The Committee on Financial Services will come to order. Without objection, the chair is authorized to declare a recess of the committee at any time. Today's hearing is entitled the annual testimony of the Secretary of the Treasury on the state of the International Financial System. Without objection, all members will have five legislative days within which to submit extraneous material to the chair for inclusion in the record. I'd like to remind all of our guests today in the hearing room that, in accordance with Rule 11, Clause 4 of the House of Representatives, to observe the standards of dignity, propriety, courtesy, and decorum traditionally observed by the House and this committee.
I now recognize myself for four minutes for an opening statement. Morning, Mr. Secretary. I want to welcome you back to the committee. We thank you for being here today and for your continued efforts to ensure America's leadership in the global economy advances the interests of American workers, businesses, and taxpayers. The United States plays a central role in shaping the international financial system. That influence reflects the global importance of the United States dollar, the size and depth of the US financial markets, and our longstanding role in critical institutions such as the International Monetary Fund and the World Bank. The United States is the leading shareholder in both of these key institutions. That gives the committee an important responsibility to ensure that American interests are protected and that US governance is subject to the appropriate oversight. We must ensure these institutions remain focused on their core missions, operate with transparency, and use their resources wisely consistent with that core mission. Under the previous administration, the World Bank and the IMF were pulled away from those core responsibilities by mission creep. For example, trying to transform the IMF into a climate development bank. That's not its role, and it distracts from its incredibly important mission.
Fortunately, under the Trump administration, we've seen a renewed emphasis on delivering measurable results through accountability and discipline at both the IMF and the bank. The World Bank must remain committed to reducing poverty and promoting economic growth by directing resources towards countries that genuinely need development assistance. For years, this committee has raised concerns about the World Bank continuing to provide billions of dollars of financing to China, the world's second largest economy and one of America's foremost strategic competitors. China has enormous financial resources of their own. It is a major global creditor and uses state-directed investment to advance its economic and geopolitical interests around the world. American taxpayers should not be backstopping Beijing and their ambitions at the World Bank. That's why the World Bank's decision to phase out its lending to China by 2031 is an important step in the right direction. We've also seen an important and long overdue change in the World Bank's approach to energy.
In 2025, with strong bipartisan push from this committee by way of HR 1474, the International Nuclear Energy Financing Act, the World Bank took its first concrete step in decades towards re-engaging with nuclear energy by agreeing with the International Atomic Energy Agency to receive nuclear expertise, support existing reactors, and advance the potential of small modular nuclear reactors. This year, we also saw the first contribution to a new nuclear energy assistance trust fund at the bank, which I hope will see additional funds from the US Treasury going forward.
Developing economies need access to reliable and affordable electricity to grow, making this exactly the kind of practical pro-growth approach these institutions should fully embrace. I commend the progress of the World Bank and I hope that this commitment will translate into more projects and more financing around the globe. While we've seen positive reports and progress at the World Bank, concerns remain about the International Monetary Fund's approach to China. The IMF plays a critical role in promoting international monetary cooperation and safeguarding global financial stability. Fulfilling that mission requires rigorous economic oversight and transparency. China presents a major test of whether the fund is willing and able to fulfill that responsibility. In its most recent Article 4 review, it found that weak domestic demand, real exchange rate depreciation, and reliance on exports have contributed to external imbalances and adverse spillovers for China's trading partners. We look forward to our discussion with you, Mr. Secretary, and I yield back.
I recognize myself just for a point of personal privilege with the ranking member's support before we get started today. I would like to share my appreciation and congratulations to three of our committee staffers as they prepare to depart the Hill and start new endeavors. Jay Jang has worked with me for five years running the financial services portfolio and fighting hard in Arkansas's second congressional district. His tireless work led to the development of our bipartisan Main Street Capital Access Act, which received a strong bipartisan vote in July, 270 votes. I'm also unbelievably proud of what we've accomplished together and can't wait to see Jay's next step. Nick Rockwell joined us this Congress and led our digital assets and financial technology and artificial intelligence subcommittee. It's great to have him here on this committee after having worked for eight years for our friends over at the House Agriculture Committee. We've been lucky to have him. He's been invaluable. Getting Genius to the president's desk and passing Clarity in the House with a strong bipartisan vote was demonstrative of his hard work. And finally, I want to recognize my good friend for a long time, Dan Snyder. Dan has been our communications director on the committee and also worked for me in our Arkansas office. He's been a steadfast communicator and made sure that my constituents know how hard we're all fighting here in Washington to ensure they have a better economy ahead. I want to thank all three of these fine staffers, wish them well in their future, and invite the committee to join me in a round of applause.
I now recognize the ranking member of the committee, Miss Waters, for four minutes for an opening statement.
Thank you very much, Mr. Chairman. Secretary Bessent, you have broken many promises since you last appeared before this committee. You pledged deeper cooperation with our trading partners, stronger American leadership, and greater stability in the global financial system. The reality, however, as Democrats warned, is an increasingly isolated America, a weak, self-serving presidency, and instability everywhere, including here at home. Your deflection and gaslighting should be interesting. What tales will you tell about economic super cycles when families take out loans to buy food? What stories will you spin to Americans whose home ownership dreams slip away with 7% mortgage rates and tariffs on building materials adding nearly $11,000 to the cost of a new home? What do you have to say about businesses struggling to survive under your nonsensical trade policies? What answers do you have for $6 diesel and the impacts of Trump's war in Iran that are driving up the cost of living for everything? President Trump and committee Republicans assured the American people that you were, quote, a steady hand who would improve the economy. Well, after 20 months of Trump's economy, I say your hands are shaking. Americans know the truth because they feel it at the grocery store, the gas pump, in their wallets, and around their kitchen tables. The only boom that's happening is the one where Trump and his family have made more than $2 billion since taking office.
Ironically, while families endure, Mr. Secretary, you have managed to find billions to bail out Argentina and your Wall Street buddies. You committed United States assets to support Japan's currency while you failed to lower long-term interest rates. You have attacked the economies of our closest allies, driving up costs here at home. You have been cozying up to Putin, given waivers to Russia to earn billions from sanctioned oil and extending its war against Ukraine. Just imagine if this administration cared even half as much about struggling Americans. Who else benefits while you ignore your responsibilities? Wall Street, for one. The stock market may be hitting record highs, but one out of five Americans are rationing their meals. AI companies, too, are doing very well on your watch, while you dismiss the threat to workers and jobs and our financial system and even our very existence. And we can't forget crypto. You call stablecoins a revolution, predicting increased demand for US treasuries. Yet you're ignoring the massive conflicts of interest in the Trump family's stablecoin and crypto businesses. The Trump family is cashing in, cashing in from the Oval Office.
