and other FSOC members

00:54:46about the impact of these rules.

00:54:48Gentleman's time has expired.

00:54:49The gentleman from Georgia, Mr. Scott,

00:54:51is recognized for five minutes.

00:54:53Thank you, Chairman.

00:54:55And Secretary Yellen, you remember the last time you were

00:55:01here, I raised concerns about the balloon going

00:55:08over the United States by China and how concerning that was.

00:55:16Since that time, this issue of national security

00:55:21and agriculture is going hand in hand.

00:55:25Our Farm Bill and my good friend, Chairman G.T. Thompson

00:55:30and I are two leaders on ag, have framed this

00:55:35as a national security issue, and here's why.

00:55:41The FBI has now labeled the Chinese government's action

00:55:48as the greatest threat.

00:55:50When Director Christopher Wray warned us in April that he said,

00:55:57and I quote, that Chinese hackers have infiltrated U.S.

00:56:03critical military infrastructures

00:56:08and are now poised to cause significant damage

00:56:14at any given moment's notice.

00:56:18So we've got a national security issue here of soaring magnitude.

00:56:26And we're working in a bipartisan way, obviously,

00:56:30to solve this problem.

00:56:32So I want to ask you some specific questions here.

00:56:37Under your proposal going forward, you have now more

00:56:42than 50 new facilities that will be added to the list of sites

00:56:48where surrounding property transactions may be reviewed

00:56:54by the committee on foreign investments,

00:56:58and now it's totaling 227.

00:57:04So I want to thank you.

00:57:07You all are moving.

00:57:08And this has to be our number one national security issue,

00:57:15largely because it's a delicate dance.

00:57:19Many people don't know.

00:57:22We do know China is our greatest threat,

00:57:25but it is also our greatest and largest trading partner.

00:57:32So it's a very delicate dance that we have to do.

00:57:37Now tell me, how did the York Committee ultimately decide

00:57:42which military bases would be included

00:57:47in this latest expansion?

00:57:49We worked very closely with the Department of Defense

00:57:53in issuing the notice of proposed rulemaking

00:57:57that came out yesterday,

00:57:59and they undertook a comprehensive assessment

00:58:03of military installations and considered a number

00:58:09of factors, operations, assets, missions,

00:58:15training at each installation, and what was appropriate

00:58:20in terms of coverage under civil.

00:58:22Yeah, pardon me.

00:58:23I got to, I want to get to a couple more.

00:58:26My understanding is that three

00:58:29or more military installations were removed from that list.

00:58:35Congressman, my understanding is

00:58:38that nothing is actually removed from the list,

00:58:41but when areas were expanded or new bases were added

00:58:47to the list, some existing bases may have fallen

00:58:52within the radius of another base

00:58:57that either was expanded or added.

00:59:00I don't think that there were any bases

00:59:04that are actually removed.

00:59:07Okay. Now let me ask you this.

00:59:10To the best of your knowledge, is there any indication

00:59:15that the Chinese government is looking beyond land purchases

00:59:20and farmland and expanding

00:59:23into buying either other types of small businesses

00:59:29around military bases?

00:59:31And I also want to thank you for working with my staff

00:59:35on this issue, and I hope that we continue to work together

00:59:40because it is now the number one issue facing us as far

00:59:46as agriculture is concerned, and now,

00:59:49as far as the whole national security of our nation.

00:59:54So I can get back to you on whether

00:59:57or not we're looking at small businesses.

00:59:59Thank you.

01:00:01I believe that would be within the scope of CFIUS.

01:00:04I look forward to working with you.

01:00:06Gentleman's time has expired.

01:00:08Recognize the gentlewoman from California,

01:00:10Ms. Kim, for five minutes.

01:00:13Thank you, Chairman.

01:00:14Secretary Yellen, thank you for joining us today.

01:00:17As you know, the House unanimously passed my bill,

01:00:21H.R. 540, the Taiwan Non-Discrimination Act.

01:00:25This will support Taiwan's membership at the IMF

01:00:28where the statehood is not a prerequisite

01:00:33to join the international organizations.

01:00:36And the IMF has no conditions

01:00:39where statehood is not a requirement.

01:00:42And as you know, Taiwan is already, you know,

01:00:45it belongs to WTO and the Asian Development Bank.

01:00:50So if Taiwan seeks its membership at the IMF,

01:00:54would you support it?

01:00:56Well, you know, Taiwan is not, is not expressed any interest

01:01:01in joining the IMF.

01:01:02This is not a decision that the United States government.

01:01:07With all due respect, Secretary Yellen,

01:01:09that's why we passed the Taiwan Non-Discrimination Act.

01:01:14And we are hoping that you will work with us

01:01:18and fully support Taiwan's membership at the IMF.

01:01:22And obviously, it goes without saying,

01:01:25the world would benefit from having the input and expertise

01:01:29of world's 21st largest economy.

01:01:32So I hope you will work with us.

01:01:34And the legislation is already passed out of the House.

01:01:37Sure. I guess what I can say is

01:01:39that we have supported greater engagement between the IMF

01:01:45and Taiwan, even with Taiwan being a non-member.

01:01:50Thank you.

01:01:51We have urged surveillance activities

01:01:54and other IMF activities to work with Taiwan to include them.

01:02:00Taiwan has indicated their expressed interest to join.

01:02:04So when that happens, I hope you will support that.

01:02:07So let me move on to the next question.

01:02:09This is something that I know Representative Garbarino

01:02:14mentioned this earlier.

01:02:15So I echo his comments.

01:02:18But to address the growing problem of indebtedness

01:02:21of low-income countries, G20 nations

01:02:24and the Paris Club agreed to the common framework with the CCP.

01:02:30So can you speak of any of your efforts to force the CCP

01:02:34to make its sovereign lending more transparent

01:02:37through the common framework?

01:02:40So we have engaged thoroughly over a long period of time

01:02:48and deeply in every way we can with China to bring them

01:02:53to the table, to participate actively in restructurings

01:02:58through the common framework.

01:03:00It's been frustrating,

01:03:02but I think that there has been some progress.

01:03:06We have urged the IMF, the World Bank.

01:03:10They've set up a sovereign debt roundtable

01:03:14in which it's a forum to discuss issues

01:03:18that China routinely raises

01:03:22that aren't really case-specific but broader.

01:03:27And I think we've made some progress there.

01:03:29And there are several countries where we haven't.

01:03:32Thank you, Secretary.

01:03:33Let's continue to be more vigilant in making sure

01:03:36that like-minded countries and with our allies

01:03:40that we can force the CCP to be more transparent.

01:03:43I'm going to move on to the next question.

01:03:45You know, we cannot afford to cave in to CCP demands

01:03:50that private creditors should be ignored

01:03:53in debt restructuring negotiations.

01:03:55There should be comparable treatment between public

01:03:58and private creditors.

01:04:00As you know, private capital is a powerful tool

01:04:03to counter the CCP's debt diplomacy.

01:04:07Earlier this year, the US

01:04:08and CCP launched the bilateral counter narcotics working group

01:04:12to counter the manufacturing and trafficking

01:04:14of all illicit synthetic drugs.

01:04:18But I'm afraid that we are giving away some

01:04:21of our leverage by lifting some sanctions.

01:04:23And once again, we're yielding

01:04:26to the empty promises made by CCP officials.

01:04:30So can you tell us about the role of Treasury

01:04:33and your role in the working group?

01:04:35Well, we participate in the counter narcotics working group.

01:04:39And Treasury has also, under the auspices

01:04:43of a financial working group, we've established

01:04:48with our counterparts led by the People's Bank of China

01:04:53an anti-money laundering forum where we're working

01:04:58on best practices and also relates to counter narcotics.

01:05:04So we have seen China take some action against firms

01:05:09that are involved in producing...

01:05:11I know last year when Xi Jinping and President Biden met,

01:05:14they also started the fentanyl working group

01:05:17and narcotics working group early this year.

01:05:20But we know from experience that we cannot solely rely

01:05:23on the commitments made by Xi Jinping and CCP officials.

01:05:26So I hope that you will do more to ensure that the CCP abides

01:05:31by the commitments that is established by working group.

01:05:34And I know you are participating,

01:05:36but please be more firm.

01:05:39We've taken sanctions, actions,

01:05:41or sales against Chinese firms on this.

01:05:44Thank you.

01:05:45My time's up.

01:05:46I yield.

01:05:47General Yelley, Lady Legal's Bank.

01:05:49With that, we go to the gentlelady from Ohio,

01:05:51Ms. Beatty is recognized for five minutes.

01:05:53Thank you, Mr. Chairman and Ranking Member.

01:05:56Secretary Yellen, I would just like to make a quick comment

01:05:59about FinCEN's beneficial ownership reporting rule,

01:06:02which has been discussed by many of my colleagues this morning.

01:06:06I know you're collecting the data

01:06:08to protect our national security and our financial system.

01:06:12And you're doing it because Congress actually mandated it

01:06:15in the Corporate Transparency Act.

01:06:19However, I too am concerned that many

01:06:22of our small businesses don't know about this new requirement.

01:06:26But I'm going to do my part to spread the word

01:06:29and to educate the business owners in my district.

01:06:32As a matter of fact, I'm excited

01:06:35about hosting Undersecretary Nelson and Director Gackey

01:06:39in Columbus next week for our FinCEN small business

01:06:43information session.

01:06:45We may want to get a little quote from you in light

01:06:48of your words today to help relax some of them

01:06:51that this is not an attack on them.

01:06:53Thank you for participating in this.

01:06:56It's much appreciated.

01:06:58And we want them to know about it, but we're not looking

01:07:03to penalize small businesses that learn about it

01:07:08and take the actions they need to file.

01:07:13Okay, well, thank you for that.

01:07:14We will certainly, in my opening remarks,

01:07:17include that in sharing that with the businesses.

01:07:20Because we found out that many

01:07:23of them absolutely have no idea about this reporting.

01:07:26But the good news is there were some who not only knew about it

01:07:30and they had actually completed their transparency forms.

01:07:36So we're going to continue.

01:07:37It's pretty simple filing for a small business.

01:07:43Well, thank you.

01:07:44Let me now go to the first question I have.

01:07:47Secretary Yellen,

01:07:48the World Bank's International Development Association, or IDA,

01:07:52as you know, is undergoing replenishment this year.

01:07:57As the largest single provider of development finance

01:08:01to the poorest countries, IDA is essential

01:08:04to addressing the most critical development challenges

01:08:07and setting high standards across the field.

01:08:10What role does IDA play in addressing the critical

01:08:13challenges caused by climate change in developing countries?

01:08:18And how is Treasury pushing IDA

01:08:20to advance its development priorities

01:08:23for the next three years?

01:08:24Well, it plays an absolutely critical role

01:08:27in providing concessional finance to the poorest countries.

01:08:32And it addresses a wide range of needs, from food insecurity

01:08:39to education to climate

01:08:42to pandemic preparedness and other things.

01:08:47We look forward to an ambitious IDA 21 refinancing.

01:08:56And we want to make sure

01:08:58that the funds are used effectively,

01:09:01given the enormous pressures that these countries are under,

01:09:07given all that's happened in terms of climate change,

01:09:11and also in terms of pressures on food and energy prices.

01:09:16Thank you.

01:09:17Secretary Yellen, under President Trump,

01:09:20the United States became more isolationist

01:09:23as it exited NATO and engaged in close contact with dictators.

01:09:29How has the United States Treasury

01:09:31under the Biden administration helped restore

01:09:34and reassert U.S. leadership in global economy?

01:09:38Well, thank you.

01:09:39Since day one, it's been a priority at Treasury for us

01:09:44to work closely and collaboratively

01:09:47with other countries around the globe

01:09:49to address common problems, whether it's food insecurity,

01:09:55development aid for countries so that they can grow,

01:10:01addressing debt problems, addressing pandemic preparedness.

01:10:08We've worked closely on trying to set a floor

01:10:13on corporate income tax rates globally

01:10:18to stop what's been a decades-long race to the bottom.

01:10:23So, and certainly when it comes to our support of Ukraine,

01:10:29the United States has shown global leadership,

01:10:33and we've worked very closely with our global colleagues

01:10:39on support for Ukraine and sanctions against Russia.

01:10:44So a wide range of things that's just a very partial list,

01:10:50and we really try to turn the clock 180 degrees in terms

01:10:57of cooperation and involvement in international fora.

01:11:03Thank you, and my time is up.

01:11:05Gentleman, your time has expired.

01:11:06With that, we'll go to the gentleman from Nebraska,

01:11:07Mr. Fletch, recognized for five minutes.

01:11:09Thank you, Mr. Chairman.

01:11:10Thank you, Madam Secretary, for being here today.

01:11:13Before I begin, I want to make a brief statement on something

01:11:16that is admittedly not within the scope

01:11:18of this particular hearing, but is very important to my district

01:11:22and agriculture producers across the country.

01:11:25With the 45Z Clean Fuel Production Credit going

01:11:28into effect in less than five months, Nebraska's agriculture

01:11:32and energy producers need full and accurate guidance promptly.

01:11:38I was disappointed to see Treasury release guidance

01:11:40in April for the 40B Sustainable Aviation Fuel Credit

01:11:44that rejected the best available scientific data

01:11:47and tied the hands of our nation's ag producers

01:11:50with an unworkable, one-size-fits-all limitation.

