▶ 0:17:59>> good morning secretary thank you for being with us today. So often we have staff members who are able to move forward and look out and so often they tell me the best job they ever had is working for my office and then they leave. One of my staff members I just spoke to recently had taken a job with the treasury.
▶ 0:18:31He said he's so sad. I said you could stay. He said he's not that sad to stay. Welcome new members of your staff from my staff and we are looking forward to working with you. As chairman of the banking committee I'm committed to enacting progrowth, pro-affordability policies. From the genius act, to housing, I'm proud of the bipartisan work this committee has done to promote economic growth and affordability.
▶ 0:19:00As we build on that progress it's important to remember affordability is not an abstract concept. It's about whether families could afford a home, save for the future, feel confident that hard work still pays off in america. Today I want to focus on the gains we have made and affordability, growth, how they fit together with financial stability.
▶ 0:19:27For many americans, one of the fastest growing states I might add in the country, these issues are not hypothetical. Secretary bessent, as you pointed out, economic growth and economic security are critical to financial stability.
▶ 0:19:54You understand firsthand how economic growth, population growth and opportunity intersect at the community level. It was created to identify and respond to systemic risk.
▶ 0:20:09For far too long it has focused on a climate agenda damaged by national stability and as you pointed out treated nearly every single sector of the economy, financial economy -- market as a potential financial stability vulnerability.
▶ 0:20:30Under your leadership f-stop is recognized with long-term economic growth and economic security are core components of financial stability. A system that slows growth, limits opportunity or prices families out of financial services is not a stable system, it is a fragile one. Thank you for refocusing on household balance sheets and financial resilience.
▶ 0:20:59When families have savings, access to credit and confidence in the future they are better equipped to weather storms, economic shocks, and the system becomes more resilient. Strong households strengthen local communities. Strong communities contribute to a more resilient national economy. I'm interested in how it balances the systemic risk and oversight with economic growth, innovation, affordability.
▶ 0:21:31The framework to remove undue burdens is it about safeguards, it's about making sure the financial system works as intended for the people that it serves. Businesses should not be caught in the crossfire or regulatory whiplash.
▶ 0:21:54When regulators fail to coordinate, the consequences don't stay in washington, they show up in higher costs, fewer choices, and less access at the kitchen table. I want to recognize the treasury's work implementing the genius act. This framework could expand dollar dominance, increase global demand for U.S. treasuries, reduce systemic risk and support economic growth and innovation.
▶ 0:22:26Affordability, growth, stability must move forward together. For families of small businesses across the country, that means an economy that is growing, policies that keep opportunity within reach. I'm confident our economy will continue to grow and our financial system will remain resilient. Thank you for being here and I look forward to your testimony. Ranking member warren, you are now recognized.
▶ 0:22:56Sen. Warren: As one of president trump's top economic advisors, you have a lot to answer for. Donald trump campaigned on lowering costs on day one. Those were his words.
▶ 0:23:14Sen. Warren: 381 days into his term, trump's economic policies have driven prices up, grocery prices are up, electricity, health care, the cost of building housing is up. President trump's economic agenda is failing families but it is working great for wall street and his billionaire buddies.
▶ 0:23:38Sen. Warren: There have been massive tax cuts for billionaires, big bank supervision has been cut to the bone and sidelining costs to go after white-collar crime. Middle-class families get the short end of the stick. Unemployment is growing and prices are up. American families can get the basic respect of a straight answer from team trump. The president lies about prices being lower when every family that has walked into a grocery store knows that prices are up.
▶ 0:24:13Sen. Warren: The trump administration has created a blue-collar boom while donald trump's own labor department equates that manufacturing jobs are down. American families aren't fooled.
▶ 0:24:35Sen. Warren: The sky is not blue, hard-working people know in their pocketbooks just how big they are. Sec. Bessent is here today in his role as chair with oversight council.
▶ 0:24:58Sen. Warren: Congress created it after the 2008 financial crash to protect families from large financial institutions that load up on debt and turn around and crash our economy. Sec. Bessent could have used f-stop over the last year so that we don't face more bank failures like silicon valley bank instead, he has helped to
▶ 0:25:29Sen. Warren: Get rid of guardrails so banks could get up on even more risk. While making it more likely that all of this ends in another taxpayer bailout. Sec.