While Main Street suffers, committee Democrats have given you every opportunity to do the right thing. We've sent letters demanding answers, but consistently you've disregarded or ignored our oversight. This hearing is traditionally an opportunity for the Treasury Secretary to deliver facts to this committee and the American people. But I do caution everyone listening today: whatever you hear today, check it out, question it. Don't be gaslit by the Trump administration and its deception. And a word about Cuba. You cut off all the oil to Cuba. You're starving the families. You're starving the children. They don't have electricity. They can't get food in. What are you doing, Mr. Secretary? Why are you being so cruel? I know we have a cruel president, but do you have to be a puppet? Do you have to do whatever he wants you to do? What are you doing to this country? You're making us not only look bad, but act bad all over the world. And I want to tell you, history is not going to be kind to you or this administration. And I say to you, stop trying to kill off the families in Cuba. Stop starving the children. Let the oil flow. Let them have electricity. Allow them to get trade and food, etc., etc. I could go on all day, but this is not a fun day for me. This is a very critical time, and you are in a position where you could do a lot better. You could be kinder. You don't have to be cruel. You don't have to see children starving and dying. And with that, Mr. Hill, I just give back the balance of my time.
The gentlewoman yields back. The chair recognizes the gentleman from Ohio, Mr. Davidson, who chairs our national security subcommittee, for one minute for an opening statement.
Thank you, Chairman. Secretary Bessent, I want to commend you for delivering real results for the American people. You've taken steps to restore focus to our international financial institutions and ensure that America remains the center of global markets and the US dollar remains the world's reserve currency. You've educated the public, Senator Warren, especially on the utility of currency swaps. Clearly, from the ranking member's opening remarks, more work remains. You've used Treasury's authorities to pursue sanctions evaders, hostile regimes, and institutions funding America's adversaries. You've put taxpayer protection first by cracking down on fraud, waste, abuse, money laundering, cyber-enabled scams, and illicit financial networks. Treasury's identification of $17.5 billion in suspect healthcare fraud is a powerful example. You've constitutionally protected privacy by rolling back the beneficial ownership information reporting requirements under the onerous Corporate Transparency Act. Thank you for your leadership, a steady hand repairing damage done by years of prior neglect or malfeasance. Thanks for your work to make America great again. I yield back.
Gentleman's time is expired. Today we welcome the testimony of the Honorable Scott Bessent, Secretary of the Treasury. Secretary Bessent, we thank you for taking time to be with us today. You'll be recognized for five minutes to give an oral presentation of your written testimony. Without objection, your written statement will be made part of our record. Mr. Secretary, you're now recognized for five minutes.
Chairman Hill, Ranking Member Waters, and members of the committee. Thank you for convening today's hearing. I look forward to discussing the international financial system as we strengthen American leadership within it. In recent weeks, the United States brought that leadership to Asheville, North Carolina.
Stop the sanctions that are killing Iranian civilians.
Committee will be in order. Committee will be in order. I formally request that those causing the disruption cease their actions immediately. The committee will suspend until Capitol Police can restore order.
Please, audience, be in compliance with the House rules. Mr. Secretary, you're recognized.
You're a war criminal. How dare you? How dare you?
Committee will suspend till Capitol Police can restore order.
Stop the sanctions on a war criminal for us.
Mr. Secretary, please proceed.
In recent weeks, the United States brought that leadership to Asheville, North Carolina, where we welcomed the world for our G20 finance ministerial.
Would anybody else like to do that now and get it over with? All right. The committee will reconvene. Mr. Secretary, you're recognized.
For decades, multilateral forums like the G20 accumulated sprawling agendas while losing sight of their core missions. Under President Trump, we are getting back to basics. Growth is the condition.
Mr. Secretary, please suspend.
Mr. Secretary, you're recognized.
Growth is a condition on which durable prosperity depends, and our chair's statement achieved broad agreement on the need to promote it. I'm also pleased that we reached consensus from economies representing more than two-thirds of global GDP to address excessive and persistent imbalances, advance financial literacy, improve the global sovereign debt architecture, and support regulatory modernization. In substance and in spirit, these priorities reflect the administration's approach to international institutions by ensuring that American time and resources serve American interests. We are also bringing that same discipline to the IMF and World Bank so they remain true to their core mandates and are better positioned to promote economic growth.
Of course, as growth guides our leadership on the world stage, it is the force that is carrying our great nation into a new era of strength here at home. President Trump's economic turnaround is especially impressive given the severity of the situation he inherited from his predecessor, when inflation soared to a 40-year high and middle-class families were tormented with price increases of 21.5% or more. Under President Trump, the private sector has created over 1 million jobs. Real wages are outpacing inflation. The bottom 25% of wage earners are seeing larger wage increases than those at the top. And the Working Families Tax Cuts has delivered the largest share of tax relief directly to millions of low- and middle-income Americans. Over 64 million tax returns claimed at least one of President Trump's signature new tax cuts: no tax on tips, no tax on overtime, no tax on American car loan interest, and an enhanced deduction for low- and middle-income seniors.
Through tax day, working families received over $325 billion in refunds. More than 40 million families have claimed the permanently doubled and expanded child tax credit. And as important as what this legislation achieved is what it prevented. If opponents of the Working Families Tax Cuts had had their way, our economy would have absorbed the largest tax hike in history, over $5 trillion. Each of these improvements points to a structural renewal of America's capacity to build, to produce, and to prosper. US manufacturing is roaring back to its fastest pace in years. August marked eight consecutive months of domestic manufacturing growth. Business activity has surged to a 52-month high. And as companies allocate trillions to building and expanding across the US, the Atlanta Fed now projects third-quarter GDP growth to surpass 4%. A new industrial super cycle is moving from investment into production and from blueprints into paychecks.
Finally, the strength of our economy has allowed the United States to wage the greatest economic isolation campaign in the history of the world against the Islamic Republic of Iran and its enablers. President Trump has taken action that his predecessors have long deferred against a regime that devotes itself to death to America and seeks nuclear weapons to do just that. Under his leadership, America is no longer managing the Iranian threat. We are ending it. And America's economic resurgence is reinforcing our capacity to do so from a position of strength. Together, the growth we are advancing abroad, the prosperity we are building at home, and the might we are unleashing against our adversaries are bound by the same conviction to restore American strength in service of the American people. That is the purpose of our economic leadership and the principle that will continue to guide it. Thank you, and I look forward to your questions today.
Thank you, Mr. Chairman. We'll turn to member questions. I recognize myself for five minutes. Mr. Secretary, when the then FinCEN director Gataki was before the committee in July, she testified that she was in discussions with Treasury leadership regarding updating the suspicious activity report and currency transaction reporting thresholds, which, as you know from your years in the private sector, are decades out of date. We heard the same under the testimony from the Biden administration. A Treasury report to Congress on updating the thresholds is now five years overdue. So, Mr. Secretary, what's your view on trying to tackle this issue of raising the threshold limits on suspicious activity reports and CTRs?
Chairman Hill, very important question, and thank you for asking. We believe that we must get this right because, as you said, it has gone on for years, and we want to do that with a combination of potentially raising the thresholds and also giving credit to institutions for the duration that they have known their clients. So we are in the midst of this, and as always, we will be looking after our smaller financial institutions, small banks and community banks, to obviate any excess expense that they are doing it while maintaining the safety and soundness of our financial system. I think that's important, and I also think, just to answer the question from big or small, that the information being provided is being used and helpful in our fight against the cartels and global terrorist illicit finance, because a lot of financial institutions don't get the attitude that that's the case. And I'm sensitive to law enforcement that's demanding that they wish the CTR limit were a dollar so that they could look at every single possible category.
