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 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 have seen, 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, and I'm sure it will continue during President Xi's state visit.
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.
The U.S. bond market has been the best performing in the world.
They could stop anytime they want to.
They could stop anytime they want to.
This administration has been at the forefront of examining the models. We began model examination. They have more than five or six.
To which piece? There's so many.
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.
I would say Sean Karen Cross and Michael Katzios.
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 D.C., at Treasury to begin discussing this. The largest banks 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.
Well, it's the plumbing, and it is the patching of a lot of open-source code.
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.
Well, that's why I'm pushing the passage of the Clarity Act, because it gives Treasury more authorities to seek out this evasion.
Yeah. So, Congressman, very, 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.
Well, contrary to the gentleman from California, the U.S. 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 that as the share of global transactions in the U.S. 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.
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 U.S. So it is to help us fortify those policies.
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.
Congressman, Kimmy had a breach and sent Chinese weapons plans back to Anthropic.
I would just say the president is completely aligned with Jensen Huang, the CEO of Nvidia.
That was a lot of your work, Congressman.
Representative, that is an excellent question, because the U.S. 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 why they're trying to unify their capital markets and be more like us.
Yes, so we'd be willing, we'd be willing with pleasure to work with your staff on this, and we are dedicated to keeping the U.S. 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.
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.
Yes, we are again working to implement that and to do that in a safe and sound manner as quickly as possible.
Yeah, my staff will contact your staff.
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.
Treasury. The Attorney General supersedes that authority.
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.
Again, that's in litigation, but it is a matter for the Attorney General.
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. The 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 — they have, 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 the 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 on 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. Licardo 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. The Chair recognizes the ranking member of our subcommittee on oversight and 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 things. 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 meme coin 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 meme coin, they purchase 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 Ponzi?
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.
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 Hearn 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 to a T. 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, 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. Well, I'm assuming you're meeting with Mr. Speaker Johnson now, working out some details. 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 — I don't — 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 Mythos, 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 were seeing in many of the Chinese models — many of the Chinese models think they're Mythos.
That's right. That's right.
They think they're flawless. So...
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, the gentleman from 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.
Congressman, there's a survey problem because Democrats are now poisoning the survey.
Mr. Secretary, you're better than that.
I'm data-driven. Reclaiming my time. It disappoints me to see somebody of your stature use the word conspiracy in the Congress of the United States. But as long as we're going there, the other thing that I heard in Texas was that we're all communists. Mr. Foster, my friend here, built a business, employed lots of people. We're not communists over here, but I do worry about the other party. There's been 10,000 Ivy League PhDs written on what precisely communism is. But can we agree, just yes or no here, can we agree that communism substitutes the control of the government and the ownership of the government over the hand of the free market? Is that a reasonable working definition of communism?
Okay. Good. Good. So can you think of any other administration since Franklin Delano Roosevelt that has taken equity stakes, government ownership in 39 companies? That's a figure by the Council on Foreign Relations. Can you think of another administration that has the United States government owning 39 American companies?
Congressman, as you said, since Franklin Roosevelt, that we are in the fight of our life.
No, no, no. For strategic industries, we have had market failures. The Biden administration completely...
Okay. Okay. Okay. Mr. Chairman, I have five minutes here.
I'm not going to argue with you on whether that's a good idea. I happen — I'm a free-market guy, so I think it's a terrible idea. Tariffs are a...
That's why we have no critical minerals. That's why the...
Mr. Secretary, I do have a question at the end of this. The government now owns 39 companies. The government has imposed tariffs. I don't like tariffs. Whether you think they're a good idea or a bad idea, they are an intervention in the free market. You yourself did a massive intervention in probably the most important market to the capital markets, which is the Treasury market. The president recently — $5,000 for a vote. Now, you could — in the legal world, that would be called a bribe, but you could think of it as an intervention in political markets. And by the way, I have no doubt that if I walked down there right now and said, 'I will pay you $5,000 if you focus your buying on the three-year Treasury,' that conversation would end with me in handcuffs. But the question I have for you, Mr. Secretary, relates to your intervention in the markets. Again, I'm not going to ask you to agree with me here, but I can think of no administration in the last 50 years that is quite as communist as the Trump administration. Constant interventions in the operations of the free market. But let's spend one minute on your intervention. About a week and a half ago, you spent some $10 billion, plus or minus, to try to lower the yield on the 10-year bond. This prices American mortgages. When you started, the 10-year bond was at 4.8%. Today, it's at a 20-year high of 5.04%. 20 basis point rise. Was your intervention successful? And will there be more?