01:11:54Nebraska's farmers don't need the federal government to come

01:11:56in at the 11th hour and dictate

01:11:58which practices are acceptable and not acceptable,

01:12:02and I will continue to advocate for greater flexibility

01:12:04that fully recognizes the role Nebraska's producers play

01:12:08in the future of transportation fuels and for an all

01:12:11of the above energy policy that puts our farmers first.

01:12:14I plan to submit some questions, Madam Secretary, for the record

01:12:16on this issue and would appreciate a quick response.

01:12:20Switching gears, Secretary Yellen, in response to a letter

01:12:23from Chairman McHenry, among others, regarding FSOC's calls

01:12:26to fill the spot market gap in digital assets, it was noted

01:12:30that, quote, crypto asset platforms engage

01:12:33in practices commonly subjected to greater regulation,

01:12:36including operating order book style markets

01:12:39and custodying crypto customer assets, end quote.

01:12:43Those activities sound a lot like activities undertaken

01:12:46by centralized intermediaries,

01:12:49and centralized intermediaries are undoubtedly an important

01:12:52piece of the regulatory puzzle for digital asset regulation.

01:12:56That's why this committee

01:12:58and the Ag Committee collaborated together on FIT

01:13:01for the 21st Century, which provides a new regulatory

01:13:04framework with sufficient responsibility and resources

01:13:07for the CFTC to effectively regulate spot markets

01:13:10for digital assets that are not securities.

01:13:12However, I think it's important that we think about some

01:13:15of the unique characteristics in decentralized systems as well.

01:13:19These protocols will allow willing buyers

01:13:21and willing sellers to find one another and make a trade based

01:13:24on the rules of the protocol to any of the market participants.

01:13:27Here's my question.

01:13:28How do you think about decentralized trading protocols

01:13:31that do not create order book style markets or involve the custody

01:13:35of customers' crypto assets?

01:13:37Wouldn't these markets, which are unique relative to most

01:13:40of our understanding of traditional centralized markets,

01:13:43require a different approach to regulation?

01:13:47You're talking about DeFi type of activities

01:13:51and- We have to recognize there's going

01:13:53to be a decentralized angle to all of this in digital assets.

01:13:57And so far, everything seems very centralized.

01:13:59So yes. Your question is what

01:14:04about the regulatory approach to those markets?

01:14:08Well, how are you thinking?

01:14:09When you look at this whole regulatory regime,

01:14:13how do you think about decentralized trading protocols,

01:14:15basically, that do not create order book style markets

01:14:20or involve the custody of a customer's crypto assets?

01:14:23Have you given that a lot of thought?

01:14:25Well, this is certainly something

01:14:27that the regulators are looking at.

01:14:29The SEC and to some extent, the CFTC, perhaps some

01:14:36of these activities may fall under the regulatory umbrella

01:14:41of the banking agencies as well.

01:14:45And I would add this, Madam Secretary, FSOC released a report

01:14:48in late 2023 dedicated an entire section

01:14:52to the risk associated with digital assets.

01:14:55One such risk, the report mentioned was,

01:14:57quote unquote, concentrated risk.

01:14:59I'd like to focus on a couple aspects of concentration risk

01:15:02that I'd like your view on.

01:15:04If there are only a small number of entities that are able to serve

01:15:07as custodians of digital assets

01:15:08for registered investment advisors, would you agree

01:15:11that such an arrangement could constitute a

01:15:13concentration risk?

01:15:15It could potentially, but I'd need

01:15:17to know more about the details.

01:15:20I will note that a witness representing the registered

01:15:23investment advisors spoke in front

01:15:24of the digital assets subcommittee panel early last

01:15:27year and testified that his firm had, quote, three, maybe four,

01:15:30end quote, options for digital assets custody currently

01:15:34and indicated the number could reduce

01:15:36with the SEC's custody rulemaking.

01:15:38I guess, Madam Secretary, in the time I have left,

01:15:40if there are only a small number of entities that are able to serve

01:15:43as custodians of the now approved SpotBitcoins ETFs,

01:15:47would you view that arrangement

01:15:49as a potential concentration risk?

01:15:52I'd just have to know more about the details.

01:15:55I'd need to really look carefully

01:15:58at the case you have in mind.

01:15:59I will leave with this.

01:16:01I emphasize there are only a handful of custodians

01:16:03for SpotBitcoin ETFs, and most issuers only have one custodian.

01:16:07With that, Mr. Chairman, I yield back, and thank you for your time.

01:16:10The gentleman yields back.

01:16:11With that, we go to the gentleman from Illinois,

01:16:13Mr. Kastin.

01:16:14You're recognized for five minutes.

01:16:15Thank you, Mr. Chair, Madam Secretary.

01:16:17So nice to see you here again.

01:16:18I'm grateful for your time today.

01:16:20I want to chat about this ongoing risk from climate change

01:16:26in our financial markets and specifically

01:16:28to what's happening in insurance sectors.

01:16:31The, you know, there's been a lot of reporting

01:16:33that I'm sure you've seen a lot of.

01:16:34New York Times said that I think property,

01:16:36homeowners insurance, homeowners property insurance firms lost

01:16:40money in 18 states in 2023, so a third of our union.

01:16:45Yeah. At least as far as the Senate counts things.

01:16:48In Texas, home insurance rates went up 23% in 2023.

01:16:55We've seen 15 companies that just left Florida

01:16:58after Hurricane Ida.

01:16:59Twelve insurers went totally insolvent after the hurricanes

01:17:02in 2021, and 20 in Louisiana.

01:17:06And I am, you know, I think, and we've had this conversation

01:17:10with you, with your staff, whether this presents a systemic

01:17:13risk to the G-SIBs is one question, but with over a third

01:17:16of Americans' wealth tied up in their homes,

01:17:18it's clearly disruptive.

01:17:21I'm grateful for what the Federal Insurance Office is doing

01:17:23to try to get the data.

01:17:25I have some concerns, though, that the data call

01:17:28from FIO is relying on the National Association

01:17:32of Insurance Commissioners, and I've heard,

01:17:35I don't think this is public, but I've heard anecdotally

01:17:37and privately from folks who I trust that there's

01:17:39at least nine states that are not participating

01:17:42in that data call, and without getting, and those states tend

01:17:46to be ones that are most exposed to climate risk.

01:17:49So I guess what I'm wondering,

01:17:51my first question is are you aware of those data gaps

01:17:54in the FIO data call, and what can FIO do to fill

01:17:58in those gaps to make sure we get a robust picture

01:18:00of where the financial risks are?

01:18:03So I knew that a couple of states were not participating,

01:18:08but I thought it was the case that most of the states

01:18:14where there are great concerns are participating.

01:18:18I'm happy to look into that in greater detail

01:18:21and get back to you.

01:18:23Okay. I don't know if that's public, but maybe we can share

01:18:24with staff what we're hearing,

01:18:25and we can just compare notes and see what we're seeing.

01:18:27I mean, FIO and NAC were able to collaborate,

01:18:34and we thought that was a better approach to try

01:18:37to collect detailed, meaningful data

01:18:40that would give us insight into this problem.

01:18:44And so that's the route we're taking.

01:18:47We expect to learn a lot from this data collection,

01:18:51and as you say, it is potentially a

01:18:55very serious problem.

01:18:57Are you able to, I don't know if you saw,

01:18:59there was a New York Times story today, but it referred

01:19:01to a National Bureau of Economic Research paper from last month.

01:19:05I think Keyes and Mulder were the authors,

01:19:07but they essentially looked at insurance payments

01:19:10that are made and were able to subtract out public information

01:19:13on property tax and mortgages to get the inferred insurance

01:19:17that was paid as part of the escrow.

01:19:19I have not, I'm sorry.

01:19:21I haven't seen that.

01:19:22Well, check out the New York Times today.

01:19:24It's fascinating because it would seem to imply

01:19:26that there's a way to back into the data at least as far

01:19:30as what's happening with this rates and where some

01:19:33of the exposures are, and we can get wonky here.

01:19:37Our time will allow, but it seemed to suggest

01:19:39that there's a real dichotomy between states

01:19:41that have a very pro-consumer regulatory structure

01:19:44that are therefore not keeping rates high enough

01:19:45to attract business, and states

01:19:47that have a very pro-insurer regulatory structure

01:19:49that are letting antitrust issues run amok

01:19:51and driving rates up, and meanwhile,

01:19:54there's always exposure.

01:19:54The state regulatory regime, I think, definitely matters

01:19:58to what's happening in individual states.

01:20:01So, I mean, I guess,

01:20:03sometimes five minutes bothers me.

01:20:07We should have longer conversations.

01:20:09The concern I have is that insurance is going

01:20:13to be this canary in the coal mine, except it's more

01:20:16like a gorilla in a very small closet, I guess.

01:20:19It's all regulated at the state level.

01:20:23In theory, we've got FIO.

01:20:25In theory, I think this committee has jurisdiction

01:20:27over insurance generally, whatever that means,

01:20:30but it just feels like this huge whack-a-mole.

01:20:32We're trying to get data, and I'm curious if you think

01:20:35that you or FIO, or maybe more broadly, FSOC,

01:20:39do you have the authority just to get and ask the right

01:20:43questions so that we can understand

01:20:45where these risks are pooling, or do we need to find ways to,

01:20:48do we need to find other workarounds,

01:20:50maybe even more regulatory fixes?

01:20:52Well, FIO has looked very carefully at this

01:20:55and considered whether the collaboration

01:20:59with the insurance commissioners was an adequate way

01:21:04to collect this data, and on balance,

01:21:07felt this was the best approach

01:21:09in that we would collect information

01:21:12that would be very useful and provide a lot of insights.

01:21:17As you know, this is normally a state matter

01:21:23and not a federal matter, but there have been increasing calls

01:21:27and given what's happening,

01:21:29I think the federal government should be looking very carefully

01:21:32at this, not just to provide information,

01:21:36but because there may be a call for federal action.

01:21:39Exactly. Let's see where the risk is pooling.

01:21:40Out of time.

01:21:41Yield back.

01:21:41Thank you very much.

01:21:43Gentleman yields back.

01:21:43Without a doubt, the gentleman from Iowa, Mr. Nunn,

01:21:45is recognized for five minutes.

01:21:48Thank you, Mr. Chair.

01:21:49Thank you, Madam Secretary, for being with us today.

01:21:51I want to highlight, I think we all agree

01:21:53that national security is at top of the list,

01:21:55certainly at Treasury and here in Congress as well.

01:21:58And national security means standing

01:22:00up to Russia, China, Iran.

01:22:03It's not about overly burdening small businesses

01:22:06in my home state of Iowa.

01:22:08So let's get started today.

01:22:09I want to thank Secretary Yellen.

01:22:12My home state has 270,000 small businesses.

01:22:15In fact, it makes up 99% of our businesses in Iowa.

01:22:20And they're facing a tremendous amount

01:22:22of paperwork coming largely from the Treasury,

01:22:24which is why we invited Director Gecki to come out

01:22:27and hear directly from Iowans.

01:22:28And she did a great job, but she also got an earful.

01:22:31She heard and admitted that FinCENT has alerted only 2

01:22:35million of more than 3.2 million small businesses

01:22:40of their obligations to be able to fill

01:22:43out beneficial ownership.

01:22:45That is an abysmal number, particularly when we have less

01:22:48than six months left in your timeline

01:22:50to help be able to execute.

01:22:52So here's my ask today, Madam Secretary.

01:22:55Would you support, you know,

01:22:56our bipartisan Small Business Red Tape Relief Act,

01:23:00which would extend the deadline for small businesses

01:23:03to be able to be compliant with Treasury?

01:23:06Well, FinCENT has 2.7 million reports so far.

01:23:12And they are engaging in a very extensive outreach

01:23:17and education effort.

01:23:20And it's their judgment that it's not necessary

01:23:26to extend the deadline.

01:23:27Madam Secretary, I appreciate that.

01:23:29Let me share with you what was delivered directly to Ms. Gecki.

01:23:33The very fact that we have only alerted 2 million over more

01:23:37than 30 million is harmful.

01:23:39If they fail to meet it in the next six months,

01:23:41it will be $500 a day to small businesses.

01:23:44We're not going after the bad guys.

01:23:45We're going after small businesses in Iowa.

01:23:48I would ask you, as the Treasury, extend this deadline

01:23:52and work on a bipartisan level with us to make sure

01:23:55that our small businesses are taken care of.

01:23:57I hope you hear me on that.

01:23:58Well, look, we're not trying to go after small businesses

01:24:04that do the best to meet their responsibilities.

01:24:10Most of them don't know what their responsibilities are

01:24:11because they've not been informed

01:24:13by FinCENT at this point.

01:24:15So the CTA penalizes willful violations of the law

01:24:21and we're not looking to take some sort

01:24:24of gotcha enforcement actions against small businesses?

01:24:29I certainly hope that's the case

01:24:31because my folks back home see a $500 fine per day

01:24:34as a pretty not only gotcha, but as a very painful impact.

01:24:38So in that vein of setting deadlines,

01:24:41one of the things I would ask Treasury is will Treasury be

01:24:44able to meet their November 1st, 2024 rulemaking deadline

01:24:48on 45Z, the clean fuel production credit?