But your leadership, I think, will be important. We'd like to make progress on this. It's a priority for the committee. We also appreciate your work, as noted in your statement, about cutting Iran's murderous regime off from workarounds of the existing sanctions. Your Operation Economic Outcast is finally seeking to bring that game of hide-and-seek to a close. However, I'm concerned that China clearly and the UAE have done too little to sever themselves from trade and money movements from Iran. What discussions are you pursuing with those two governments, particularly, to get them in line with your goals?
I think that we have seen some very forward-facing statements from the UAE. They've announced that they have cut off financial transactions and trade with Iran. And one of my deputies was just there and had a very good discussion with all the members of their financial system. And as you would see, two weeks ago, we sanctioned the branches of an Egyptian bank in Dubai, and that bank will be closing. That bank transferred more than $1.8 billion since 2025 to Iran. So our message has been, and it has been heard, that we know who you are. You know who you are. Stop. So we now have a cadence. We have sanctioned three banks with China. We have had some very good private discussions, and I look forward to those continuing this weekend when I meet my Chinese counterpart, the vice minister, Li Feng, and I'm sure it will continue during President Xi's state visit.
I appreciate that. I think that'll be an important agenda item for the bilateral discussion. Mr. Secretary, you also know that the Supreme Court is recently reviewing petitions that they review the Corporate Transparency Act. I personally support the Supreme Court reviewing this act because I think the private sector needs a definitive answer on the Corporate Transparency Act. I want to thank the Treasury and the administration for targeting it in line with the work of Mr. Davidson, but I hope that if the Department of Justice contacts the Treasury, that you wouldn't object to that review at the court. Let me turn to the IMF in the time I have remaining. My opening statement was about going back to basics for the IMF. And I don't want to see China increase its allocation in the special drawing rights basket of currencies. I think that's a mistake. It's not a market economy. It doesn't have a freely traded currency. You called out China, with all 19 countries calling out China at your G20 meeting. Would you agree that the IMF needs to hold China more accountable?
I believe that the IMF is in advanced discussions with China on the nature of their imbalances and the potential threats to global financial stability that those imbalances may pose.
Thank you. I yield back. I recognize the ranking member of the full committee, Mrs. Waters of California, for your question.
Thank you very much. Secretary Bessent, Americans and small businesses feel the pain of your reckless economic policies. They are paying sky-high prices for beef, gas, electronics, and really everything on and around the kitchen table. With the administration's chaotic tariffs, reckless war in Iran, and other unsound policies, the average American is paying $3,500 more than they otherwise would be for groceries, gas, energy, and healthcare. And that was the number before President Trump started an unnecessary trade war with our neighbors and allies in Canada. Now, thanks to retaliation on wood and lumber, even the kitchen table itself is unaffordable. Yet Trump is not concerned about all of this. The president has said repeatedly that there is no affordability crisis, that it's a hoax. He has said that he literally does not care that Americans are paying more for gas and diesel caused by his war of choice with Iran. For your part, you launched a so-called economic D-Day against Iran, but markets barely blinked. Crude oil prices continue to increase, and you have dismissed the effects on American households and businesses, while middle- and lower-income Americans feel the painful effects of the K-shaped economy. You claim that neither it nor the economic difficulties exist. So, Secretary Bessent, you have dared the markets to bet against you, claiming that, quote, I am the House now, unquote. So, despite your feeble efforts, there continues to be a sell-off of US treasuries, with 30-year Treasury yields rising to levels that have not been seen since 2007, just yesterday. In fact, the 10-year Treasury hit 5%. Mr. Secretary, do you agree that these high Treasury yields or interest rates on Americans' bonds means that loans paid by families to fix a roof or buy a car will also be expensive? Yes or no?
The US bond market has been the best performing.
Yes or no, Mr. Secretary? Yes or no, Mr. Secretary? Reclaiming my time. Reclaiming my time. Reclaiming my time. Reclaiming my time. Reclaiming my time. You keep talking, I'll keep reclaiming my time. And I'm asking you, Mr. Secretary, turn to your trade policy. If tariffs are not inflationary, as you claimed in your previous testimony, then why has inflation increased by more than 3% over the past year? Do you deny that inflation is too high at 3%? Yes or no?
Yes or no, Mr. Secretary? Yes or no, Mr. Secretary? You believe the tariffs... Reclaiming my time. Reclaiming my time. Reclaiming my time. Reclaiming my time. Reclaiming my time. I didn't hear you, Mr. Hill. What did you say?
I said it's the gentle lady.
Does the time belong to the gentle lady?
Indeed it does. And so that's not good enough. Sir, you and President Trump, the so-called conservatives, you have overseen an increase in the debt to a record $40 trillion, $40 trillion. You have promised reduced deficits but delivered only higher numbers and paying for American households. And this is so outrageous when you and others have claimed to be about getting rid of the deficit. Well, but maybe none of that matters if President Trump continues to blindly push for AI and data centers with absolutely no safeguards. He's doing this even as costs and threats skyrocket for America. Did you hear what Bill Gates had to say? Did you hear what Elon Musk had to say? Did you hear about Anthropic? Did you hear about I'm O Day? They all said stop it. Watch it. AI is dangerous. You got to be careful. Did you hear any of that?
They could stop. They could stop anytime they want to.
Did you hear any of that? Yes or no?
They could stop anytime they want to.
Reclaiming my time. Did you hear what your friends had to say? What the big billionaires had to say? Did you understand that? They said, we're moving into a dangerous period of time. We need to watch it. We need to slow down. Did you hear that?
This administration has been at the forefront of examining the models. We began model examination via more than five or six.
Your friends said watch it, be careful, that we're moving into a dangerous time on AI, and if you don't admit that, it means that you're not willing to stand up to the truth because you heard it, you know they're saying it. These are the guys that you all work with. These are the guys that you have to be more billionaires and trillionaires, so you know what they're saying. People want you to give them regulatory.
You don't have any more time. The chair now recognizes the vice chairman of the full committee, Mr. Heisinger of Michigan, for five minutes.
Thank you, Mr. Chairman and Secretary Bessent. This has become a common theme. Would you like to respond on my time, which keeps eating into my time because you can't actually answer the question? I'll give you 30 seconds if you'd like to respond to any of that.
To which piece? There's so many.
Well, it's a smorgasbord. I understand. Well, we can move on.
Interestingly enough, the idiocy that we saw earlier, I'm going to be doing a hearing in the Foreign Affairs Committee today titled Trojan Horses: Covert Foreign Malign Influence Operations, which will be discussing organizations like Code Pink and the Singum Network, which has funneled hundreds of millions of dollars into the US to fund idiots like this so that they can come and do things like this, performance art that they are trying to do. So that is my apologies, but I guess you can expect more, and maybe we'll see if a few of these people can get arrested twice in a day when they show up at my 2:00 hearing. So, Mr. Secretary Bessent, I understand the Treasury Department and the broader administration have several major tech security efforts running at the same time, from work at NIST and the new quantum readiness task force to the launch of the AI and cybersecurity vulnerability clearinghouse called Gold Eagle. How is Treasury making sure these efforts work together while avoiding siloed or duplicative efforts?