▶ 0:25:48Sen. Warren: Bessent tried to shut down consumer financial protection bureau, the agency trying to return more than $21 billion with the big banks and giant corporations. They have told the banks they cheat as many people as they want. He had donald trump with better. Sec. Bessent is ignoring emergent risks in the economy.
▶ 0:26:20Sen. Warren: The credit market looks like a ticking time bomb. Late last year moody's found that banks had $300 billion of exposure. The risks posed by these shadowy holdings is growing. If jamie diamond said when you see one cockroach there are probably more. Sec. Bessent and them have their eyes shut and say they don't see any cockroaches at all.
▶ 0:26:52Sen. Warren: Here's all you need to know about what is happening under president trump's and sec. Bessent's watch. Middle-class families are paying higher prices on just about everything while it becomes harder and harder to get a raise or find a job. Meanwhile, wall street ceos are getting the hand in glove treatment is trump policies edge the economy closer to another disastrous financial crash.
▶ 0:27:22Sen. Warren: President trump is so busy raking in cash from foreign governments and building his old and trusted ballroom that he is completely out of trust with how it is making life harder. We are only one year into donald trump's second term.
▶ 0:27:42Sen. Warren: If trump and bessent could change course quickly economy may keep delivering but it will get even worse for american families. Thank you. >> sec. Bessent.
▶ 0:28:02Sec. Bessent: Chairman scott, ranking member warren, members of the committee, thank you for inviting me to discuss the financial stability oversight council annual report. This report is a combination of extensive collaboration among members and I would like to thank them for their hard work and dedication and advancing the president's bold vision for a better america.
▶ 0:28:29Sec. Bessent: Since day one president trump has focused on building parallel prosperity with wall street and main street together. Treasury has tirelessly pursued progrowth policies to unlock the potential available to all americans when they are free to save, invest, and drive their own economic destinies. The financial stability oversight council plays an important role.
▶ 0:28:57Sec. Bessent: Too often we have seen regulation by reflex rather than preempting crisis regulators are frequently reacting to them after the fact. They have played the role of hazmat cleanup team rather than preventing dangerous spillovers in the first place.
▶ 0:29:19Sec. Bessent: Under president biden the bank regulators preoccupy themselves with reputation risk, climate related and other risks and no clear nexus to safety. At the same time the center for supervision on management that distracted examiners from the real risk.
▶ 0:29:42Sec. Bessent: The result predictably was the second, third, fourth largest bank matters in the history under administration. Besides under minding safety and soundness, regulation by reflex has driven excessive regulation leading to economic stagnation and economic stagnation is itself a threat to financial stability.
▶ 0:30:07Sec. Bessent: In calibrating regulations, federal agencies must avoid the zero risk financial system which resulted in what others would call the stability of the graveyard. It should aim to identify vulnerabilities that could lead to systemic crisis and encourage the private sector to mitigate those risks before mitigating additional regulation.
▶ 0:30:30Sec. Bessent: It also works with those members to avoid existing regulation that stifles the capital formation and innovation. The best way to achieve these goals is by centering economic growth and economic security at the heart of the agenda. Promoting economic growth and economic security is essential to ensuring financial stability.
▶ 0:30:55Sec. Bessent: Economic growth with the balance sheets creating capital buffers that reduce the risk of financial stress. Economic security reinforces domestic production capacity, raising living standards while reducing vulnerability to external shocks and supply chain disruption.
▶ 0:31:22Sec. Bessent: The annual report prioritizes economic growth and economic security accordingly with specific focus on four policy areas. Treasury markets, cybersecurity, ai. They are insuring the U.S. treasury market remains the deepest in the world. They are supporting efforts to strengthen this market including through the interagency working group and a market resilience working.
▶ 0:31:55Sec. Bessent: Targeted reforms by individual agencies remain essential to financial stability. The council is taking action to protect our financial system from sophisticated cyber attacks. Nation state actors continue to target our financial institutions and critical infrastructure.