01:24:55They're working.

01:24:58This is the successor to the sustainable fuels.

01:25:03That's correct.

01:25:04So that's something that Treasury is working on.

01:25:07I can't give you an exact.

01:25:10I hope you meet your deadline, Madam Secretary,

01:25:13because you've laid out a very strict $500 a day deadline

01:25:17for small businesses in Iowa

01:25:19that work largely in renewable fuels.

01:25:21I hope that Treasury can meet its own deadline

01:25:23that you've laid out of November 1st.

01:25:25I'd like to change briefly now to Iranian illicit oil sales.

01:25:29I think we've all seen the threat in the Middle East,

01:25:31both what it's done for Hamas, Hezbollah, the IRGC.

01:25:34Americans have died.

01:25:36Americans are still in the firing line.

01:25:37Treasury's the lead for sanctions.

01:25:39Can you tell us today, are there any U.S.-based firms

01:25:43providing insurance to Iran's illicit ghost fleet

01:25:47of oil tanker ships?

01:25:52I can't speak to particular entities.

01:25:58What I can say is that we are working to crack down.

01:26:05Let me give you what The New York Times has, Madam Secretary.

01:26:08A list of 27 tankers currently supporting the illicit sale

01:26:14of oil from Iran to some of our worst adversaries.

01:26:17General Michael Carrillo of CENTCOM noted

01:26:20that Iran continues to sell 90% of its oil directly to China

01:26:24and fund a terrorist war in his AOR as a result of this.

01:26:28I have asked five times now for Treasury to be able

01:26:31to find a list, both in the classified

01:26:33and unclassified versions, of how we are cracking

01:26:36down on insurance violators here in the United States.

01:26:40Are we going to be able to do anything,

01:26:41or are you going to be able to have an answer for us

01:26:43on the insurance companies here domestically-based

01:26:46that are providing insurance to a terrorist regime?

01:26:50Most of the insurance companies that I'm aware of

01:26:54that do this are outside the United States.

01:26:57But there are ones here in the United States,

01:26:58you would agree?

01:27:00But I'm not able to comment on specifics.

01:27:04I would like a follow-up.

01:27:05Thank you, Mr. Chair.

01:27:06I yield my time.

01:27:07Chairman's time has expired.

01:27:09The gentleman's time has expired.

01:27:10We'll have to go to the gentleman from New Jersey.

01:27:11Mr. Gottheimer is recognized for five minutes.

01:27:14Thank you, Mr. Chairman.

01:27:14Secretary Yellen, the average price of childcare

01:27:17in this country is now higher than the average cost of rent.

01:27:20In my home state of New Jersey,

01:27:21the average family pays more than $440 a week

01:27:24in childcare costs.

01:27:25What forms of tax relief are available

01:27:27for hardworking families struggling with these high costs,

01:27:29and what is the Biden administration doing

01:27:31to combat the effects of these rising costs, please?

01:27:34Well, we certainly have proposed extending

01:27:39the child tax credit, which was immensely helpful,

01:27:43and we're supportive of the legislation

01:27:46that has gone through the House,

01:27:49would urge action in the Senate

01:27:51that would extend the childcare,

01:27:55the child tax credit, along with other provisions.

01:28:02Thank you.

01:28:03And I think it would be great

01:28:05if we could actually get that passed.

01:28:07We'd lift 400,000 children above the poverty line.

01:28:11Switching gears a little bit,

01:28:12following on the questions that were just asked,

01:28:14I applaud your recent decision

01:28:17to impose additional sanctions on a shadow banking network

01:28:21that has enabled Iran to fund proxy terror groups,

01:28:23including Hamas, Hezbollah, and the Houthis.

01:28:26Holding Iran accountable has been a top priority

01:28:28for me and for many of us,

01:28:29which is why I was proud to help pass

01:28:31the bipartisan Iran-China Energy Sanctions and Ship Acts.

01:28:34Can you elaborate more on these sanctions

01:28:36and additional action the administration is taking

01:28:38to reduce the risk of Iran-funded terrorism

01:28:40against America and our allies?

01:28:42Well, we have taken a wide array of sanctions actions

01:28:47to try to stop the flow of illicit funds from Iran

01:28:52that funds terrorist groups, the Houthis, Hezbollah, and others.

01:28:58We've worked jointly with other countries

01:29:01to impose a really using every tool

01:29:06that we have to crack down on that,

01:29:09as well as sources of revenue,

01:29:11including oil revenues that enable Iran

01:29:16to have the funds to distribute to these terrorist groups.

01:29:21Do you think we need to do more

01:29:22to address cooperative sanctions evasion

01:29:24between Iran and our other adversaries,

01:29:26including Russia, China, and Venezuela?

01:29:30I'm sorry, what specifically do you have in mind?

01:29:32What are we doing?

01:29:33Are we doing anything there?

01:29:33Is this something that's on your front burner

01:29:35that you're concerned about, the sanctions evasion?

01:29:39We have taken...

01:29:42I mean, we know that there are oil shipments that Iran has,

01:29:48and we've recently taken...

01:29:50We have systematically tried to shut that down

01:29:55and recently taken very significant actions

01:30:00that military groups in Iran have used

01:30:08to support their activities, oil shipments.

01:30:12Thank you.

01:30:13Madam Secretary, are you familiar with the recent state laws

01:30:15that require banks to provide an explanation

01:30:17with specific reasons for closing or denying an account,

01:30:20including in situations where the decision

01:30:22was related to financial crimes risk?

01:30:25Yes.

01:30:26I'm concerned these state laws may conflict

01:30:28with federal requirements, especially the obligations

01:30:30that banks have under the federal anti-money laundering laws

01:30:33that prevent terrorists and illicit financing

01:30:35in the U.S. financial systems.

01:30:37I presume you share those concerns?

01:30:39Well, it's a federal obligation

01:30:42to file suspicious activities reports and comply

01:30:46with the requirements of the Bank Secrecy Act,

01:30:51and that's something that we require

01:30:55and expect all banking organizations to do.

01:30:59Are you doing anything to address this issue,

01:31:01this conflict here?

01:31:03Well, I'm certainly stating that it is an obligation

01:31:07of banks and that we would enforce.

01:31:15Chair, I'd like to enter into the record

01:31:16a bipartisan letter signed by my colleagues

01:31:18on this committee, Representative Luekemeyer

01:31:20and Sherman, please.

01:31:22Without objection.

01:31:23Thank you.

01:31:25We urge you and your counterparts, the OCC

01:31:27and FinCEN, to look into this issue, please,

01:31:29and act, and I hope, if it's okay,

01:31:32I'd love for our teams to sit down together

01:31:34and talk about actions that we can take.

01:31:36Be glad to do that.

01:31:38Thank you so much.

01:31:39In my last 30 seconds, I just want to zoom in

01:31:40on a terror financing issue for just a minute.

01:31:42With respect to Iran, do you agree

01:31:44the IRGC's designation as a specially designated

01:31:47global terrorist organization

01:31:49as a foreign terrorist organization

01:31:51should not be lifted until such time

01:31:53that it has demonstrated that it has permanently

01:31:55ceased the conduct for which it was designated

01:31:58in the first place?

01:32:00I mean, that's something I haven't,

01:32:02you know, the exact requirements

01:32:04I haven't looked into, but that's probably

01:32:08reasonable.

01:32:09Yeah, I'm concerned about that,

01:32:10and of course, looking at the UNRWA employees

01:32:13who participated in October 7th,

01:32:15and I hope you're looking at that as well.

01:32:17Well, we think that those who were responsible

01:32:20for the atrocities should be held to account.

01:32:24Thank you. I yield back.

01:32:25Thank you.

01:32:26Gentleman's time has expired.

01:32:27Would that go to the gentleman from New York,

01:32:28Mr. Lawler?

01:32:29He's recognized for five minutes.

01:32:31Thank you, Mr. Chairman.

01:32:32Madam Secretary, when was the last time

01:32:34you met with President Biden in person?

01:32:37I'm not going, I meet with President Biden

01:32:41over a wide range of issues,

01:32:45the economy, China, Russia.

01:32:46When was the last time you met with him in person?

01:32:48I'm not going to comment on my meetings

01:32:52with the President.

01:32:53Those are private.

01:32:56Well, as a Cabinet Secretary,

01:32:59have you noticed any mental or cognitive decline

01:33:01in any of these meetings?

01:33:05The President is extremely effective

01:33:09in the meetings that I've been in with him.

01:33:13That includes many international meetings

01:33:15that are multi-hour like his meetings

01:33:19with President Xi.

01:33:21I've met with him, with other leaders

01:33:25who were in meetings.

01:33:26So are you testifying that you have not seen

01:33:29any mental or cognitive decline?

01:33:31Mr. Chairman, point of inquiry,

01:33:33she's not a physician.

01:33:36She's a member of the Cabinet.

01:33:38You're asking her a medical question.

01:33:40Let's keep the comments to the subject.

01:33:42It's not a medical question.

01:33:43It's her interpretation as a member of the Cabinet.

01:33:49I'm just asking what your testimony is.

01:33:51Mr. Chairman, I move to have those words taken down.

01:33:53She is not a physician.

01:33:57Will people please not go between the witness

01:34:00and the committee?

01:34:04Okay.

01:34:06Mr. Lawler, she's answered the question.

01:34:07Let's move on.

01:34:13They're recognized for the balance of your time.

01:34:16Thank you, Mr. Chairman.

01:34:19Madam Secretary, have there been any discussions

01:34:21among Cabinet secretaries about invoking

01:34:24the 25th Amendment?

01:34:25No.

01:34:29The Supplemental Appropriations Bill

01:34:30enacted in April contained two of my bills.

01:34:35The SHIP Act, which requires the imposition

01:34:37of sanctions on foreign ports and refineries

01:34:40that knowingly process Iranian oil,

01:34:43and the Iran-China Energy Sanctions Act,

01:34:45which requires you to close correspondent accounts

01:34:48for Chinese banks if they are involved

01:34:50in petroleum transactions with the Central Bank of Iran

01:34:54or another sanctioned Iranian financial institution.

01:34:58This applies no matter how minor or infrequent

01:35:00the transaction may be.

01:35:03In March, General Carrillo, the head of CENTCOM,

01:35:06testified before the Armed Services Committee

01:35:08that Iran continues to sell 90% of its oil to China,

01:35:12funding Tehran's subversive activities

01:35:14across the region.

01:35:15That is a quote.

01:35:17Anyone who participates in the sale of Iranian oil

01:35:19plays a role in helping the regime evade U.S. sanctions.

01:35:24Engaging in this trade is tantamount to aiding

01:35:27and abetting a terrorist state, and it must end.

01:35:30These sanctions create a significant financial incentive

01:35:33for ports and refineries to stop dealing in Iranian oil

01:35:37or else lose access to the U.S. economy.

01:35:41Since Joe Biden took office, Iranian oil sales

01:35:43are up over $100 billion, $100 billion increase.

01:35:49Can you speak to where you are in implementing these laws,

01:35:52the SHIP Act and the Iran-China Energy Sanctions Act,

01:35:56and will you commit to swiftly implementing these sanctions

01:35:59as required by the law?

01:36:01So I need to look into the details

01:36:05of where we are with respect to these particular acts,

01:36:10but we have put in place a wide array of sanctions on Iran,

01:36:17including for oil dealings.

01:36:21We have sanctioned firms in other countries

01:36:27that are involved with the Iran oil trade,

01:36:31and we are constantly evaluating additional sanctions

01:36:37to put in place.

01:36:38Since the supplemental aid package passed,

01:36:40have you had any meetings on the SHIP Act

01:36:43or the Iran-China Energy Sanctions Act?

01:36:45I have regular meetings with my staff.

01:36:48Have you had any discussions

01:36:49on those two provisions of the supplemental?

01:36:52I've discussed with them Iranian sanctions.

01:36:55Specifically the SHIP Act

01:36:57and the Iran-China Energy Sanctions Act.

01:36:58That's not the way we organize our discussions.

01:37:03We talk about our Iranian program and what we're doing.

01:37:08So I'm going to interpret your answer as to be no,

01:37:11you have not had discussions on the SHIP Act

01:37:14and the Iran-China Energy Sanctions Act,

01:37:17and the Treasury Department has not advanced sanctions

01:37:21with respect to those two laws.

01:37:23I have not said that.

01:37:25Well, is it yes or no?

01:37:29I have had discussions with them,

01:37:31and it's covered a wide array of sanctions issues

01:37:35in connection with Iran.

01:37:37I'm not sure specifically which actions have to do

01:37:43with which aspects of the law.

01:37:45And that's how it's presented to me.

01:37:48I sent a letter specifically on the SHIP Act

01:37:51and the Iran-China Energy Sanctions Act

01:37:53to you and Secretary Blinken a few weeks ago.

01:37:56We have not heard back.

01:37:58We certainly would appreciate a detailed response

01:38:01as to what has been done to implement the law

01:38:04that was passed under the Supplemental Aid Package.

01:38:08And in my remaining time,

01:38:09have you communicated the sanctions risk to Beijing at all

01:38:13with respect to the Iran-China Energy Sanctions Act?

01:38:16We have discussed with them our concerns about

01:38:21Chinese businesses and others involved with these matters.