So we have an effort across the government, all departments. The Treasury began with the financial services for which we are responsible, but whether it is the Department of War, the cybersecurity, the White House Office of Technology, we have been closely coordinating for more than six months on this.
It is an interagency process.
Okay, is there a lead within the interagency, or...
I would say the Sean Karen Cross and Michael Katzios.
Okay. All right. These efforts may prove critical in protecting our financial plumbing. There's a lot of discussion about that. Specifically regarding the Gold Eagle clearinghouse, is there anything that you can share or plan to publish in the near future about how entities in the financial services sector, from traditional financial institutions to the layer 1 blockchain networks, can qualify to participate? I think it is important, this discussion that we're having here on the layer 1 blockchain networks as well.
Yeah. No, I think that's very important. And as you would have seen in the news, as soon as the news of Mythos came out, I gathered the largest banks, who happen to be in DC, at Treasury to begin discussing this. The largest banks, they have very good cybersecurity resilience, and they have been very helpful in terms of creating more resilience, and that is moving down the capitalization chain from super-regionals to regionals to small and community banks, and then we are populating that out into the service providers.
Is the real concern amongst the working group the plumbing side of this?
Well, it's the plumbing, and it is the patching of a lot of open-source code.
Yeah. Okay. I want to move on to something a little bit different. You know, you and I have previously discussed in various publications about our shared aspiration for the 3% target. I happen to chair, co-chair a bipartisan fiscal forum, the BFF. We chose that on purpose, by the way. And we have introduced, with my colleague Scott Peters from California, we've introduced a resolution that Congress should adopt this fiscal target of a budget deficit no more than 3% of gross domestic product or lower. I believe this is the most practical, tangible goal we can set to finally turn the tide on our national debt. In fact, we have up to 20 evenly bipartisan co-sponsors in a Senate companion bill. What's your current outlook on that 3% target, and can you even explain why this first step is not just critical to the international financial system, but also to families and workers across our nation?
Well, the reason the 3% is important is because at 3% is when we start bending the debt curve and actually start paying down debt. The important thing to look at is the deficit to GDP, which actually, in the first fiscal year, the Trump administration came down from the astounding level of about 6.3%. The calendar year was 6.8 or 6.9 in the Biden breakaway spending. We brought it down to about 5.7, 5.8% for the fiscal year. So we actually did have a fiscal contraction, and we would have continued that fiscal contraction this year but for the tariff refunds.
If you want to be interrupted again, show up at my subcommittee hearing at 2 o'clock today.
Gentleman yields back.
Chair recognizes the ranking member of our subcommittee on capital markets, Mr. Sherman of California. You're recognized for five minutes.
Mr. Chairman, I want to thank you for focusing our attention on China, its special drawing rights, its access, at least until 2031, to the World Bank. But we were alerted to concerns about China just a few minutes ago when we had a Code Pink-style, I assume it was Code Pink, disruption of this hearing. And I should point out that Code Pink is chiefly financed by China, the Chinese Communist Party. One more reason to be concerned about China's role in international finance. The war has driven up gas prices and has driven up interest rates. Before this war, the 10-year was at 4%. Now it's virtually at 5%. Last year, I urged the administration to fill our Strategic Petroleum Reserve. They did not. As a result, we have not been able to respond to the Strait of Hormuz problem as effectively as we could. Now we have those of the administration talking about a Bitcoin reserve. I've never, no country that has ever won a war in history had a Bitcoin reserve. But if you don't have an oil reserve and if you don't have reserves of rare earth minerals, then you are at strategic risk. Certainly, any money that we would put in a Bitcoin reserve, which we could lose in a day, should instead be in strategic reserves of things we actually need to run the economy. We are told that tariffs don't drive inflation. Boy, do we need financial literacy in this country. This hearing focus is significantly on the role of the US dollar. The role of the US dollar is undermined by an incredibly erratic federal administration that makes us the laughingstock of the world. It is exacerbated by the crazy tariff policies. Now we have a war with Canada. And the crypto bros made it clear that the whole purpose of crypto was to displace or partially displace the dollar as the world's reserve currency. What I'm particularly concerned about is that in the Senate they are considering the Clarity Act without plugging the loophole in stablecoin. The deal with stablecoin was that we'd allow stablecoin, oh my god, but at least we would prohibit interest on it. Now the crypto guys have spent tens of millions on legal fees to evade that prohibition on interest on stablecoin. A recent study has shown that that could lead to a $1.5 trillion reduction in bank deposits, meaning that the primary way that we finance small business in this country would have $1.5 trillion less. Not to mention that there'd be $15.5 trillion less to deal with the Community Investment Act. And finally, of course, this stablecoin is a system designed to be ultra-secret, to defeat law enforcement, and to ignore and evade our know-your-customer laws.
Now, Mr. Secretary, one of the core principles of US banking systems, accountability rests with identifiable people and institutions. Yet many DeFi protocols and decentralized stablecoin arrangements operate through decentralized governance, autonomous mechanisms that lack accountability. Given the record of the number of DeFi exploits reported in the first half of this year and the use of AI in exploiting code, are you concerned that a growing share of global financial activity could migrate to systems where there's no accountable party and no know-your-customer requirements? What implications would this have for our efforts against illicit finance, and what effect would it have on the integrity of the international financial system?
Well, that's why I'm pushing the passage of the Clarity Act, because it gives Treasury more authorities to seek out this evasion.
The Clarity Act emboldens and makes more popular the rival to the US dollar, which is crypto, or at least they are the newest rival to the US dollar, and they've said that their purpose... It's as if America owns Coke, and your suggestion is let's invest and glorify Pepsi. We don't need the competition, especially when we're doing such a terrible job of running our economy and of looking strong in the world. And I yield back.
Chair recognizes the gentleman from Wisconsin, Mr. Fitzgerald. You're recognized for five minutes.
Mr. Secretary, thanks for being here today. I want to go back to China, if I could, a little bit more basic kind of approach. The IMF is supposed to promote, obviously, global financial stability, but it appears kind of on a regular basis, China continues to use opaque lending practices. They manage kind of the exchange rate, and they're certainly delaying debt restructuring, I guess you would call it, in developing countries. What are we doing, or what can we do to use our influence, the United States, use its influence at the IMF to hold China more accountable and make sure that Beijing doesn't continue blocking all these debt restructurings and distorting, they're basically distorting kind of the international system, right? I was wondering if you'd give us your thoughts on that.
So, Congressman, very important problem. We addressed it at the G20, and we will see the first debt restructuring since then. And it is because, look, the Chinese system of lending includes many tolling agreements, many hidden provisions, and transparency in debt restructuring is the ultimate feature for a successful debt restructuring. The IMF has joined us in believing that that must happen and that we must have transparency. It is also my opinion that this widely talked-about Belt and Road Initiative has gone from a lending operation to a collection operation as they have bankrupted many, or are bankrupting many, of their borrowers.
And so let me follow up. So at the G20, I know the discussions happened, but just the efforts by China and really other countries in reducing kind of the reliance on the dollar. So can you just kind of tell us why maintaining the dollar status as the primary reserve currency matters? I know that seems like, you know, this is the Financial Services Committee, but what is your opinion on that, and what's your take on that?