▶ 0:32:14Sec. Bessent: The council supporting expanded information sharing, joint monitoring and scenario-based exercises and emphasizing the need for regulated firms to manage cyber risks through third-party service providers. Third, the council is committed to supporting efforts to buy her nice and regulatory frameworks from banks to credit unions.
▶ 0:32:38Sec. Bessent: Supervision should address material risk, enhance transparency and reduce unnecessary burdens for community banks. The council is prioritizing artificial intelligence to strengthen financial stability. They are working with public and private sector partners to enhance system resilience while monitoring emerging risk.
▶ 0:33:06Sec. Bessent: I will close by highlighting our progress and enhancing the utility of our annual report. It was shifted away from a past approach where nearly every major market and financial sector was described as a financial security vulnerability. We are tuning out the white noise to concentrate on the issues that matter most for U.S. financial stability. I look forward to taking your questions.
▶ 0:33:36Chair Scott: Thank you secretary. To all the members we have essentially full attendance. Looks like everyone wants to ask a question. I will be pretty consistent on calling it at five minutes.
▶ 0:33:56Sen. Warren: Just so long as it is everybody else.
▶ 0:33:58Chair Scott: We will work on it. I would love to give you a couple minutes to respond to some things the ranking member said. Starting with the fact that two of the three largest bank failures in american history happened under president biden, not president. Correct?
▶ 0:34:21Sec. Bessent: Correct.
▶ 0:34:25Chair Scott: Under president biden we saw devastation in household after household after household, he dug a big hole where the average family was losing over $1000 per month in spending power, accurate?
▶ 0:34:48Sec. Bessent: Worker suffered under policies championed by the biden-warren economy. President trump has had to fill that hole. We have seen some of the strongest gdp growth we have seen in decades.
▶ 0:35:06Sec. Bessent: We have seen strong gdp growth in spite of many not all of the members on the right -- my right side of the room voting for the longest government shut down in history. Despite that we have seen extremely strong economic growth.
▶ 0:35:24Chair Scott: Let's make sure this get some attention today, you look at the success of the working families tax cut bill, for those folks in blue-collar america working every single day , sometimes two jobs trying to make sure ends meet.
▶ 0:35:40Chair Scott: When you sit down at the kitchen table wondering if anyone is paying attention to washington to the suffering and challenges around the country, the answer today is absolutely positively yes, we know that. We saw you are and tips of america, your taxes went down significantly, is that accurate?
▶ 0:36:06Sec. Bessent: Yes, sir. No tax on tips, overtime, social security, deductibility of all the loans for american-made cars. Every democrat voted against that in favor of the largest tax hike in history.
▶ 0:36:23Chair Scott: On top of that, frankly you looked at the attempt of my friends on the left on childcare, some of the proposals would have taken childcare from $15,300 to $29,000. Some of the estimates given by their bill. We actually increase the child tax credit to $2200.
▶ 0:37:00Chair Scott: Compare the two levels of leadership. With great contrast, back-to-back leadership, there's no question we are working on someone working with middle-class americans undeniably that would be the trump economy?
▶ 0:37:18Sec. Bessent: During joe biden's tenure, cpi was 4.7%, cumulative cpi was 21.5%. There was a loss of real purchasing power for working families. We have seen an increase of real wages for 2025. We have seen it fall for the past three months to 2.1.
▶ 0:37:49Sec. Bessent: There is an index called true inflation that is observed inflation that comes with the lag that just fell below 1%.
▶ 0:38:00Chair Scott: I only have one minute left. I hope everybody else hold themselves to the same standard. When inflation in 2021. 9%, bad or good for the american economy?
▶ 0:38:19Sec. Bessent: Terrible.
▶ 0:38:21Chair Scott: When -- president trump has been able to keep inflation under 3% still under our goal of 2%, much better for our economy? Interest rates have been able to come down consistently?
▶ 0:38:36Sec. Bessent: Yes, we have seen interest rates come down this year. The 10 year U.S. treasury had its best year since 2020 when the bond markets and our g-7 colleagues had rate hikes.
▶ 0:38:52Chair Scott: I only have 10 seconds, at the end of the day homeownership and affordability is more likely now than it ever would've been under the biden economy?