Yes, it was, sir. And the...
Wait, wait, wait. The 10-year went up by 20 basis points. How can you say it was successful?
Well, there is a counterfactual of what would it have done, and we then proceeded to have the two most successful Treasury auctions that we've had in 20 years. And the US bond market that continues during the past month, since President Trump has come in, has been the best-performing bond market in the developed world.
I have one last question. You didn't use our cash for that. You let short-term bonds pay essentially for the purchase of long-term bonds. But you've talked about maybe using the Treasury General Fund. That's the American people's money. Do you have the intention of using the Treasury General Fund to continue this operation?
I don't think you understand what the Treasury General Fund is. The TGA is the checking account for the federal government. And if we can buy bonds cheaply, which is what we do, that we approximately $10 billion of...
I just asked a yes-or-no question about whether you intend to use that operation.
You can ask a question. You can tell me how to answer it.
Mr. — your time is expired. I'd let it go on because I wanted you to get that clarification, and I'd invite the secretary to put that in writing. The committee is interested there. Thank you. The gentleman, the true gentleman from Montana, Mr. Downing, you're recognized for five minutes.
Well, thank you, Mr. Chairman. And Mr. Secretary, thank you for being here. I want to first start by applauding your efforts and the Trump administration's efforts to reduce red tape and ensure that regulations are appropriately tailored. You know, I also want to quickly acknowledge the Treasury's efforts to stand up Trump accounts, which really do have the potential to give kids a financial leg up. But straight into my questions. As a former state insurance commissioner, one of my biggest priorities is maintaining strong and competitive state-based insurance markets, which, in my experience, is the best way to serve the needs of Americans. And during the Biden administration, I saw firsthand how the Federal Insurance Office, or FIO, was empowered and politicized to encroach on that system, despite a key function of FIO being to represent the US insurance industry on the international stage on prudential matters. And I saw all kinds of deviations from that, including, you know, trying to get the US to adopt, you know, European capital standards rather than adopting the other way on the strongest, most effective insurance market on the planet. You know, acting as a regulator when they clearly weren't a regulator. And probably one of the biggest transgressions I saw there was in the previous administration's Green New Deal aspirations, basically making data calls on our domestic insurers, usurping the authority of our domestic regulators. So, Mr. Secretary, can you discuss the efforts Treasury has made under your leadership to rein in those abuses we saw at FIO during the previous administration, and what further reforms might you support?
So, Congressman, that's a very important distinction. FIO was created under Dodd-Frank, but it is not a regulator. It is a convener. It is an observer. They facilitate communication, and we do not exercise authorities. I believe that the 50-state insurance mechanism that we have in the US is extremely robust. And I had the regulators, the insurance commissioners, come to Treasury in the spring for some very detailed discussions on what's happening in private credit. I was very impressed with the depth and breadth of their work. And importantly, they regulate each other because to do business, you know, in Montana, New York — you know, Montana has to certify a New York company selling there. So it is a very robust system, right? And look, I think what we can do is, which is what we do, identify the potential areas that we are concerned about for financial stability, and then make sure that the insurance regulators are aware of them. Because, as I've often said in risk management, the biggest risk you're taking is one you don't know you have.
Right. Well, thank you for that. And obviously, you know, we understand what the intent was behind FIO, but we have seen usurpations of what their authority was under the previous administration. And you — I've championed efforts to reform and abolish FIO. You know, the McCarran-Ferguson Act of 1945 made clear that states have sole regulatory authority over the insurance industry, which was upended by Dodd-Frank when it created FIO. So, Mr. Secretary, do you believe that Treasury should minimize its insurance activities to clearly define federal responsibilities and leave insurance regulation to the states?