Well, contrary to the gentleman from California, the US is in fact the leader, and the leader does not fear competition. Competition makes us better, and we have thus far dismissed competition. What we have seen is as the share of global transactions, the US dollar continues to thrive. The share of global transactions in dollars actually went up this year, and the only thing that we have seen is a diminishment in the reserve assets, and that is just through the decrease, mostly, of Russia and China in their reserve holdings. But we have seen many other countries, and as a matter of fact, we just had two of the most successful Treasury auctions in 20 years, which speaks to the credibility of our system and what this administration is doing and the global confidence in us.
What we oftentimes focus on what the administration can do on that. What should Congress be doing to preserve not just the dollar as the currency, but just to stabilize the markets overall?
Well, we will be talking about a fiscal consolidation that is coming, and as the previous representative asked me, that is important. We have to get our house in order. And, you know, as I say, a strong dollar is not a price on a screen. It is a set of behaviors. And what we have seen in this administration, where we are creating regulatory certainty, tax certainty, trade certainty, and energy certainty, that is bringing in trillions of dollars into the US. So it is to help us fortify those policies.
Very good. Thank you for being here today. I yield back.
Gentleman yields back. Chair recognizes the ranking member of our subcommittee on digital assets, Mr. Lynch of Massachusetts. You're recognized for five minutes.
Thank you very much, Mr. Chairman, and I want to thank the secretary for being here. Mr. Secretary, as Secretary of the Treasury, you have direct influence on the ability to advise the president on matters of AI, not only from an economic standpoint, but also from a regulatory standpoint, as well as a national security standpoint. Sometimes when I hear the president talk about AI, and I have the honor of being the ranking Democrat on this committee on AI and crypto, when I listen to the president, I do not believe he has a grasp of what we're dealing with with AI. I'll be honest, I don't think the president could spell AI if I gave him the first letter. He is calling it a hoax. I think your own leadership at Treasury and the things you have tried to do and anticipated are far more logical and thoughtful than what I'm hearing from the White House. And I think I'm not trying to put you on the spot here, but I know you have suggested some things in the area of AI that are thoughtful and cautionary and deliberate, and yet I hear the president saying this is all a hoax, you know, and I'm just trying to figure out, do you think the president understands that when we talk about building an AI, we're not manufacturing it like a car? Sometimes he talks in those terms. We're really growing AI in a lab, and now based on the statements from Anthropic and OpenAI and others, including Elon Musk, it's, we're having a control problem. We're having an alignment problem. You know, this incident with Hugging Face.
Stop the sanctions that are killing Iranian civilians.
We've lost control. Do you think the president understands that it is not as simple as what he has described? Do you think the president understands that it probably doesn't matter whether the good guys develop a super intelligence or the bad guys develop a super intelligence if you don't have control of that entity and it has preferences and goals that are inimical to the existence of humanity? It won't matter. It's the entity itself that they're creating that is going to present the threat to us and to your kids, grandkids, all of humanity in general. Does the president get that, Mr. Secretary?
Congressman, I look forward to working with you on this. And I do take exception. It does matter whether the good guys or the bad guys have this. As a person who manages the relationship with China on AI, it matters a great deal.
But Mr. Secretary, here's my point though: we're having control problems. So if we build something we can't control and the Chinese build something they can't control, and the entity itself is what is the danger to us all at the end of the day. If we create a super intelligence that is beyond our control and does not follow our instructions, and it's been very difficult on the value loading piece of this where we try to imbue the AI with values that humans have, that we have as a democracy. We have failed in that. That has been impossible to do so far. And yet we've got this race, and I hear from my, and I have great respect for Mr. Hill and my Republican colleagues on this. We keep hearing about this race, this race against China. We can't slow down. We need to beat them. Well, we don't control the entity that we're trying to create, and neither does China. I bet they've had breaches. They've had breaches, but they haven't reported them. Anthropic has. OpenAI has. Elon Musk has.
Congressman, Kimmy had a breach and sent Chinese weapons plans back to Anthropic.
What I'm saying is I hope there's a way that you might be able to talk sense to the president about AI and the threat that you and I know it presents.
I would just say the president is completely aligned with Jensen Huang, the CEO of Nvidia.
The chair, your gentleman's time has expired. Chair recognizes the gentleman from New York, chairman of the House Homeland Security Committee, Mr. Garbarino. You're recognized for five minutes.
Thank you, Chairman Hill. And Secretary, thank you for being here. And again, thank you for your work on getting SALT in the one big beautiful bill that put a lot of money back in my constituents' pockets.
That was a lot of your work, Congressman.
Well, but it was with your partnership and your meeting that we got across the finish line. So, thank you very much for that. I want to talk about foreign banking organizations. From 2020 to 2023, they underwrote approximately $11 trillion, more than 40% of the financing raised in the United States. They also employ more than 200,000 US workers and contribute $30 billion in payroll. Secretary, given these substantial contributions, what steps is Treasury taking, including through its coordination with financial regulators, to ensure our policies continue to attract foreign investment and allow foreign banks to compete on a level playing field, helping ensure the US remains the world's financial center?
Representative, that is an excellent question because the US has, around the globe, we have a very unusual regulatory system in that we have three federal regulators: the Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency. Then there are state-level regulations. So we are trying to make sure that all the regulators are aligned with best practices and tailoring regulation for both the risk in the system and the size of the banks.
That's great. I mean, as we know, regulation for banks is very important, but when you overregulate like the EU and some other places do, you know, they lose investment. We want to make sure we're protected, but actually still have investments. I love that you're doing that.
That's why they're trying to unify their capital markets and be more like us.
Everybody wants to be like us. I have another question. Under US generally accepted accounting principles, clearers are treated as agents rather than principals, meaning client-cleared trades typically do not come onto the clearer's balance sheet. Many US broker-dealers that are subsidiaries of foreign parent companies must also comply with the International Financial Reporting Standards, IFRS, which has not made the same clarification. Absent IFRS guidance, those firms could be required to carry cleared trades on their balance sheets, significantly impairing their ability to participate in the Treasury market. I'm concerned that excluding major market participants because of accounting inconsistency could restrict Treasury market liquidity and run counter to the goal of the Treasury clearing mandate. We do not want international standard-setting bodies hindering the successful implementation of our Treasury clearing efforts. Do you share this concern, Secretary? And would you be willing to weigh in where possible to help this get corrected before the go-live date?
Yes. So we'd be willing, with pleasure, to work with your staff on this, and we are dedicated to keeping the US Treasury market the deepest, the broadest, and the most robust. So we want to make sure that we prioritize safeguards, but we also want to prioritize our standing in the world.
Thank you very much for that, and we look forward to working with you and your team on that. Now turning to digital assets: as Treasury implements the Genius Act, Congress was deliberate in distinguishing between financial intermediaries and developers of decentralized technologies that do not custody customer assets or control transactions. Secretary Bessent, how is Treasury ensuring its regulations preserve those distinctions and do not inadvertently impose intermediary-style requirements on software developers or other technology providers?
So, Congressman, we're in the rulemaking process right now and I can't comment on that, but we have taken substantial input from Congress and stakeholders as we aim to keep America the crypto capital of the world.