▶ 0:39:07Sen. Warren: For a solid year while I ran for president donald trump -- while he ran for president donald trump promised he would lower cost on day one if you were elected. Those were his words, not mine. You are one of the president's top economic advisors. Let's start with a little truth telling about the economy one year in. Affordability is the top concern for americans across the country.
▶ 0:39:39Sen. Warren: Donald trump called affordability a hoax, a scam, a con job. You are the secretary of treasury you know the numbers. It is affordability a hoax, scam, or a con job?
▶ 0:39:55Sec. Bessent: What president is referring to is the media saying the affordability crisis was generated by this administration when it was you and president biden destroyed the buying power of the american people. There is an affordability crisis and you are front and center in it.
▶ 0:40:17Sen. Warren: Donald trump is not saying what is happening to families right now is a hoax?
▶ 0:40:23Sec. Bessent: He is saying that trying to lay the blame on this administration rather than the biden-warren economy is a hoax.
▶ 0:40:36Sen. Warren: Everything that happened since then, nothing is a hoax? Let me just ask about what has happened in the one year donald trump has been president. Last week president trump said we have the groceries going down . Did grocery prices drop in 2025?
▶ 0:40:56Sec. Bessent: Numerous prices have.
▶ 0:41:01Sen. Warren: Did grocery prices drop?
▶ 0:41:03Sec. Bessent: Numerous grocery prices have gone down.
▶ 0:41:08Sen. Warren: I don't know if you can't hear me, did grocery prices drop in 2025?
▶ 0:41:12Sec. Bessent: Numerous grocery prices have gone down.
▶ 0:41:20Sen. Warren: Please stop. Have you seen the bureau of labor statistics that is donald trump's own bureau of labor statistics numbers that report grocery prices were 2.4% higher at the end of 2025 then they were at the end of 2024? Trump's own department of agriculture has projected those prices would climb higher in 2026.
▶ 0:41:50Sen. Warren: Under donald trump families are paying more and more for groceries. If you are just going to insult people by denying facts that are out there and tell people they are doing great when they are struggling, that is just another way to say you don't have a plan to bring down these prices. You are not willing to admit the failures. I will ask you a question in just a second. It is not just groceries.
▶ 0:42:22Sen. Warren: The numbers from trump's own economic agency show that americans are paying more for utility bills, health care, housing construction. Families are not fooled by these lies. You owe it to american families to own up to what is going on. I have one more question for you.
▶ 0:42:46Sen. Warren: You read the search for donald trump's fed chair nominee -- ran the search for donald trump's fed chair nominee and he said no one who disagrees with me will be fed chairman. Kevin warsh got the job -- nomination last friday. He joked that he would sue him if he failed to lower interest rates. Just in case, this should be an easy one.
▶ 0:43:13Sen. Warren: Could you commit right here and now that trump sped nominee, kevin warsh will not be sued, investigated by the department of justice if he doesn't cut interest rates exactly the way donald trump wants?
▶ 0:43:27Sec. Bessent: That is up to the president. Could you commit you will not --
▶ 0:43:42Sen. Warren: That he will be criminally investigated?
▶ 0:43:46Sec. Bessent: He said he had reservations.
▶ 0:43:53Sen. Warren: If this is a joke why not say so.
▶ 0:43:54Sec. Bessent: You made a joke about you too, you got a lot of laughs. I don't know if you want to respond to that. He is highly qualified. Why don't you tell the nation what you told me that you held up chair powell's fed chair nomination.
▶ 0:44:18Sen. Rounds: Mr. secretary, makes her being here and for your service to our nation. I will come back and talk a little bit on the technical side for a minute. 2025 annual report recommends its member agencies use the council's artificial intelligence working group to identify regulatory impediments to the financial institutions
▶ 0:44:50Sen. Rounds: From your perspective, what are the biggest impediments today that prevent banks from adopting ai for compliance, fraud detection, and risk management?
▶ 0:45:02Sec. Bessent: As you know, ai is an exciting and new technology. There is a great amount of learning to do with it. The treasury, the regulatory agencies are working with our private partners to implement in a gradual way, robust usage of ai. Ai could be a great tool.