Thank you. So, my legislation, the McCarran-Ferguson Restoration Act, really strikes a balance on abolishing FIO while maintaining some key responsibilities. So I hope you'll take a look at that. Moving on, in the interest of time, I was very pleased to see the final rule issued by FinCEN to permanently remove the invasive beneficial ownership information requirements for US small businesses. I've heard from countless companies as to how costly and unworkable this requirement would have been. Can you briefly discuss why exempting US businesses from this requirement was so critical to the administration's commitment to cut red tape?
Well, Congressman, I think first of all, it's important to know who we didn't exempt, and it's foreign entities, right? So, but by exempting 33 million small businesses from these onerous and expensive reporting requirements, you know, I believe it is a victory for common sense, right?
Another burden I hear from our community banks in my district is how costly it is to comply with the Bank Secrecy Act and anti-money laundering laws. The $10,000 domestic currency transaction report threshold has never been raised to account for inflation since the Secrecy Act became law in 1970. You discussed this issue with Chairman Hill earlier, but can you describe why it's important to keep these thresholds updated?
I invite you to describe them in writing to the gentleman from Montana. Thanks for the question. Chair recognizes the ranking member of our task force on monetary policy, Mr. Vargas of California. You're recognized for five minutes.
Thank you very much, Mr. Chair and ranking member for the hearing. Appreciate it, Mr. Secretary. Thank you for being here, joining us. I know you have a very tough job, and I appreciate you taking it. I do. I've been here since the beginning of the hearing, so I have heard most of your testimony, and some of the things I was going to ask you've already been asked. But one of the things that I did hear that you did attend the midterm Republican convention in Dallas, and you did hear, of course, and you commented about the $5,000. In fact, the actual quote from the president was this: 'If Republicans win, you win with us, and you get $5,000.' So, is that a good idea? Pardon me. Is that a good idea?
I think it's a good idea for the American people to keep more of their money.
So, they get five — does that hurt the deficit or the debt? Does that increase the deficit or does it increase the debt?
I believe that there are ways to do it without increasing the debt or deficit.
Why don't you go ahead and tell us then, because it doesn't seem like that's been the case so far.
That is in process right now.
So, it's somehow mysteriously or magically going to occur. You can't tell us. You can't give us any.
I'm not ready to discuss it at present, but at Treasury, we've been working on it for quite a while.
The reason I say this is because we hear this all the time, that in fact this is going to reduce the debt. Reduce the debt. I remember when President Trump used to talk about how outrageous the $24 trillion debt is. Now, of course, it's at $40 trillion. So, again, we hear these miraculous things that are going to happen, and they don't seem to appear. But since we are talking about miraculous, I studied to be a Catholic priest for a long time, and I had to study metaphysics, Thomistic philosophy in particular, because you have to pass an exam as a Jesuit called the quodlibet. And we talk about ontology, you learn about ontology, epistemology, the notion of what is existence, what is being, how do you know these things? I never thought I was going to have to research them once again. But because of AI, I do find myself once again going back to this information, trying to figure out, you know, what exists, what doesn't exist. This is a dangerous thing. And I'm not a techie, but I do know philosophy. As the systems learn more and more about us, they do become very dangerous. And you're in a position to do something important. The people who are technically savvy more and more are saying these are very dangerous things, and yet you were talking a little bit about how we have to do this for really efficiency purposes. What are you doing for safety?
We've been working on safety nonstop since the release of Mythos, and I can tell you what we shouldn't do on safety is to give these labs a liability exemption, which is what they are asking for. The best way to guarantee safety is that the creators are liable for what they build and generate and they put out into the economy and to the American people and to the world populace.
Would you like to expand a little bit more on that? Because if it's just a liability — I'm a lawyer too. I understand liability. So if the safety issue is just a liability for you, as you know, oftentimes companies go ahead and take the risk because of the potential profit. Are you building in any other type of safety other than the risk, the liability?