I understand that we are in the rulemaking process, but again, I just want to make clear Congress did intend that they were excluded. So when in the rule drafting, just please remember that. And last, I want to turn to retirement security. In 2022, SECURE 2.0 became law to help create more opportunities for Americans to save for retirement. Secretary, can you provide an update on the implementation of SECURE 2.0 and how those efforts fit into the president's executive order?
Yes. We are again working to implement that and to do that in a safe and sound manner as quickly as possible.
Okay. Do we have a timeline or... do we... is there a timeline of when?
Yeah. My staff will contact your staff.
Okay. I appreciate that, Mr. Secretary, and I am out of time, so I yield back.
Gentleman yields back. Chair recognizes the gentlewoman from Colorado. Miss Patterson, you're recognized for five minutes.
Thank you, Mr. Chairman, and thank you, Mr. Secretary, for being with us today. There is so much that I'd like to address in the short time that I have. I think that the greatest concern that the American people have right now is not just the crippling economy, the illegal tariffs, the consequences of the illegal war, the people who are struggling every day to make ends meet. But it is the endless corruption and the selling off of the American people's priorities for the benefit of Trump and his family and his cronies. In just the last few days, I couldn't believe the news that was coming out that Jared Kushner is pursuing his own business deals while he's supposed to be engaging in Middle East peace talks. The Russian oligarch paying for post-wedding celebrations. The 60 Minutes show that exposed the video footage of people offering pardons as long as they'd give Trump hundreds of thousands of dollars. The corruption is unprecedented in every way, and there are real consequences to everyday Americans. We're also very concerned about January 6th violent insurrectionists being paid out and trying to exempt Trump and his family members from a deal that you are overseeing with the IRS, exempting them from any crimes that they might have committed in the past. So I want a commitment from you. I've sent a letter asking for information on this. I have yet to receive a response, but can you commit right now, today, that there is a legal revocation of the IRS deal that you are overseeing, and will you please give us a commitment that you will give us these documents that were requested?
Representative, you are confused. I do not oversee it. It is done by the Department of Justice, and we take instruction from the Attorney General.
But Mr. Secretary, you oversee the IRS. You oversee the dollars coming in and out of the Treasury.
Attorney General supersedes that authority.
Okay. Mr. Secretary, you're supposed to protect the American people and our tax dollars. Can you commit that you will not distribute any of these funds right now, for all of us today?
Well, it's the subject of litigation, so I can't talk about it, but I'm not sure which funds you're talking about.
Okay, Mr. Secretary, any funds that would pay out January 6th insurrectionists, whatever people, whatever fund we want to call it, any taxpayer funds going out to pay out these insurrectionists, as well as exempting Trump and his family from any investigations with their dealings.
Again, that's in litigation, but it is a matter for the Attorney General.
All right, Mr. Secretary, the hardest part of my job right now is being in my district and having to speak to people directly about the impacts of this administration, what it's having on their daily lives. I am shocked when I see you on TV talking about how the economy is doing, that the economy has never been better. That couldn't be further from the truth. People are struggling to make ends meet. The skyrocketing tariffs are hitting businesses with an unexpected average of $25,000 a month in Colorado. Canada is our greatest trading partner, so huge implications for the trade war that Trump has pursued. 50% tariffs on products that we rely on. So our families are getting health care ripped away. Our economy has been crippled from failed policies, and yet we hear you. What I hear from people is that you're one of the smart people in the administration. You know better. You know what's happening to the people across this country, and yet you continue to stand and say Trump's talking points. And my ask is that we deserve, we need better. You are a voice that we need of reason and a check on Donald Trump when we feel like we have none. Mr. Secretary, I want to read a couple of stories. I have countless stories from people reaching out to my office about the consequences every day. Margie says, 'My husband and I both have good jobs, but with child care costs that are hitting more than our mortgage and grocery bills that feel like they go up every week. It's been brutal, and these two things are just the tip of the iceberg. It shouldn't be this hard for a family of four to survive.'
Gentlewoman's time is expired. Chair recognizes the gentleman from New York, Mr. Lawler, you're recognized for five minutes.
Thank you, Mr. Chairman. Mr. Secretary, thank you for being here and thank you for your leadership on Operation Economic Outcast. Could you please describe the impact Operation Economic Outcast is having on the Iranian economy as we speak?
Well, Congressman, I would just quote the president of Iran, the speaker of the parliament, and the head of the central bank, who said that the economy is in dire straits. He was warning both his hardline IRGC compatriots and the Iranian people. So we have seen the currency collapse. We have seen inflation through the roof, and unbelievably, in a country with the third-highest energy resources in the world, they now have three- to four-hour gas lines because they have to import their fuel. So the economic outcast is possible because of the blockade. So the combination of the blockade and the months that we spent mapping the nodes through the payment system, that we are cracking down on them, and I believe that these violent outbursts that we are seeing from them is a result of a wounded and cornered animal.
Appreciate it. Keep up the strong work on that front. I want to raise an issue related to Holocaust-era restitution. There's growing evidence that certain Swiss bank accounts holding assets belonging to Holocaust victims and their families were never accounted for or included in the original 1998 Swiss bank settlement. And testimony to that effect was made to the US Senate earlier this year. Mr. Secretary, given Treasury's role in overseeing matters of international finance and asset recovery, are you aware of these reports on unaccounted-for accounts?
Yes, sir. And do you believe it would be appropriate for the department to revisit or press for the settlement to be reopened or expanded to ensure these assets are properly identified and returned to survivors and their descendants?
Our international affairs department would be happy to work with your staff on that, Congressman.
Great. Thank you. Treasury Department has been very active in the AI space, both within the financial sector itself and more broadly in the tech stack. Can you share more information about Treasury's involvement with efforts to create baseline standards for AI developers and how banks should be thinking about AI within their institutions?
Yes. So as I said earlier, this began back in March, and we have engaged on a daily, weekly, and monthly basis. We began with the largest banks and with their chief information officers, with their leadership, and we have transferred much of that into Project Gold Eagle, which is a clearinghouse for everything that we learn about resiliency within this, and we continue to engage with them. And I can tell you that the financial sector have been, from the largest banks to the smallest banks, from domestic banks to international banks, have been very good partners, and they are working on resiliency.
Appreciate it. The European Union has been attempting to assert regulatory authority on American enterprise through the Corporate Sustainability Due Diligence Directive. CS3D would force US companies, many with only modest European exposure, to comply with sweeping EU-mandated supply chain audits, liability standards, and ESG-driven operational changes. Given the administration's stated goal of restoring strong economic growth, how do you assess the impact of this kind of foreign regulatory overreach on America's ability to reach a sustained 3% growth rate?
Well, Congressman, I used to be a lifeguard, and one of the first things they teach you in lifeguarding is that a drowning person may grab you and try to pull you down with them. So at the G20, we offered an agenda of growth, which includes substantial deregulation. And we hope that the EU will follow a fantastic report from the former head of the ECB, Mario Draghi, on how they can solve their growth problems. But the way to do it is not to encumber the dynamic economies. It is for them to free themselves.