▶ 0:45:30Sec. Bessent: We have to also think that ai could be a risk through state and nonstate actors. It is a public-private partnership and we are pushing very hard across the agencies.
▶ 0:45:45Sen. Rounds: F socks talks about reliance on vague concepts such as reputational risk as you mentioned in your opening statement it restricts valuable opportunities. Given the clear standards and the responsible ai adoption, what a time-limited financial institution with clear guardrails help folks test ai tools in a controlled setting while regulators evaluate risks and benefits?
▶ 0:46:17Sec. Bessent: That is clearly one very interesting option. We are considering that moving forward we would be happy to work with your staff on that.
▶ 0:46:30Sen. Rounds: I look forward to working with your team as well. I'm also curious, we have talked now and the discussion will go on and on about how to build the economy and so forth. The american public, with the secretary of treasury very often, let's talk about how we reduce the price of getting a home for the american family.
▶ 0:46:59Sen. Rounds: A lot of it has to do with bringing down interest rates. Could you share with us a little bit, we talked about the cost of treasuries coming down. Could you share what it means with the growth of gdp and what that does for the average american home buyer?
▶ 0:47:22Sec. Bessent: I would be glad to. President is focused on main street. A mortgage rate is two components. We could say it is derivative of the tenure, we have seen that decline and it is the spread between the 10 year bond and the actual mortgage security. We have seen that.
▶ 0:47:52Sec. Bessent: What we saw in january was the lowest mortgage rates in almost three years.
▶ 0:48:00Sen. Rounds: We have $37 trillion in debt. That competes with folks that want to loan the money out with mortgage. Could you talk about what that means with gdp and someone who is looking at bonds and so forth and how that impacts a homeowner?
▶ 0:48:20Sec. Bessent: Yes. Two things. We brought down the fiscal deficit for the calendar year. 2020 4-2025, 2020 for the deficit to gdp, the important number was 6.97%. We brought it down to 5.4, that was a combination of holding spending and growing the economy.
▶ 0:48:50Sec. Bessent: As we continue to do that we decline and push out inflation. What we see from the m.I.t. Study, it was responsible for almost half of the great inflation. The overspending according to m.I.t. Was responsible for that and penalized american homeowners.
▶ 0:49:14Sec. Bessent: By controlling the budget, growing in a responsible way we will bring them regulatory rates. I will say building costs are now down.
▶ 0:49:27Sen. Rounds: Thank you.
▶ 0:49:28Sen. Reed: The president announced on january 9 effective january 20, 2026 high, as president of the united states is calling for a one year cap on credit card interest rates of 10%. At the world economic forum the president said profit margins for credit card companies now exceeds 50%.
▶ 0:49:53Sen. Reed: The offer indicated the interest rates. You are one of the top financial members. Do you this?
▶ 0:50:05Sec. Bessent: I support president's policy. What you said would be in direct contrast of what senator warren said of this administration being a favor of big banks.
▶ 0:50:20Sen. Reed: I wanted answer and you gave me one. Let's look at the current situation. We already have legislation that protects service members by putting a 36% cap not just on credit cards but all credit relationships and protects them from being exploited. In my youth I saw it firsthand.
▶ 0:50:55Sen. Reed: Would it make sense to have this interest rate for all americans?
▶ 0:50:57Sec. Bessent: 36% doesn't seem like much protection to be.
▶ 0:51:03Sen. Reed: It seems better than some of the things being presented to service members. These plans to buy commodities and sometimes the rates go to 500 and still today you have companies that charge extraordinary rates. They also don't hang out there either. I think that would be sound stuff.
▶ 0:51:33Sec. Bessent: You haven't seen all of new haven.
▶ 0:51:39Sen. Reed: I haven't but I have seen a lot of it. The situation at fannie and freddie is significant. We have significant federal interest. Under the director, these taxpayer compliance with the law or with stock exchange listing standards.
▶ 0:52:08Sen. Reed: He has appointed himself director of both boards even though the loss says the director may not hold any physician on employment, a majority of the board is not independent, the committee is no longer comprised of independent members. The committee has been sacked by political affiliates. These are all prohibited by law and regulations. How are you bringing that compliance?