01:38:25But not specifically on the Iran-China Energy Sanctions Act?

01:38:31We have discussed an array of sanctions issues.

01:38:34Okay.

01:38:35General, this time has expired.

01:38:37Just a reminder to the committee that getting into

01:38:39the personal business effects of the President

01:38:43as well as Mr. Trump is inappropriate for this committee.

01:38:49With that, we'll move to Ms. Talib from Michigan.

01:38:52She's recognized for five minutes.

01:38:54Thank you, Mr. Chair.

01:38:55Thank you, Secretary, for being here.

01:38:58As you probably know,

01:39:00many of the countries in the Global South

01:39:03are facing a tremendous debt burden.

01:39:06I think that's almost half of the world's population right now.

01:39:10About 3.3 billion people are impacted by this,

01:39:13living in countries that spend more on the interest

01:39:17on their debts than the healthcare

01:39:19or education in their communities.

01:39:21And you know an IMF issues fees called surcharges.

01:39:25On heavily indebted countries.

01:39:28Secretary Lewin, do you believe that developing countries

01:39:29suffering through perfect, you know, storm of global crises,

01:39:33including shocks to the food and fuel prices,

01:39:37soaring interest rates, climate change, and so much more,

01:39:41should be required to pay these fees

01:39:43on top of the interest they pay on their debt?

01:39:46Well, the surcharges framework,

01:39:49we think is important to create appropriate incentives

01:39:54to repay the IMF in a timely way and to contain borrowings.

01:39:59But the IMF, with our support, is currently reviewing

01:40:04That's right. Do you support that review?

01:40:06this policy.

01:40:07Do you support that review?

01:40:08Yes, we are supportive of the review.

01:40:13Can you explain to our residents

01:40:15what the special drawing rights are at the IMF?

01:40:19Special drawing rights are essentially a system

01:40:26in which countries agree to provide lines.

01:40:33The way I think of it is providing countries

01:40:36with additional lines of credit

01:40:39that are in proportion to their quotas at the IMF.

01:40:44And I love telling my residents

01:40:46that it actually would provide immediate relief

01:40:49to countries across the globe

01:40:50while costing the U.S. payer nothing, absolutely nothing.

01:40:54Is that correct?

01:40:54Does it cost our U.S. taxpayer any money?

01:40:57No, we earn interest on special,

01:41:01if we provide hard currency for special drawing rights,

01:41:07we earn interest on that.

01:41:10And it doesn't cost us anything.

01:41:12And Secretary Yellen, I've heard,

01:41:15is the United States actually standing in the way

01:41:17of new issuance or looking at the special drawing rights?

01:41:22Well, we fought at the onset and after the pandemic struck,

01:41:29which hit so many countries,

01:41:31created a global shortage of liquidity

01:41:35that an SDR allocation was appropriate

01:41:38and one took place, a large SDR allocation.

01:41:44At this point, we don't think an SDR allocation is needed

01:41:48or appropriate.

01:41:49So you don't think a new issuance is required?

01:41:51I mean, I don't want to send a message

01:41:52that our country, Secretary, doesn't,

01:41:55that our message to developing countries

01:41:57that the U.S. is unwilling to respond to the debt crisis.

01:42:00We've been very supportive of an expansion

01:42:04of the Poverty Reduction and Growth Trust.

01:42:07But why not just help them?

01:42:09I don't understand.

01:42:10Well, it does help them

01:42:12because it gives them interest-free loans

01:42:16to the countries that are most in need.

01:42:18So more debt.

01:42:19So the way the international financial institutions

01:42:21are governed is inconsistent.

01:42:21Well, it's debt.

01:42:23SDRs, in a way, are debt, too,

01:42:25because countries that use them do have to pay interest

01:42:29on them, so it's not that different.

01:42:32Yeah, the way the international financial institutions

01:42:34are governed is inconsistent

01:42:36with the democratic ideals we seek at home.

01:42:38And in the IMF, for example, the U.S.

01:42:41and other G7 countries get 41% of votes,

01:42:44despite only having 10% of the global population.

01:42:47So, Secretary Yellen, what would you say to countries

01:42:50who feel we don't practice what we preach

01:42:53when it comes to democratic decision-making

01:42:55at the international financial institution?

01:42:58So we have certainly been supportive

01:43:01of governance reforms that increase the role

01:43:06and the voice of borrowing countries

01:43:10so that they have more say in representation.

01:43:16We've supported adding directors

01:43:21who represent low-income countries.

01:43:26And we've supported the idea of reviewing the formula

01:43:31that would determine quota allocations in the future.

01:43:37We've been opposed to ad hoc quota review

01:43:44that would reallocate in a sort of ad hoc way voting rights,

01:43:52but we are supportive of the IMF reviewing the formula

01:43:57that determines voting rights.

01:44:01Thank you.

01:44:01Thank you, Secretary.

01:44:02IU.

01:44:03Ladies, time has expired.

01:44:04With that, we go to the gentlelady from Indiana,

01:44:06Ms. Houchen, recognized for five minutes.

01:44:09Thank you, Mr. Chairman.

01:44:10Thank you to the ranking member.

01:44:11And thank you, Secretary Yellen,

01:44:12for your testimony and being here today.

01:44:14Like many of my colleagues, I have concerns about the ways

01:44:17in which this administration continues to support policies

01:44:20and practices at international financial institutions

01:44:24that do nothing to further American interests

01:44:26and instead seem to only help China

01:44:29and our competitors continue to make gains at our expense.

01:44:33From allowing mission creep into social and climate issues

01:44:36to giving our adversaries the upper hand

01:44:38in key geostrategic regions,

01:44:41this administration has been allowing America's influence

01:44:44abroad to be undermined, and it has to stop.

01:44:48Starting with the first of this month and running

01:44:50until the end of next June, the World Bank is aiming

01:44:53to devote 45% of its financing to climate-related programs

01:44:57in the bank's latest annual report.

01:44:59Climate was referred to some 200 times, largely in the context

01:45:03of the bank's green energy investments

01:45:06and reducing the reliance of developing countries

01:45:08on fossil fuels.

01:45:10At the same time, China has been taking an all-of-the-above

01:45:13approach to energy investments, pushing renewable energy,

01:45:16while also developing oil and gas resources.

01:45:19One of our foremost concerns when it comes to China

01:45:22and the CCP is the extent to which they exert their influence

01:45:25over developing countries by providing funding

01:45:28for basic necessities, when half the population

01:45:30of sub-Saharan Africa does not have access

01:45:33to electricity to begin with,

01:45:35it's not hard to see why China's influence

01:45:37in that area might be growing.

01:45:39Secretary Yellen, if 45%

01:45:41of the bank's resources are chasing arbitrary climate

01:45:44targets, why wouldn't developing countries keep looking

01:45:47to China and to Chinese lenders

01:45:49to meet their core developmental needs?

01:45:52Well, the World Bank and the MDBs are heavily focused

01:45:56on broad development goals, relieving poverty

01:46:01and ensuring sustainable growth.

01:46:04But achieving those goals is also linked

01:46:08to addressing climate,

01:46:10which is increasingly compromising the development

01:46:16goals, especially in the poorest places.

01:46:20And climate and access to electricity are linked

01:46:24at the spring IMF World Bank meetings of President Banga.

01:46:29Secretary Yellen, I'm sorry, I only have five minutes,

01:46:32so I'm going to go on to another question.

01:46:34Sixty percent of the U.S. electricity generation does come

01:46:38from fossil fuels, but as part

01:46:40of this administration's climate agenda, you are voting

01:46:43against virtually all World Bank fossil fuel projects in Africa.

01:46:47Why is the Treasury holding Africans to a standard

01:46:50that the wealthiest countries in the world cannot meet?

01:46:55This reflects the goals that Africa itself has,

01:46:59that very often, most often,

01:47:03renewables aren't the cheapest way of developing energy.

01:47:09And it's a question of bringing electricity

01:47:15in Africa.

01:47:16Six hundred million Africans lack electricity

01:47:20and renewables both address climate change and resilience

01:47:25and are the cheapest way of bringing electricity

01:47:30to those who don't have it.

01:47:32Okay.

01:47:32There's a goal of.

01:47:34One of the most, one of, I'm sorry,

01:47:35one of the most egregious examples

01:47:37of the World Bank empowering China and its efforts

01:47:39to expand its geopolitical influence has been

01:47:42through allowing the CCP to overbuild its production capacity

01:47:46in certain products in order

01:47:47to flood the markets to other countries.

01:47:49They've done that with industries

01:47:51like aluminum extrusion, and now they've done it

01:47:53with solar technology.

01:47:54Last May, the president doubled U.S. tariffs

01:47:56on Chinese solar cells, and since the World Bank is aiming

01:48:00to direct 45 percent of its financing in the next year

01:48:03to climate projects, the bank's money may still just go

01:48:07to purchase Chinese solar panels, batteries, and the like.

01:48:10This seems to be supporting China financially

01:48:13in their efforts to expand their geopolitical footprint.

01:48:16Why is the Treasury supporting this if the department is

01:48:19concerned with Chinese overcapacity

01:48:21and the CCP dominating the market

01:48:23in green energy industries?

01:48:24Well, we are very concerned and attentive

01:48:27to procurement strategies and make sure that all

01:48:33of the MDBs have open processes

01:48:37and that American firms know American firms rarely bid

01:48:43on these contracts, and we want them to do so.

01:48:47Does the Treasury and the department, do they intend

01:48:49to then roll back the reliance on Chinese solar panels

01:48:55in order to prevent them from profiting financially

01:49:00from the United States in this way?

01:49:04Well, if American firms

01:49:06or other firms can provide these solar panels and bid

01:49:10on those contracts, then certainly there would be less

01:49:14use of Chinese products in those projects.

01:49:17We would certainly hope that U.S. companies would be chosen

01:49:20over Chinese companies when it comes to solar panels.

01:49:24Thank you very much.

01:49:24I yield back.

01:49:26Gentlelady's time has expired, but then we go to the gentleman

01:49:28from New York, Mr. Torres.

01:49:32Thank you.

01:49:33Madam Secretary, what impact on Treasury rulemaking do you

01:49:37expect from the loss of Chevron deference?

01:49:40Do you expect the impact to be disruptive, minimal?

01:49:43Is it too early to tell?

01:49:45Well, I am concerned about the Chevron decision.

01:49:49As the White House has indicated,

01:49:52it limits the use of agency expertise in designing rules

01:50:03or deferring to rules that we put in place subject

01:50:09to congressional legislation.

01:50:12But we intend to go on with rulemaking efforts

01:50:17and protect the American people through those rulemakings.

01:50:23And we're evaluating, our legal team is evaluating whether

01:50:29or not there is specific implications.

01:50:32I'm not aware of anything specific so far.

01:50:36I have a question about the semiconductor arms race

01:50:38with China.

01:50:39According to a report by the Boston Consulting Group

01:50:43and the Semiconductor Industry Association,

01:50:45by 2032, the United States will account for 30%

01:50:49of advanced semiconductor production compared

01:50:52to only 2% per China.

01:50:55Do you believe, as I do, that these projections demonstrate

01:50:58the success of the Biden strategy, the combination

01:51:01of chips investment in America and the export controls

01:51:04on China?

01:51:05I do.

01:51:06Yes, I would agree with that.

01:51:09And Madam Secretary, you've been sounding the alarm

01:51:11about China's overcapacity.

01:51:14Yes.

01:51:14Legacy chipmaking.

01:51:16According to the same report, by 2032,

01:51:18China will account for one-fifth of chips in the range

01:51:22of 10 to 22 nanometers and one-third

01:51:25of chips above 28 nanometers.

01:51:27What action should the United States take

01:51:29to combat China's overcapacity of legacy chipmaking

01:51:33and when should we take those actions?

01:51:36Well, the recent actions of putting tariffs

01:51:41in place did include some legacy chips.

01:51:45And of course, the Semiconductor and Chips Act is designed

01:51:50to promote additional production in the United States

01:51:54to secure our supply chains and to gain the dynamic benefits

01:52:00that come from producing and learning in the process

01:52:04of production, developing new technologies.

01:52:08On a separate topic, the Financial Times has reported

01:52:12that Chinese organized crime operates a network

01:52:15of underground banks that launders money

01:52:17for both Mexican cartels who are trafficking in fentanyl

01:52:21and Chinese nationals whose capital is fleeing China.

01:52:24Chinese money laundering is essentially financing the

01:52:27deadliest drug crisis in American history,

01:52:29a crisis whose latest death toll surpasses 100,000 Americans.

01:52:34What role is the Treasury Department playing

01:52:36in policing the illicit finance at the heart

01:52:39of America's deadliest drug crisis?

01:52:42So, I certainly agree that it is a national tragedy what's

01:52:47happened with drugs, particularly fentanyl

01:52:51and other synthetic opioids.

01:52:53And Treasury is using every tool at its disposal to try

01:52:59to crack down and reduce the flow of illicit drugs

01:53:04into the United States.

01:53:06That includes by direct sanctions that we put on firms

01:53:13in China and elsewhere that are providing precursors.

01:53:17We have an agreement to work collaboratively with China

01:53:23to reduce the activities of Chinese firms

01:53:27in supplying precursors to Mexico.

01:53:30We're working collaboratively with Mexico.