In New York and California, they have very aggressive escheatment practices and try to sweep unclaimed property into the state to effectively pay for their bloated budgets. How are you and the administration going to protect the Trump accounts from being swept up by California and New York in these grandiose escheatment practices that they have put forth? Rep. LaHood and I are working on the SAFER Act and would love to work with you on that.
Yes, that could be a problem. You know, again, drowning people try to pull everyone down with them, and you know, we can...
Mr. Secretary, let me ask you to respond to Mr. Lawler in writing on that question. Chair recognizes the ranking member of our subcommittee on oversight investigations. Mr. Green, you're recognized for five minutes.
Thank you. Thank you for appearing today, Mr. Secretary. Quick question for you. At the purchase of a meme coin, what does one get to evidence the purchase?
A person purchasing a meme coin at the time of purchase, you get something to evidence the purchase. I assume it's an electronic receipt.
And how does one acquire value after having purchased the meme coin?
Again, value can take many different forms. How does one acquire value when one buys gold? How do you acquire value when you buy...
Let's talk about the meme coin. Right now,
You would get it through appreciation, or many people may just buy it for capital stability.
Well, some people buy it assuming that they'll make some sort of profit as a result of the purchase. And is it fair to say that that profit in many instances will be based upon another person buying at a higher price?
That's the way a market system works, Congressman.
Well, in this market system, the president's dollar memecoin allowed him to make $635 million last year. Investors lost $3.81 billion. The coin fell from $75 at launch to $1.65. Those purchases that were made by persons buying the memecoin, they purchased a digital token which amounts to nothing. They don't get anything beyond the token in the wallet. Nothing more than that. And there is this term that I'm not fond of, but it's a term that's utilized. The term is the greater fool theory. It takes someone who's willing to pay more for nothing than the original investor for the person to make a profit. That's speculative. But it's also called something else. It's called a Ponzi scheme. These things have been legalized under this administration. Ponzi schemes have cost persons lots of money, and people who impose them have gone to jail. They've been prosecuted. But in the Trump world, we now have legalized this scam to the extent that when a person buys the Trump coin, there's a transaction fee that's paid. When it's sold, there's a transaction fee. The president makes money on the purchase and on the sale. And if the president happens to have taken a few of these coins himself at the genesis of this process, he makes a profit when it goes up. And if he takes his profit off the top, as other investors do who buy in early, they do well. But the masses of people, they're the people who are losing the $3.81 billion. These schemes have not traditionally been legal. How do you justify legalizing these Ponzi schemes?
Well, Representative, I'm unfamiliar with this. I don't think it meets the criteria for a Ponzi scheme. A Ponzi scheme is a different kind of financing scheme.
Well, excuse me if I may just ask you. Pardon me for interrupting, but explain to me how it differs from a Ponzi scheme when the profits that are made are dependent upon someone else paying more for what you purchased, which is nothing. We'll call it a digital token. So how is that different from a...
Every market is dependent on if you want to make money on someone paying more, whether you...
Whether you sell your house, whether you sell stock...
Sir, if I may, if it's gold, you have a tangible asset. They are tangible assets. This is an intangible asset. It doesn't exist...
Except in the mind. Equities and bonds are an intangible asset.
Okay. Well, this one is the one that the president has used to take advantage of people. I would hope that our country would see that the president is a corrupt person. I yield back.
Gentleman yields back. Chair recognizes the chair of our subcommittee on housing and insurance, Mr. Flood of Nebraska. You're recognized for five minutes.
Thank you, Mr. Chairman. Mr. Secretary, when you appeared before the House Ways and Means Committee in June, Congressman Hern raised the issue of third-party litigation financing. You said at the time that you look forward to working with him on the issue, especially where foreign money is coming into our system, sponsoring lawsuits, and paying no taxes. More recently, you warned Wall Street on X that, quote, 'Tax rules should reward investment, not abusive financial engineering,' end quote, and said, 'Treasury would not tolerate financial products designed to exploit the tax code.' Well, I think that specifically describes third-party litigation financing. These transactions allow investors to take ordinary income from litigation recoveries and convert it into capital gains income through financial engineering. Mr. Secretary, will you commit to having the Treasury and the IRS examine the tax treatment of third-party litigation financing, including arrangements that have foreign investors? I'm concerned that we've got sovereign wealth funds that are gaming our justice system and getting these nuclear verdicts and then paying themselves back big time. So my question is, will you work with us to ensure that TPLF proceeds are subject to the appropriate US tax treatment?
Look forward to working with you and your staff on that, and I have long believed that this is a malignancy within our legal and financial system.
And it should be stated that you look at home insurance premiums in America, they have been skyrocketing. Yes, weather peril, but also third-party litigation financing is also driving that. Second question, Mr. Secretary, some of my colleagues today have claimed that crypto will destabilize the US dollar, but I have a hard time understanding how a payment stablecoin under the Genius Act that must be backed dollar by dollar in a US financial institution, how could that undermine the very dollar that it's tied to? I know you're working hard to implement Genius. How do you expect this statutory framework for stablecoins to strengthen the dollar's position as the world's reserve currency, which is one of the reasons we all voted for it? How to increase the global demand for dollar-denominated assets and ensure that this emerging technology ultimately reinforces, not threatens, the strength of the US dollar?
With stablecoins, the highest-demand stablecoins are indeed US dollar-backed. So we believe that as we finish the rulemaking, which we're in the midst of now, and working on congressional intent and speaking to the stakeholders, that we will see an increase in demand for US safe-haven assets, US dollar assets, especially Treasury bills, and that will likely buttress the US dollar vis-à-vis other currencies, especially as other countries implement central bank digital currencies, which could be seized at any moment, as we have seen in numerous cases.
Thank you very much for that. As you know, the Bank Secrecy Act is the top regulatory cost center for financial institutions, and I'm pleased that the administration is looking at modernizing AML controls with a new program rule. When it comes out, will it be strong enough to actually change supervisory practice on the ground level to focus on risk?
Yes. What we are seeing is that many of the suspicious activity reports that we see are even ex post, and much to my dismay, when I arrived at Treasury, we also saw that many of the SARs, which are in the hundreds of thousands to millions filed every year, end up in a digital filing cabinet. So at FinCEN, we are operationalizing FinCEN so that we can both follow the leads, follow pathways on those, and communicate with local law enforcement in a more robust way.
I want to touch on community banks, which don't have the resources or large compliance teams, and fewer BSA reports a month could make a big difference. A threshold increase would meaningfully reduce the compliance burden for them. Is that something we can include in the final AML rule?
We are working on that now, and we are working on both perhaps a threshold increase based on the length of time the customer has been with an institution. And Congressman, as you know, no one knows their customers better than small and community banks.
Right. So how can we integrate their knowledge and the fact that they do know their customer, they see them, as opposed to... we find that most of the deficiencies are with the very large banks. Thank you very much, Mr. Chairman. I yield back.
Gentleman yields back. The chair recognizes the ranking member of our subcommittee on housing and insurance. Mr. Cleaver of Missouri, you're recognized for five minutes.
Thank you, Mr. Chairman. Mr. Secretary, thank you for being here. The president vowed at the Republican convention, mid-term convention in Dallas, that he would give $5,000 to each American if Republicans win the election. I think he called it a Trump dividend. First of all, you know, I'm concerned about the direction we're going in terms of one part of our government taking complete control over the government. And we know that things like this happened before, but do you believe that the president can make a declaration about $5,000 for each American without the consent of Congress?
We are currently examining that at Treasury, and when the Republicans win in November, if we need to, I look forward to working with Speaker Johnson on it.
If necessary, on the $5,000 dividend.
So that... so it is a thing. I'm not sure what a thing means. It is a thing when it is real. The president's declaration about $5,000 per American. What is real? So it's been researched and...
The president's intent is very real.
As a Treasury Secretary, I'm sure you... do you have any apprehensions about a $1.88 trillion deficit that would be impacted even more negatively if every American received $5,000 from the federal government?
Well, first of all, I think putting more money in the American people's pocket should be an objective for everyone, and I believe there are ways to do it that would not affect the deficit.
Yeah. And ways to do it without involving Congress.
Again, if Congress is needed, I look forward to working with Speaker Johnson. If not, then not.
Well, spending begins in the House of Representatives, and $5,000 per person, it would seem to me, would have to move through the legislative body. We're seeing a slow and, in my estimation, dangerous reduction in the equality of the three branches of the government. And I always think about 1973, the War Powers Act. I think the bombing was secretly taking place in Cambodia without the knowledge of people in Congress. And so I'm not sure... I'm assuming you're meeting with Mr. Speaker Johnson now, working out some details. Sorry, are you working out details with Speaker Johnson on the $5,000?
If it becomes clear that we need congressional authority, I will meet with Speaker Johnson, and I look forward to it.
There was also a pledge for $2,000 for individuals before this by the president. And it's concerning. If we can... my time is gone, but I am very concerned about releasing unchecked superintelligence when people are declaring that it's an existential threat to humanity. Senator Kennedy has suggested that we pass some kind of law that required a kill switch. Are you familiar with that?
Well, a kill switch, based on what the senator has suggested, would be the switch that would be the ultimate switch that would shut down AI if this threat surfaced the reality of...
Time has expired. Invite the secretary to respond in writing to that question. Chair now recognizes the gentleman from Iowa. Mr. Nunn, you're recognized for five minutes.
Thank you very much, Mr. Chairman. Secretary Bessent, thank you very much for spending time with us today here in DC. Most importantly, thank you for coming to places like Iowa and hearing frontline folks share with you how the investment of rural capital, which this committee has done, which you have led, has really helped impact local lenders, whether they're banks, credit unions, small businesses, take root and really grow. You spent some time with me recently in Des Moines, and you heard directly from folks who have said, you know, the lending options available to them because of your leadership here, the rollback in regulation is helping them grow businesses. We had one of our companies had their best year ever as a direct result of both the tax cuts, but the rollback of red tape. I want to say thank you very much for your leadership. Most importantly, thanks for hearing from folks right in the middle of America on how much this helps grow the heart of the heartland.
Representative, it was a pleasure to be there, and it's really a tale of two states that I've been in: Minnesota, which is top five for personal income tax, top five for corporate income tax, and the people who are leaving and the businesses that feel trapped, as opposed to Iowa, which is booming.
That's right. I also want to highlight, and I want to thank my colleague across the aisle, Emanuel Cleaver, here on efforts we've done for things like rural housing. And this is an area where making sure all of America gets the opportunity to have an American dream. The Treasury has been a partner in making sure that our local lenders have the access to capital necessary to make that successful. I also want to speak today on something that I think has, you know, really driven what we have been a leader here on the Financial Services Committee. We've led in both crypto, we've led in digital assets, including stablecoin, and now we're looking at this artificial intelligence that has exploded in the last year alone. Our committee has passed unanimously my AI Plan Act to be able to identify ways that the federal government can learn from what's happening both in the private sector while at the same time not putting prohibitive restrictions on innovation here in the United States. I also think it's unique that the Treasury has an opportunity here to help us wage an America-first innovation while stemming the tide from groups like China, a near competitor in the space, from getting tactical advantages in the AI space. That's everything from making sure that chips are made here in the United States to also ensuring that foreign actors don't take an opportunity to leapfrog America's frontier AI models. Secretary Bessent, I wonder if you could speak to us about what the Treasury is doing to help keep America's competitive advantage, increase our innovation, while at the same time, as was noted here, not allowing technology to get ahead of our capability to best help the American people.
Congressman, thank you for that question. And we are trying to maintain the optimal growth rate. So we are solving for both the innovation and safety. And we have been working on that for more than six months since these large language models, since the release of Mistral, which was the first, what I would say, step-function increase in AI as we approach AGI. And one of the things I would say is that we need to develop more open-source models in the US. We can't let these large labs have regulatory capture because that will stop innovation. One of the ways we can push back against China, because the Chinese models, they distill from the US models, which is a polite scientific word for steal. And the more we develop our own open-source models here, or open models here, then we will be able to eventually... the Chinese models, people will not use them because again, you know, you're seeing in many of the Chinese models, many of the Chinese models think they're Mistral.
That's right. That's right.
They think they're Claude.
Mr. Secretary, I think you're absolutely right in the sense that made-in-America AI is good not only for the entire world. It's one of the best safeguards we have to make sure the Communist Party of China doesn't become the mainstay for the future of artificial intelligence. I'll end with this, Mr. Chair. One of the efforts that we're trying to lead here is not only what we can do to make sure our partners in China, when they come to the United States at the end of this month, know that we are committed to this, that they find no harbor, and that we will be soft on this issue, but also Congress must lead. And this is one of the reasons that we are presenting a letter to both the House, Republican and Democrat leadership, as well as the Senate, to make sure that we have a commission focused specifically on aspects that we can do to make sure artificial intelligence becomes first and foremost here in the United States and national security is prioritized. I'd like to enter into the record...
Thank you very much, Mr. Chairman.
Gentleman's time is expired. Chair recognizes the ranking member of our House Intelligence Committee, Mr. Himes of Connecticut. You're recognized for five minutes.
Thank you, Mr. Chairman, and thank you very much, Mr. Secretary, for being here. And purportedly we're here to talk about international monetary stuff. The chairman and I were just in Bolivia. Bolivia is hanging on by a thread, waiting for them to approve an IMF deal. I just hold that up as an example of how important it is that you provide the leadership that, of course, keeps our neighbors stable and safe. That's not what I want to talk about, though. What I want to talk about is... let me start. Did you attend the midterm convention in Texas last weekend?
You did. Okay. I'll tell you, I saw two things at that convention. Number one, it's a little bit like you quoting the Atlanta Federal Reserve as a GDP projection for the third quarter. The Atlanta Federal Reserve has a GDP projection that is double what the Survey of Professional Forecasters is saying it will be at 2.5%. So I saw a lot of happy talk about the economy, which, by the way, is political malpractice. When the American people, and this is in the Michigan Consumer Sentiment Survey, see consumer sentiment lose 20 points since the beginning of the Trump administration, you have a political problem. I don't expect you to comment on that, but you have a political problem. Which is why my friends on the other side of the aisle are not talking much about the economy today.