01:53:33We've announced many new sanctions actions cracking

01:53:37down.

01:53:38I just do, I do worry that the CCP is stringing us along.

01:53:42You know, 97% of the fentanyl precursors are manufactured

01:53:47in China.

01:53:47You know, Xi Jinping has the power

01:53:50to unilaterally shut down the supply chains that account

01:53:54for almost all of those fentanyl precursors.

01:53:55At what point does the United States impose sanctions

01:53:59on China for perpetuating the deadliest drug

01:54:02crisis in American history?

01:54:05We have seen China take some positive steps in recent months

01:54:11and we'll try to build on that, but I wouldn't rule

01:54:14out anything in the future.

01:54:17Thank you, Madam Secretary.

01:54:21Gentleman yields back.

01:54:22With that, we go to the gentleman from Oklahoma.

01:54:24Mr. Lucas, you're recognized for five minutes.

01:54:26Thank you, Mr. Chairman.

01:54:27Secretary, thank you for appearing

01:54:29before the committee today.

01:54:31I think you would agree that the health and resiliency

01:54:33of the global financial system is tied

01:54:35to the capital levels of global banks.

01:54:38Treasury's core mission is, of course,

01:54:41to provide for a strong economy

01:54:42and to protect the integrity of the financial system.

01:54:46During our discussion, when you last appeared before the

01:54:48committee, you largely deferred to the Fed, FDIC,

01:54:52and OCC on the details of the Basel proposal.

01:54:57I've been particularly focused on the negative impact

01:54:59the proposal would have on our capital markets

01:55:01that are critical to the U.S. economy.

01:55:04I hope this is an area that you also are paying

01:55:07close attention to.

01:55:08We're in a situation where the chairman of the Fed today,

01:55:13during Senate testimony, said he still expects major revisions

01:55:17and would like to reopen the proposal for comment.

01:55:20At the FDIC, the current chairman has announced

01:55:22that he'll resign to restore confidence in the agency

01:55:26while his replacement is awaiting

01:55:28Senate confirmation hearings.

01:55:30And at the OCC, we have an acting comptroller

01:55:33who's not been confirmed by the Senate.

01:55:36At the very least, given the expected revisions,

01:55:39reopening the proposal for further comment

01:55:41seems reasonable.

01:55:43Secretary Yellen, is it still your stance not

01:55:47to take a public position on the details

01:55:49of the Basel proposal?

01:55:52I'm not going to take a stand on the details.

01:55:55I think that's up to the banking agencies

01:56:00and the rulemaking process that they'll go through.

01:56:04As you noted, the agencies are planning

01:56:09significant revisions in response

01:56:12to all of the comments that they have received.

01:56:16And I'm certainly supportive of their going

01:56:20through that process and revising as appropriate.

01:56:24Secretary, I appreciate the position you're in.

01:56:26And given your history at the Fed,

01:56:28you are uniquely positioned to understand

01:56:30the far-reaching impact of the Basel proposal

01:56:33and the potential for unintended consequences.

01:56:35Now, shifting focus, I'd like to discuss

01:56:39the U.S. Treasury market.

01:56:41The global financial system depends

01:56:42on a well-functioning Treasury market,

01:56:45the deepest and most liquid market in the world,

01:56:48where any disruptions could create risk

01:56:50across capital markets.

01:56:53You've heard my concern about the Basel endgame's

01:56:55impact on the Treasury market,

01:56:57paired with the significant market structure reforms

01:57:00coming from the SEC.

01:57:02You've assured the committee that you're monitoring

01:57:04this along with your interagency counterparts.

01:57:07Given the importance of the Treasury market

01:57:10to the United States and the world,

01:57:11we should ensure robust participation.

01:57:15Undersecretary Lange has suggested

01:57:17that excluding excess reserves held

01:57:20in the Federal Reserve System from the leverage ratio

01:57:23would be effective during times of market distress.

01:57:26The Fed did this in 2020, and it was effective.

01:57:29Secretary Yellen, do you agree

01:57:31that there are beneficial reforms

01:57:32that could increase participation

01:57:34in the U.S. Treasury markets?

01:57:36Well, that certainly is a reform

01:57:39that was worthy of discussion.

01:57:42And I, at the time, thought it was very appropriate

01:57:46to take that step

01:57:48and would be supportive of greater liquidity

01:57:51in the Treasury market.

01:57:53But again, this is a decision for the banking regulators,

01:57:58but I would hope that they would take this into account.

01:58:02The U.S. Treasury market is the most important market

01:58:04in the world and the bedrock of the global financial system.

01:58:08And I'd encourage you to support those efforts

01:58:10to boost market liquidity and resilience.

01:58:13One last question.

01:58:15Two pieces of legislation, led by myself

01:58:17and Representative Luettenmeyer,

01:58:19officially added the Secretary of Agriculture to CFIUS

01:58:23and improved the referral process

01:58:25of the agricultural transactions for review.

01:58:29Could you describe how CFIUS scrutinizes transactions

01:58:32in the ag sector and the relationship with the USDA,

01:58:36if you can?

01:58:38So, for land transactions that occur in the vicinity

01:58:45of military installations that have been identified

01:58:50by the Department of Defense's critical ones,

01:58:55there's scrutiny of transactions.

01:58:59And in some cases, there's even been outright.

01:59:03I think you know that in the mine one case

01:59:07that the President ordered divestment of activities

01:59:13that were going on in the vicinity

01:59:17of a military installation.

01:59:20And yesterday, Treasury issued a notice

01:59:24of proposed rulemaking that follows a comprehensive study

01:59:30by the Department of Defense

01:59:32that adds 50 additional military bases

01:59:37and changes the geographic limitations of others.

01:59:42Thank you, Secretary.

01:59:43And thank you, Mr. Chairman, for the effort that you

01:59:45and I put in to making this possible.

01:59:47Thank you, gentlemen.

01:59:48I think it's, thank you.

01:59:49The gentleman yields back.

01:59:50But I think it is very important

01:59:51that we address this situation.

01:59:53I appreciate your working with us.

01:59:54And I appreciate the Secretary's work on it as well.

01:59:57With that, we go to the gentleman from Nevada,

01:59:59Mr. Horsford, is recognized for five minutes.

02:00:02Thank you very much, Mr. Chairman.

02:00:03And to the Ranking Member, Madam Secretary,

02:00:05good to see you again.

02:00:07Housing remains the number one issue in my district

02:00:11that I hear from my constituents.

02:00:13But that should be no surprise

02:00:16as Nevada is currently bearing the brunt

02:00:18of this country's affordable housing crisis.

02:00:21Supply, or rather a key lack

02:00:24of supply remains the driver behind our affordability

02:00:27emergency, which has left Southern Nevada

02:00:30with only 13 affordable

02:00:32and available rental units

02:00:34for every 100 low-income household.

02:00:38This is an unconscionable level of scarcity

02:00:41and incentivizing construction is the only

02:00:44feasible path forward.

02:00:46It is going to take strong public-private partnerships

02:00:49as well as coordination with housing developers

02:00:51to spur the investment necessary

02:00:54to make housing affordable for everyone.

02:00:56To do so, we must work with the tools available to us

02:00:59to leverage our tax code

02:01:02and make increased construction of these projects

02:01:05feasible across the country.

02:01:07Under your purview is the low-income housing tax credit,

02:01:11one of the most powerful incentives that we have

02:01:14to provide the necessary support

02:01:16for the development of affordable housing.

02:01:18However, I've heard from my local developers

02:01:21that this effective credit can be more efficient,

02:01:25which will expand the population that it can serve.

02:01:28There are necessary improvements that the program

02:01:31could achieve, which are included in my legislation,

02:01:34the Housing Market Transparency Act.

02:01:37The bill would create a central repository

02:01:39for state housing agencies

02:01:41to provide critical information on housing developments,

02:01:44such as the construction costs, quality of living spaces,

02:01:47health and safety information, and ownership data.

02:01:51The public-private partnerships of LIHTC program

02:01:55that make it such an effective method

02:01:57of bringing affordable units to a community

02:02:00also create inherent issues with transparency.

02:02:04So, Madam Secretary, how could Treasury and the IRS

02:02:08make LIHTC more efficient

02:02:11if you were able to capture comprehensive data

02:02:14on these properties?

02:02:15And additionally, what other improvements

02:02:18to the LIHTC program do you recommend

02:02:20to help further incentivize the badly needed construction

02:02:24of more affordable developments?

02:02:27Well, Treasury certainly supports efforts

02:02:30to improve transparency and accountability

02:02:34that are consistent with legal requirements.

02:02:39And we're very happy to review the bill

02:02:44that you have introduced

02:02:47and try to provide technical assistance

02:02:50or we could work with the IRS

02:02:54on administration of LIHTC

02:02:57and see if there are interactions there

02:03:00that would be favorable.

02:03:02Completely agree about we have a real crisis

02:03:05with respect to affordable housing.

02:03:08I would say, generally, Treasury is trying to think of

02:03:14how it can use every single tool at our disposal

02:03:19to improve supply of affordable housing.

02:03:23I was in Minneapolis a few weeks ago

02:03:26and was able to announce that we're using

02:03:30$100 million that is income from our investments

02:03:37in the CDFIs to plow it back into affordable housing.

02:03:43And, of course, with respect to LIHTC,

02:03:46you know, the President's budget proposes

02:03:50increased funding of LIHTC, which would be very important.

02:03:55The President proposed a program

02:03:58that would expand affordable housing by 2 million units

02:04:03and love to see that become law.

02:04:06I agree with the need to build more housing

02:04:09to address the affordable housing crisis.

02:04:11Madam Secretary, I also wanted to note

02:04:15the incredible success from the direct file program.

02:04:20And I am pleased that Treasury recently announced

02:04:24that you will be making this direct file permanent.

02:04:27Nevada had the fifth best uptake of the program

02:04:32of any state in the country.

02:04:34Notably, 90% of the respondents rated

02:04:38that the program was excellent or above average.

02:04:42So I believe that we need to continue to promote

02:04:46the direct file program and expand

02:04:49and permanently reauthorize it so that Nevadans

02:04:52will be able to have that support all year

02:04:55to learn about their options to direct file

02:04:57and to earn the tax credits and benefits that they deserve,

02:05:02especially as we have debates

02:05:03about who should get the tax benefits.

02:05:06It should be the working people of America,

02:05:08not big corporations or billionaires.

02:05:11With that, I yield back.

02:05:13The gentleman yields back.

02:05:14With that, I will recognize myself for five minutes.

02:05:19Welcome, Ms. Yellen.

02:05:20Good to see you again today.

02:05:22We've discussed this issue in the past.

02:05:25You know, my concern initially was a very slow response

02:05:29with regards to sanctions that were put on

02:05:31all the things that could be helpful to Russia

02:05:33whenever they invaded Ukraine.

02:05:35And so I ask you in the last couple of times

02:05:37you've been here,

02:05:38in your position as the head of FSOC,

02:05:42is there a committee or a group that's being put together

02:05:45to be able to have sanctions immediately ready

02:05:47to put on China when China invades Taiwan?

02:05:51Our own generals say it's going to happen

02:05:52over the next three years.

02:05:53So therefore, I think we need to have a plan in place

02:05:55so it doesn't take several months like it did with Russia

02:05:59because I think in order for us to be impactful,

02:06:00we've got to do this very quickly.

02:06:01So you indicated last time you were here

02:06:03that there is a committee that's working on this.

02:06:07Would you like to discuss it a little bit more?

02:06:09Sorry, there are interagency discussions around Taiwan.

02:06:18Those discussions include working with our allies

02:06:21to be able to identify different entities,

02:06:24different groups to be able to sanction

02:06:27and make it more difficult for China to economically continue

02:06:31once they invade and we put sanctions on them.

02:06:34I'm sorry, I'm not really able to discuss.

02:06:37I don't want specifics.

02:06:39I just want generalities here, I understand.

02:06:40But I think it's important for us to know as a committee

02:06:43to provide our oversight that there is a concern

02:06:46about this, number one, and number two,

02:06:47that there are discussions going on and they include allies

02:06:50to be able to address this issue when and if it occurs.

02:06:54We have many discussions about common issues with our allies

02:07:00and I would include this in that list,

02:07:05but I'm not able to provide any specifics.

02:07:07Okay, I understand that.

02:07:08Thank you very much.

02:07:09Next question is a little bit different.

02:07:12What's your greatest concern when it comes

02:07:16to foreign finance issues like this?

02:07:18When it comes to what?

02:07:19With foreign finance.

02:07:20We're talking about foreign financial institutions

02:07:22and different issues today with regards

02:07:24to international financial system.

02:07:26What's your greatest concern about all of this?

02:07:29About foreign financial institutions?

02:07:31Yeah, things that you're involved in,

02:07:32things that are concerning to our country with regards

02:07:35to whether it be CFIUS or whether it be sanctions

02:07:37or whether it be, you know,

02:07:38international artificial intelligence.

02:07:42What's the biggest concern you have when it comes

02:07:44to international financial relationships and issues?

02:07:48Well, I have many different concerns, but in the realm

02:07:52of sanctions, we have very powerful sanctions

02:08:00that are available because of the important role of the dollar

02:08:04in international transactions.

02:08:07The ability to cut off foreign banks or other businesses

02:08:13or individuals from the ability to transact

02:08:18through the U.S. financial system and to participate

02:08:22in the dollar, the dollarized.

02:08:26Okay, so basically your protection

02:08:27of the dollar is one of your greatest concerns?

02:08:30I think that that's important

02:08:32and the more we have used sanctions,

02:08:36the more countries look for ways to engage

02:08:41in financial transactions that don't involve the dollar.

02:08:45Okay, according to Executive Order 13818,

02:08:49a foreign person is to be sanctioned

02:08:51if the Treasury Secretary finds them responsible for

02:08:54or complicit in or directly or indirectly engaged

02:08:57in serious human rights abuse.

02:09:00In Russia, we sanctioned Vladimir, with regards to Russia,

02:09:02we sanctioned Vladimir Putin

02:09:03and the Foreign Minister following the invasion

02:09:05of Ukraine with respect to the Uyghur genocide.

02:09:08It is Treasury's position that this is standard for sanctions,

02:09:12that this standard for sanctions applies to,

02:09:14with respect to the Uyghurs.

02:09:15Is it Treasury's position that this standard applies

02:09:17for sanctions against Xi Jinping?

02:09:20And if not, why has the Chinese leadership been spared?

02:09:26Well, we have engaged in sanctions related

02:09:32to the Uyghurs under the force of...

02:09:35My question is, you sanctioned the leadership of Russia,

02:09:37but you haven't sanctioned the leadership of China.

02:09:40Why? That's the basic question.

02:09:43This is a basic foreign policy issue that...

02:09:50Well, sanctions fall under your jurisdiction,

02:09:52so the administration and you working together

02:09:55have not felt that this is important yet.

02:09:58This is a question I would suggest

02:10:02that you refer to the State Department.

02:10:07Okay, well, I know that one of our members talked

02:10:08about the sanctions against various banks in China

02:10:11with regards to drug money and laundering Mexican cartel money.

02:10:15I think it's important that we continue that.

02:10:17I sat on the Chinese Select Committee,

02:10:19and it is a really, really big deal

02:10:20that we continue to sanction those banks

02:10:22that facilitate the money laundering of money

02:10:25from the drug cartels, because that's one of the ways

02:10:27we can kind of help thwart that.

02:10:29With that, I yield my time back.

02:10:31If I would go to the gentleman from North Carolina,

02:10:33Mr. Nickel is recognized for five minutes.

02:10:37Thanks so much, Secretary Yellen, for being here today.

02:10:40I was very glad to hear you commit to Congressman Hill,

02:10:44that you'll continue to work with Congress

02:10:46to create a regulatory structure for digital assets,

02:10:49and that you hope it will reach a quote-unquote good conclusion.

02:10:52I think it's especially important that we continue to work

02:10:54on this issue in a bipartisan way.

02:10:57This Congress, we're on track to be one of the least productive

02:11:00in our nation's history, but this is a place

02:11:01where we've had good bipartisan agreement,

02:11:03and I hope you will continue to make it a priority

02:11:06for this administration.

02:11:08I also want to talk about your role as chair of FSOC,

02:11:13and want to echo Congressman Flood's concerns

02:11:17with the concentration risk in the market for crypto custody

02:11:21due to the SEC's misguided SAV-121,

02:11:24which makes crypto less safe for consumers.

02:11:28You know, we have the best banks in the world.

02:11:30They ought to be able to take care

02:11:32of this custodial banking piece,

02:11:34but I appreciate your attention to these important issues.

02:11:37And I certainly want to applaud you

02:11:39and your agency's important leadership on the global stage,

02:11:43seeking to forward American interests,

02:11:45repair alliances, and isolate dictators.

02:11:48First question is about Russian oil.

02:11:50In April, I joined a bipartisan fact-finding mission to Ukraine

02:11:54to show our support in their war against Putin's aggression

02:11:57and unprovoked attack on their country.

02:12:00After I met with President Zelensky, it was clear to me

02:12:03that we need to do as much as we can to prevent Russia

02:12:06from fueling the war with profits from their oil exports.

02:12:10If we fail, we hand over Ukraine to Russia,

02:12:13and we know that an emboldened Putin will continue

02:12:15on to Eastern Europe.

02:12:17The U.S.-led oil price cap has reduced Russian export earnings

02:12:21significantly, but there's a lot more to do.

02:12:23On the whole, we're seeing countries comply

02:12:25with the price cap restrictions, but China, India,

02:12:29and Russia have access to limited non-G7 shipping

02:12:32and insurance services, which don't have to comply

02:12:35with the cap.

02:12:36Secretary Yellen, what is the strategy

02:12:38to address the price cap circumvention,

02:12:40and how do you propose that we hold these countries

02:12:43and entities accountable?

02:12:45Well, so as you said, at first we had a very big impact

02:12:52on Russian revenues, and then to circumvent the price cap,

02:12:57they invested very heavily in a shadow fleet of vessels

02:13:03and insurance coverage.

02:13:05So they would free themselves of dependence

02:13:08on Western services, including shipping.

02:13:12Now, that's expensive, and they have really diverted a lot

02:13:19of resources from other uses in order to build that fleet.

02:13:25Then we took the step this past year of sanctioning some

02:13:32of the ships, the SOFCOM float ships that are involved

02:13:37in this trade, and that appeared to be effective

02:13:41in widening the discount that they received on Russian oil,

02:13:47and we continue to look at expanding those sanctions.

02:13:52Now, you know, our goals from the outset with respect

02:13:56to the price cap were twofold,

02:13:59that we want to reduce Russian revenues

02:14:02or alternatively raise their costs of selling oil,

02:14:08and also we want to keep the market well supplied.

02:14:12And so as we contemplate additional sanctions,

02:14:16we really also look at what impact do we think

02:14:20that our actions could have on the global oil market

02:14:24if our sanctions raised global oil prices significantly.

02:14:31That would be a negative not only to American drivers,

02:14:36but also to countries around the world

02:14:40that are dependent on foreign oil, and so we want

02:14:44to be careful about doing it, but we continue

02:14:47to look at additional sanctions.

02:14:50Thanks so much.

02:14:50As the world looks for alternatives to Russian

02:14:53and Iranian oil, nuclear energy, you know, must play a role.

02:14:57Governments around the world are shifting policies toward

02:14:59nuclear power as clean, a reliable source

02:15:02of 24-7 electricity.

02:15:04I'm very glad the administration has rallied the world

02:15:06and secured pledges from 22 countries

02:15:08to triple their nuclear energy capacity by 2050.

02:15:11Unfortunately, Russia and China continue

02:15:13to dominate the global nuclear market.

02:15:15Meanwhile, U.S. companies are competing

02:15:17against foreign governments without meaningful support

02:15:19from the federal government.

02:15:21When countries in key strategic areas

02:15:24around the world need civil nuclear energy,

02:15:26I don't want them to rely on Russia and China.

02:15:29What should Congress be doing to assist the administration

02:15:31in deploying nuclear energy around the world?

02:15:36I mean, all I can really say here is the Treasury is supportive

02:15:40of using all available technologies, including nuclear.

02:15:47I mean, our role is with the multilateral development banks.

02:15:52They, with the exception of the EBRD, don't touch nuclear,

02:15:58and we have been supportive

02:16:01of having them review their policies in this area.

02:16:05My time has expired.

02:16:06Gentleman's time has expired.

02:16:07That will go to the gentleman from Michigan.

02:16:09Mr. Huizinga is recognized for five minutes.

02:16:11Thank you, Mr. Chairman and Madam Secretary.

02:16:15Good to see you again.

02:16:16I want to start with an issue that's important

02:16:18to a sizable population in my district

02:16:21in the Battle Creek-Springfield area of Michigan.

02:16:25That is home to about 5,000 Burmese citizens.

02:16:31And last year, the Office of Foreign Asset Control, OFAC,

02:16:35issued a directive that prohibited Americans

02:16:37from providing any such services, directly or indirectly,

02:16:41that would benefit the Myanmar oil

02:16:44and gas enterprise, also known as MOGI.

02:16:46Unfortunately, and actually, I'd like to, Mr. Chairman,

02:16:49submit a copy of that for the record.

02:16:52Without objection.

02:16:54And last year, as well, in consultation

02:16:57with the State Department, Treasury,

02:16:59you determined that MOGI is a political subdivision

02:17:03of the military junta in Burma.

02:17:05So, in other words, the Burmese government.

02:17:08The MOGI generates a billion U.S. dollars annually,

02:17:13and by as far as their largest foreign revenue for Burma,

02:17:17and by extension, the junta.

02:17:20Unfortunately, late last year,

02:17:21Treasury stopped short of listing the MOGI

02:17:23as a specially designated national,

02:17:26which, as you know, not only blocks the assets,

02:17:29but then puts other countries on notice

02:17:31that they shouldn't be doing business

02:17:33with this designated entity.

02:17:37So, Madam Secretary, why hasn't Treasury used its authority

02:17:40to block the MOGI from receiving financial support

02:17:44from around the world,

02:17:46which is funding an abusive government?

02:17:48And frankly, what I'd like to know is,

02:17:50what would you have to say to my constituents,

02:17:52and what am I supposed to tell these folks,

02:17:55many who have fled the civil war in Burma,

02:17:59the genocide that's happening,

02:18:00the continued bombings that are happening

02:18:03for their family members

02:18:06that are still in these horrific conditions?

02:18:09Well, we absolutely are committed to denying

02:18:13the Burmese military sources of funding

02:18:17that they are using to suppress

02:18:23So why would you leave them off that particular list?

02:18:28We did announce sanctions relative to MOGI,

02:18:32and we issued a directive that prohibits U.S. persons

02:18:37from providing financial services to MOGI for its benefit.

02:18:41I understand, but again, you left them off a list

02:18:43that would have toughened those up.

02:18:45And frankly, in response to that last week,

02:18:47along with my colleagues from this committee,

02:18:49Mrs. Wagner and Mr. Sherman,

02:18:52we introduced a bipartisan Brave Burma Act,

02:18:56which requires the president to determine on an annual basis

02:19:00whether to impose stronger blocking sanctions on MOGI,

02:19:04on the Myanmar Economic Bank,

02:19:07and foreign persons operating in the jet fuel sector

02:19:11of the Burmese economy.

02:19:12That's where those bombings are coming from,

02:19:14and jet fuel is a critical piece to the junta

02:19:20continuing the genocide that's there.

02:19:23So, Mr. Chairman, clearly, I believe more work needs to be done,

02:19:28and I look forward to having this bill actually

02:19:31be a part of a markup.

02:19:33But, Madam Secretary, I need you to take a closer look at that,

02:19:36because we, frankly, need your support.

02:19:38Well, I promise that I will do that,

02:19:41and we certainly are concerned with the situation in Burma.

02:19:45Contemplate additional sanctions actions,

02:19:48and we'll work with you on that.

02:19:50I'm not going to get into this right now,

02:19:52but we have seen some of those sanctions slip in other areas,

02:19:54like Iran and Russia, and I'm concerned about that,

02:19:58and we can continue that conversation.

02:20:00I do, and I'm not expecting you to know details about this.

02:20:04This was a letter we sent yesterday,

02:20:07and, Mr. Chairman, I'd like to submit that for the record as well.

02:20:11What objection?

02:20:11The letter is concerning significant problems

02:20:13with the enforcement of U.S. sanctions

02:20:15against the Taliban officials.

02:20:18In May, the Special Inspector General for Afghanistan,

02:20:21also known as SIGAR,

02:20:23highlighted that since the failed withdrawal from Afghanistan

02:20:26in August of 2021,

02:20:29$10.9 million in U.S. taxpayer money

02:20:34has been paid to the Taliban

02:20:35in the form of taxes, fees, duties, and utilities.

02:20:40Now, first of all,

02:20:41is there any reason to doubt the IG and his report?

02:20:47I have not had a chance to review it.

02:20:51Okay, the report was from May.

02:20:54The report was from May.

02:20:55Our letter was from yesterday.

02:20:57So, I would appreciate a quick response

02:21:01to our inquiry on this.

02:21:03I think this is a significant problem that we have,

02:21:07and I know in D.C. we talk about trillions and billions,

02:21:10but $10.9 million of U.S. taxpayer dollars being used

02:21:16to pay the Taliban government taxes, fees, duties, and etc.,

02:21:20seems outside the bounds, Mr. Chairman.

02:21:23I know my time is yielded, or my time is up,

02:21:25but I do appreciate the opportunity

02:21:27to continue this conversation with you, Madam Secretary.

02:21:29I yield back.

02:21:30The gentleman's time has expired.

02:21:32With that, we'll go to the gentleman from Texas.

02:21:33Mr. Gonzales is recognized for five minutes.

02:21:36Thank you, Mr. Chairman,

02:21:38and thank you, Madam Secretary,

02:21:40for being with us this morning.

02:21:42I'm pleased that the Treasury Department

02:21:44noticed the proposed rulemaking

02:21:46concerning the outbound investment screening program.

02:21:50There's no doubt that U.S. money

02:21:51should be kept out of the hands of Chinese and Russian firms.

02:21:56I also want to add another angle

02:21:58concerning foreign investment

02:22:00that's a concern to us in South Texas

02:22:01and, I think, along the border.

02:22:03Many of our constituents are seeing

02:22:05Chinese money flooding into Mexico,

02:22:08where manufacturing facilities are at

02:22:12and are being developed south of the border,

02:22:14so goods can be shipped to the United States

02:22:17as a Mexican product instead of Chinese,

02:22:21and I worry that if we consider

02:22:22only the direct U.S. investments

02:22:24into Chinese or Russian factories

02:22:26that they can produce technology of concern,

02:22:31those investments may be directed instead

02:22:36to factories overseas

02:22:37and Chinese-owned companies in third nations.

02:22:41Will the Treasury Department consider,

02:22:43or have you already considered,

02:22:45those sort of nonlinear investments

02:22:47that aim to evade the goals

02:22:49of the President's outbound investment screening program?

02:22:53If not this mechanism,

02:22:55if not this mechanism,

02:22:57in what capacity could we work together

02:23:00in order to prevent U.S. investments

02:23:02from funding, for example,

02:23:04the semiconductor factory

02:23:06that's in Mexico owned by Chinese entities?

02:23:09So, I think you raise an important issue,

02:23:12and it's one that we're aware of at Treasury.

02:23:16I made a visit to Mexico last year,

02:23:20and this is a matter that I've discussed

02:23:24with senior Mexican officials.

02:23:28We're discussing with them,

02:23:31developing their own,

02:23:35essentially, investment screening mechanism

02:23:38similar to our CFIUS.

02:23:41They're open to discussing and working with us on that,

02:23:46and I think that's a first step

02:23:49at looking at these issues.

02:23:51We realize the North American market

02:23:54is highly integrated

02:23:57and that we have a common interest in this.

02:24:01That's what my next question was going to be.

02:24:03Have they been forthcoming in wanting to work with us?

02:24:05They have been,

02:24:07and I discussed this when I was at Mexico

02:24:12with a press conference that I gave there.

02:24:14I think it's a huge concern,

02:24:16not only our direct investments,

02:24:18but a lot of things that are happening

02:24:19with Chinese moving into that region.

02:24:21You're right, and it's an important issue.

02:24:24Thank you.

02:24:25Also, in 2023,

02:24:28Mexico received a record $63 billion in remittances.

02:24:33It was a 7.6% increase from 2022,

02:24:38of which 95% of this came from the United States.

02:24:42With a recent surge in remittances,

02:24:44I'm concerned that this has inadvertently made it easier

02:24:48for some of the Mexican cartels to launder drug money

02:24:51and cartels use civilians as conduits for remittances

02:24:55who then hand the money back to the cartels,

02:24:58a practice known as smurfing.

02:25:01What is being done to limit the use of remittances

02:25:03as an avenue to finance illicit activities?

02:25:07How can we identify and monitor laundering schemes

02:25:10run through legitimate financial transactions?

02:25:13I feel there's an increase.

02:25:14There was a recent report by a Reuters journalist

02:25:19that was down there that actually followed

02:25:20one of the ladies in Sinaloa

02:25:22that went to one of these places to collect the money

02:25:24and then kept a very small slice of it

02:25:27and gave the majority of it back to the cartels.

02:25:30It's a huge concern as remittances grow,

02:25:33and I think certainly they're harder to monitor and police.

02:25:40What are we doing,

02:25:41and what cooperation do we have for Mexico?

02:25:43I think that that should be a clear area of concern.

02:25:48I just see it very unregulated.

02:25:50So, I mean, we've certainly been focused

02:25:52on Mexican drug cartels

02:25:55and have been cracking down on them

02:25:57with Mexico's cooperation.

02:26:00With respect to remittances,

02:26:02many of them occur through money service businesses,

02:26:09and those businesses are subject to the Bank Secrecy Act,

02:26:16AML, CFT, compliance regime.

02:26:21There's been a spike in these resources coming into Mexico,

02:26:25and it's just a concern being on the border

02:26:27and, you know, seeing all the activity

02:26:29and the growth of the Mexican cartels

02:26:32on the other side of the border is really worrisome,

02:26:34and I think we should pay closer attention to this.

02:26:36There's a Mexican think tank that just came up

02:26:38that said $4.4 billion of the money

02:26:41that we remitted to Mexico last year

02:26:43was sent directly to cartels,

02:26:47and I hope that we can continue to work on this issue.

02:26:50It's a huge concern for all of us.

02:26:52It's an important issue, and, of course, we want to work on it.

02:26:55Thank you so much.

02:26:56The gentleman's time has expired.

02:26:57Just a reminder, the Secretary does have a hard stop

02:26:59at 1 o'clock today,

02:27:00so we're going to try and squeeze in as many as we can here.

02:27:02Right now, the next one up is Mr. Barr,

02:27:04who's recognized, a gentleman from Kentucky for five minutes.

02:27:07Thank you, Madam Secretary.

02:27:08I want to drill down into the Treasury Department's

02:27:12ineffective sanction strategy when it comes to Russia.

02:27:16A June 26 Wall Street Journal article

02:27:18highlighted a collision of foreign and energy policies

02:27:22within the Biden administration

02:27:23and frustration among Treasury staffers

02:27:26over the lack of action against oil trading networks

02:27:29that ferry Russian and Iranian oil.

02:27:32While Treasury sanctions, on the one hand,

02:27:34are attempts to, quote, throw sand in the gears of Russia

02:27:38and Iran's oil export machines, unquote,

02:27:41the article identifies attempts by the National Economic Council,

02:27:44led by Lael Brainard,

02:27:46to keep global oil output up

02:27:48to ward off pressures on inflation, and, quote,

02:27:51keep gas prices stable ahead of the election

02:27:55by encouraging oil to flow into global markets, unquote.

02:27:59Secretary Yellen, who is running the show in the administration?

02:28:02Those who want to be tough on our adversaries,

02:28:05like Russia and Iran,

02:28:06or those who want to ensure that global oil flows

02:28:09keep gas prices stable ahead of the election?

02:28:13It's a very good question.

02:28:15I think the article is, frankly, very misleading

02:28:19because the NEC and Treasury are really on the same page.

02:28:27We've been working together closely

02:28:30and we really have identical goals.

02:28:33So, the same page in terms of trying to defend

02:28:37this failed oil price cap scheme?

02:28:41I'm sorry, I don't think it's a failed...

02:28:43Well, let me reclaim my time.

02:28:45Bloomberg reported last week

02:28:47that Russia's government revenues from oil sales

02:28:50rose almost 50% compared to last year.

02:28:55If this is not an indictment of Treasury's licensing policy,

02:29:00and the failure of the oil price cap scheme,

02:29:02I don't know what is.

02:29:04Well, it worked very well in the first year.

02:29:07Not anymore.

02:29:08Not anymore, Madam Secretary.

02:29:10Okay, so...

02:29:11Let me reclaim my time.

02:29:13Let me reclaim my time.

02:29:14I offered an amendment

02:29:16to the Financial Services Appropriations Bill.

02:29:19I got 30 Democrats to vote to sanction Russian oil exports.

02:29:2430 Democrats, mostly climate-oriented Democrats.

02:29:28This administration, which has this massive climate focus,

02:29:32wants to punish American energy production.

02:29:35That's the whole strategy.

02:29:37Through ESG and climate disclosure and no permitting,

02:29:41no licenses, no Keystone Pipeline.

02:29:43But when it comes to Putin's oil machine,

02:29:46license it.

02:29:48Allow exports of Russian energy.

02:29:51What on earth are you all doing?

02:29:54We've said explicitly from the very outset

02:29:57we've had two goals with the price cap program.

02:30:01Number one, deprive Russia of revenue.

02:30:04Number two, make sure the global oil market is well-supplied...

02:30:09You failed in both.

02:30:10...to neither Americans nor people in other...

02:30:12Madam Secretary, you failed in both.

02:30:15Because you are waging a war against American energy,

02:30:18but you're green-lighting Russian energy,

02:30:20you're weak on Russia.

02:30:22I want this administration to revisit the failed oil price scheme

02:30:26and sanction the crap out of Vladimir Putin's energy,

02:30:30which is financing the war effort.

02:30:32And the oil price cap is not working.

02:30:36Let me shift to China.

02:30:38Treasury has prohibited U.S. dealings

02:30:41with the publicly-traded securities of certain companies

02:30:44connected to China's military-industrial complex.

02:30:47But since being put on CMIC's list,

02:30:49Hikvision revenues have risen 30%.

02:30:51Sinochem's revenues up 60%.

02:30:54China mobile stock prices shot up 90%.

02:30:56Huawei, SMIC, went on to develop advanced 5G chip.

02:31:00And Huawei isn't public to begin with.

02:31:02Clearly, regulating the trading of publicly-traded securities

02:31:06has proven irrelevant.

02:31:07Why doesn't Treasury impose blocking sanctions

02:31:11on these CMIC companies?

02:31:14Well, I can't discuss particular cases,

02:31:18certainly not in this venue.

02:31:21We are always looking at entities that are

02:31:27engaging in activity that could merit sanctions.

02:31:30Madam Secretary, would Treasury welcome an opportunity

02:31:32by legislation, my bill, on China outbound?

02:31:36You all have issued an executive order.

02:31:38I think it's Congress's responsibility

02:31:40to create an outbound investment framework.

02:31:43Would Treasury welcome an opportunity through legislation

02:31:46to explain on an annual basis

02:31:49why it has refrained from imposing full blocking sanctions

02:31:54on Chinese entities on the CMIC list?

02:31:57And it could be perhaps in a SCIF.

02:32:01Well, we can discuss it with you

02:32:03and I'll have my staff be in touch with yours

02:32:07to understand what you have in mind.

02:32:07Well, we've got a list of Chinese military-industrial complex companies,

02:32:12but Treasury hasn't sanctioned any of them.

02:32:15That's a real good question for Treasury to answer

02:32:18to the American people

02:32:19through their elected representatives in Congress.

02:32:21And with that, I yield.

02:32:22Chairman, time has expired.

02:32:24With that, we'll go to the gentleman from Illinois.

02:32:25Mr. Foster is recognized for five minutes.

02:32:28Thank you.

02:32:29Secretary, was there anything you wanted to add

02:32:31about the oil camp policy

02:32:33that you didn't have a chance

02:32:34during the previous round of questioning?

02:32:37Thank you.

02:32:37Well, what I wanted to say is that

02:32:41an objective is to keep the oil market well supplied

02:32:45so neither Americans nor residents

02:32:49of many countries around the globe,

02:32:53including the poorest,

02:32:54are faced with spiking energy prices.

02:32:57And we are considering additional sanctions

02:33:01on Soviet ships

02:33:03now that Russia's taken this approach.

02:33:05But we want to evaluate

02:33:08what the potential impact could be

02:33:10on global oil markets.

02:33:12And we're discussing that in an interagency basis.

02:33:16I'd also like to congratulate the administration

02:33:20on having made a significant amount of money

02:33:22with the STRATEGIC PETROLEUM RESERVE,

02:33:25whereby you're sort of monetizing your ability

02:33:28to store oil,

02:33:29to be able to sell at a high price

02:33:31and refill at a low price

02:33:33and make the taxpayer a whole pile of money.

02:33:35So, to the extent that you were at the table there,

02:33:37good work.

02:33:38I'd also like to second my congratulations

02:33:41on your successful pilot program

02:33:42for the IRS Free File System.

02:33:44I believe it should be an option available

02:33:46to taxpayers at all income levels.

02:33:48I've been introducing legislation in this area

02:33:50for more than a decade,

02:33:51and so it's really nice to see it come to pass.

02:33:53And as a next step,

02:33:55in February I reintroduced the Auto-Fill Act,

02:33:58which would allow individuals who choose

02:34:00to download tax forms

02:34:01that are automatically populated

02:34:03with information that the IRS already collects

02:34:06from employers,

02:34:07from the Social Security information,

02:34:09from financial institutions.

02:34:11You know, our tax code's complicated enough

02:34:13and we shouldn't force people to keep around shoeboxes

02:34:16full of all these stubs they get

02:34:17and they have to use them for their tax forms.

02:34:20And this would be a common-sense solution

02:34:22available in most countries

02:34:24to just have the government help you

02:34:26fill out the part of the forms

02:34:27with information they already have.

02:34:29So, please consider that as a next step

02:34:32in strengthening this very successful pilot program.

02:34:35Okay, now, on April 24th,

02:34:38President Biden signed the Repo Act,

02:34:40which gives the administration authority

02:34:42to seize Russian assets

02:34:43and use them for the benefit of Ukraine's war effort

02:34:46and their eventual reconstruction.

02:34:47Last month, the G7 agreed in principle

02:34:50to use the interest earned on frozen Russian assets

02:34:52to back a $50 billion loan for Ukraine.

02:34:55And following that meeting,

02:34:57you said that the logistics of such a loan were complicated

02:34:59and that you could not provide a timeline

02:35:01for getting that money to Ukraine.

02:35:03And since you've made those comments a few weeks ago,

02:35:05has progress been made to get the money to Ukraine?

02:35:08And what challenges are you running into

02:35:10from our G7 allies?

02:35:11Is there anything that Congress can do

02:35:13to speed this process along?

02:35:15Well, thank you for that.

02:35:17The leaders in the G7

02:35:20asked that we'd be ready by the end of the year

02:35:23to transfer $50 billion.

02:35:28So, we're working very closely now.

02:35:32The leaders have endorsed this general concept

02:35:35to work out the details.

02:35:38There are steps that the European Union needs to take

02:35:42to make sure that the windfall revenues

02:35:47will remain available to service these debts.

02:35:51We're discussing the allocation of the loan

02:35:55among G7 members.

02:35:58These are very intense discussions

02:36:00taking place right now.

02:36:01Anything we can do to provide additional leverage

02:36:03in those negotiations?

02:36:05We're, I think, on a bipartisan basis willing to do.

02:36:07Honestly, this is a collaboration.

02:36:10The G7 is working together constructively.

02:36:15There are some complex issues here.

02:36:18But we're working constructively to get this done.

02:36:22You also mentioned that the $50 billion loan

02:36:23could be the first of several,

02:36:25that this is the first tranche,

02:36:26and if necessary, there could be more behind it.

02:36:28So, how far can this strategy go

02:36:30and on what timescale to support Ukraine?

02:36:33What fraction of the amount of money you'd get

02:36:36by simply seizing and liquidating the Russian assets?

02:36:41We think all options should remain on the table.

02:36:44But if you have to stick to this business with the loans

02:36:48and using the interest income,

02:36:50what are the limits to that?

02:36:52We believe that a global approach,

02:36:55a strategy where the G7, the European Union,

02:37:00act jointly together is effective and appropriate.

02:37:06So, we're looking for strategies

02:37:09that other countries can also endorse.

02:37:12And the issue of simply seizing assets,

02:37:16whereas we have been very clear.

02:37:19We believe there's a sound legal basis

02:37:23to do so in the United States and elsewhere.

02:37:26This has been something of a bone of contention.

02:37:30And so, the approach that the G7 leaders have endorsed

02:37:35is an alternative which doesn't raise all of the same issues

02:37:40as seizing the assets would.

02:37:42And it lets us act together as a coalition.

02:37:46Well, thank you and keep at it.

02:37:48Jim, this time has expired.

02:37:49With that, we'll go to the gentleman from Texas,

02:37:51Chairman of the Small Business Committee, Mr. Williams,

02:37:53recognized for five minutes.

02:37:54Thank you, Mr. Chair and Secretary.

02:37:56Good to see you again.

02:37:58The last time you were here, I asked you

02:38:00that what actions Treasury was taking

02:38:03to educate small businesses on their obligations

02:38:05to file beneficial ownership information in FinCEN.

02:38:08And you acknowledged the burdens that small business

02:38:11will face with compliance surrounding this rule

02:38:13and committed to working with businesses

02:38:15to better educate them on compliance.

02:38:17However, from what I've been hearing from small businesses,

02:38:20owners that I travel around and I'm being on the ground,

02:38:23is that they are still unaware of the FinCEN's

02:38:24beneficial ownership reporting requirements.

02:38:27Now, FinCEN Director Gackey recently said

02:38:29that only 2 million small businesses

02:38:31out of over 32 million

02:38:33have filed beneficial ownership information.

02:38:35So this shows that something needs to be done

02:38:37because you cannot hold these small businesses responsible

02:38:40for something they've never heard of

02:38:41or even aware of the rules of the road.

02:38:43So my question would be,

02:38:45could you expand on how Treasury will work with small business

02:38:47to educate them on beneficial ownership?

02:38:50And is there any possibility for Treasury

02:38:52to provide more time for small businesses

02:38:54to come in compliance? That's important.

02:38:56So at this point, we're engaged.

02:39:00FinCEN is in a very broad outreach effort.

02:39:03It's received 2.7 million filings already.

02:39:08The filing and requirements are easy, easy to do.

02:39:14And FinCEN believes that the time frame is adequate

02:39:19for the companies in existence before this year

02:39:23have until January 1 to file.

02:39:26But that's their current view

02:39:29if things don't go according to plan.

02:39:34Well, small business is burdened right now.

02:39:35So please take a look at that.

02:39:37And the Biden administration's climate agenda

02:39:39is forcing the IMF and the World Bank

02:39:41to take their eye off the ball

02:39:42and channel resources and funding

02:39:45toward climate-related projects

02:39:46and not projects that would enhance

02:39:47the overall well-being of a country or region.

02:39:50The World Bank is working to devote

02:39:5345% of their financing to climate.

02:39:56And you are voting in opposition to any fossil fuel projects.

02:40:00Developing countries need to access

02:40:02to electricity and other vital resources,

02:40:04not some unelected bureaucrats telling them

02:40:07that they can't finance an energy project in their country

02:40:10because it would support fossil fuels.

02:40:12So my question would be, because of this,

02:40:15many developing countries will be forced

02:40:16to turn to Chinese financing.

02:40:18Now, how is Treasury going to combat

02:40:20growing Chinese influence around the globe

02:40:22if your policies are enabling them to grow their influence?

02:40:26Well, look, what we see is that countries in Africa

02:40:30and elsewhere, especially those that, as in Africa,

02:40:35you have 600 million people who don't have electricity at all,

02:40:40actually want to use renewables

02:40:43to expand access and to address climate

02:40:47and to have systems that, over time,

02:40:51will be more secure, less dependent on fluctuations

02:40:57in global markets.

02:40:58And this is the strategy that they prefer.

02:41:04Our policy, in terms of lending,

02:41:08is that if it's not possible to use renewable energy,

02:41:13we want that to be looked at first.

02:41:16If it isn't feasible or it's unduly expensive,

02:41:21we will vote in favor of projects that use natural gas.

02:41:27And so, and in fact, in those that have been presented,

02:41:31the great majority we've been supportive of.

02:41:34But climate is a very serious concern

02:41:41in so many countries around the world.

02:41:43It's impeding the goals of sustainable development

02:41:49and poverty reduction.

02:41:51And so it is a priority of borrowing countries,

02:41:55as well as the World Bank and other MDBs.

02:41:58In business, you don't want to sell off an empty shelf

02:42:00and you want to have products that people want to buy.

02:42:02So I think we need to have all options available.

02:42:07There's also been developments at the IMF

02:42:09under the Biden administration

02:42:11that I find extremely concerning.

02:42:12Specifically, the IMF proposed that billions of dollars

02:42:15in special drawing rights assets

02:42:17be generally allocated as global membership.

02:42:19Now, this is alarming.

02:42:20It's hostile to actors like China, Iran, and Russia,

02:42:22who receive the funding to use it as they please,

02:42:24all of which can be done without congressional approval.

02:42:27So quickly, Secretary, you should be using your influence

02:42:30in the IMF to protect U.S. influence,

02:42:33ensure transparency,

02:42:34and prevent malign actors from exploiting resources.

02:42:37So how could increasing IMF resources

02:42:39and allocating SDRs to China, Russia, and Iran

02:42:42affect the U.S. national security?

02:42:43And what steps are you, at Treasury,

02:42:46taking to protect our U.S. interests?

02:42:47Well, we oppose allowing malign countries

02:42:54to use SDRs that they receive as allocation.

02:42:59We will not exchange them for dollars,

02:43:02which must be done in order for them to be used.

02:43:06And we work with other countries

02:43:09that have that capacity to make sure it doesn't occur,

02:43:14and it hasn't occurred.

02:43:16The gentleman's time has expired.

02:43:18With that, we'll go to the gentleman from New York.

02:43:19Mr. Meeks is recognized for five minutes.

02:43:21Thank you.

02:43:22Secretary Yellen, let me just say

02:43:24I greatly appreciate the work that you have done

02:43:27with the State Department,

02:43:28with the National Security Council,

02:43:30and the whole Biden administration

02:43:33in isolating Russia in the wake of its illegal,

02:43:35unjustified, and immoral invasion of Ukraine.

02:43:38You know, just yesterday, the Russians bombed

02:43:42a children's hospital in the center of Kyiv

02:43:44with absolutely zero evidence of any military targets

02:43:48were within the vicinity of such site.

02:43:50And then I overheard and heard some members of Congress

02:43:54rudely addressing you, talking about Russia,

02:43:58when, in my opinion, what they should be talking about

02:44:01is the candidate of their choice,

02:44:04who has a bromance with Vladimir Putin,

02:44:08who gave away top secrets to Russia in the White House,

02:44:15who said that the Russian intelligence

02:44:19is better than the U.S. intelligence,

02:44:22who has said that he wants to be an islander,

02:44:26wants to immunize what Russia does with its parades

02:44:29and everything else, that he likes a strong man.

02:44:32So, they shouldn't be talking to you

02:44:35or worried about you and your policy.

02:44:38They better be talking to their candidate of choice,

02:44:41as the rest of the world is worried about him

02:44:43being in the presidency.

02:44:44Mr. Meeks, we just had this conversation a while ago.

02:44:48Well, if you'll do it, I've got to come back.

02:44:50We had this conversation a while ago,

02:44:52and the conversation is that you stay away

02:44:54from the personalities and individual activities

02:44:57of the candidates, whether it be Mr. Trump

02:44:59or the President Biden.

02:45:01So, therefore, direct your comments to the Secretary.

02:45:04I am.

02:45:05Now, you're going into the personalities, sir.

02:45:07We've already gone down this road.

02:45:09We've already gone down this road today.

02:45:11It's going to stop.

02:45:12Go back to questions with regards to other issues

02:45:14that you think are important.

02:45:16Mr. Chairman.

02:45:17Yes.

02:45:18The gentleman from New York was speaking about facts.

02:45:22He was getting into personalities.

02:45:24He was not making up anything.

02:45:26He was talking about facts that are proven.

02:45:29I've ruled how this is going to go.

02:45:30OK, Mr. Meeks, you're recognized for the balance of your time

02:45:33to address issues that are important to this committee

02:45:36with regards to the Secretary's responsibilities for today.

02:45:40I love talking about facts here, Madam Secretary.

02:45:43And the record will reflect that.

02:45:46Now, I have two bills, Madam Secretary,

02:45:48and I think this is the way that we should look at that,

02:45:49that I would believe would further strengthen the sanctions

02:45:53on Russia, both of which have been sent to your team

02:45:56and have garnered broad bipartisan support,

02:45:59because I try to work in a bipartisan way,

02:46:00except when I hear the other side not doing that,

02:46:03then we've got to make sure that we step up.

02:46:06One bill would sanction leaders of the Russian nuclear company

02:46:09Rostatom, and the other bill would preemptively ensure

02:46:13that no PRC or other foreign company could work to build a tunnel

02:46:18from the Russian mainland to Crimea.

02:46:20And I'm hopeful that we can do some work together

02:46:23to get those bills into law, and I hope we can do it this year.

02:46:27But I know that you've been doing a lot of work in this area,

02:46:29so could you just please discuss the work you and the administration have done

02:46:33to hold Russia accountable, as well as its enabler, China?

02:46:38Well, we have been focused since Russia's,

02:46:43and even before Russia's brutal invasion of Ukraine,

02:46:49when we realized that it was likely to happen on creating

02:46:53the toughest possible sanctions regime that we could

02:46:59to deny Russia the military equipment it would need to carry out this war.

02:47:07And as time has passed, we've strengthened our sanctions.

02:47:14We've sanctioned individuals, entities, banking organizations,

02:47:20virtually the entire military-industrial complex of Russia,

02:47:26and then have been seeking to reduce Russia's access to these goods

02:47:34that it gets from China and other countries that are suppliers.

02:47:40Iran is a supplier of drones, UAVs,

02:47:45and we have an extensive sanctions regime,

02:47:49which we're constantly tightening.

02:47:54Most recently, with respect to China,

02:47:57not only have we cracked down and placed sanctions on Chinese entities and firms

02:48:04that are involved in supplying military-related goods,

02:48:09we've now gone after, with the President's new executive order,

02:48:14financial institutions that are processing payments involved in this trade,

02:48:21basically threatening to cut off banks' access to the dollar-based trading system

02:48:30if they facilitate these transactions.

02:48:33And we've recently broadened it so that any foreign bank,

02:48:39Chinese or in other countries,

02:48:41that engage in transactions with any sanctioned entity in Russia,

02:48:49and that includes all of the largest Russian banks, SpareBank, VTB, and others,

02:48:56all of those financial institutions are subject to our sanctions.

02:49:03And we've put a price cap on Russian oil to try to reduce their revenues,

02:49:08so reduce their access.

02:49:10But you've been doing a lot, a lot of work, and you're continuing to do so.

02:49:14I wanted to ask you a question about outbound investments, etc.,

02:49:20but don't have the time.

02:49:22Thank you for the facts.

02:49:24Thank you for the work that you're doing to hold Russia accountable.

02:49:26Thank you.

02:49:27And China.

02:49:29The gentleman's time has expired.

02:49:30With that, we'll call a stop to the hearing here

02:49:35with regards to the Secretary's wish to be able to stop at 1 o'clock.

02:49:39We're going to get you out, Madam Secretary, I believe, by the time.

02:49:43I'd like to thank you for being here today and your testimony.

02:49:46Without objection, all members will have five legislative days

02:49:48within which to submit additional written questions for the witness to the chair.

02:49:51I'll forward the questions to the witness for a response.

02:49:55I ask you, Secretary Yellen, to please respond to those

02:49:57no later than August 30th, 2024.

02:49:59With that, the hearing is adjourned.

Treasury Secretary Janet Yellen Testifies Before House Financial Services Committee

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