▶ 0:52:38Sec. Bessent: That would be f hfa, not treasury.
▶ 0:52:42Sen. Reed: You are one of the largest taxpayers. The $200 million bailout, you have no interest?
▶ 0:52:58Sec. Bessent: I'm very interested. It is the admission to the american people.
▶ 0:53:10Sec. Bessent: You should ask the director, director.
▶ 0:53:25Sen. Reed: Yes that you are very aligned. According to the annual reports, continuing to rely on financial support with our senior preferred stock purchase agreement under which taxpayers purchased up to 80% of their shares. They manage associates. It falls in place with these competitions of the conservatorship.
▶ 0:53:57Sen. Reed: You have the premise or the power to place fannie and freddie into conservatorship. I would think that gives you a little bit of leverage. You are reneging on responsibilities. You're also being the senior person here your behavior towards some of my colleagues is childish, thank you.
▶ 0:54:20Sec. Bessent: Thank you, good to see you.
▶ 0:54:26Sen. Kennedy: I'm over here, how are you? We have had some tough ice storms, would you and your colleagues consider an extension on allowing people to file taxes?
▶ 0:54:43Sec. Bessent: I've been in touch with the governor in the great state of louisiana and he had died and my staff are working on that. It is traditional to grant extensions for events like this.
▶ 0:55:01Sen. Kennedy: Let me preface this by saying I understand the tariffs. They have a number of purposes. The four month -- the foremost reason is to try to stop other countries from taking advantage of us.
▶ 0:55:21Sen. Kennedy: If canada for example came to the united states and said we are going to zero tariffs in the united states. Would you speaking to our president go to zero tariffs?
▶ 0:55:49Sec. Bessent: Absolute not as we saw last week when prime minister carney went to china, you lowered tariffs from a 100% to 6%. We can let our northern border be used as a way to come into the U.S..
▶ 0:56:17Sen. Kennedy: I will lead you a little bit. The poverty rate according to the census bureau is 11%, isn't it?
▶ 0:56:36Sec. Bessent: I will take your word. The census bureau defines poverty, does it not?
▶ 0:56:41Sec. Bessent: Yes.
▶ 0:56:44Sen. Kennedy: In determining our poverty raised 11% or 36 million americans only will consider direct cash payments from the federal government from people such as ssi payments or tentative payments, isn't it true the census bureau in determining poverty doesn't
▶ 0:57:14Sen. Kennedy: Include things like non-cash payments, it doesn't include medicaid, food stamps, housing subsidies or refundable tax credits, isn't that true? Let me give you an example. A mom with two kids it is $27,000. Mom works part-time.
▶ 0:57:45Sen. Kennedy: She makes $11,000. According to our census bureau, she is below the poverty line. She also receives -- she works, she receives $4100 in refundable earned income tax credits.
▶ 0:58:12Sen. Kennedy: $3400 in child tax credits, 9200 dollars in food stamps. $16,000 in medicaid, $31,000 per year in free school lunches, $6,000 in payments. If you add that up, that is $64,100 per year. According to math.
▶ 0:58:43Sec. Bessent: I will believe your arithmetic.
▶ 0:58:48Sen. Kennedy: Using the census bureau's definition of poor, they don't include all of these payments, they just include the income and the tanf payment. Does that make sense?
▶ 0:59:02Sec. Bessent: No sir and you should bring that up with the commerce department.
▶ 0:59:09Sen. Kennedy: I know how close you and the commerce secretary are. I'm hoping you could bring it up with somebody above. I will not comment on that. Would you talk to the president about this? If you include non-cash payments, the poverty rate in america is 1%.
▶ 0:59:41Chair Scott: Let's go on. >> you would agree the credibility of the treasury is important. I want to give you a chance to retract a statement you made on national tv. Alex pretti was shot 10 times and killed by federal agents in minneapolis.
▶ 1:00:12Chair Scott: Some administrations called him a domestic terrorist, you suggested alex pretti was culpable in his own killing because he had a gun in his waistband holstered, which he was licensed to carry. When asked he said I'm sorry this gentleman is dead but you went on to say he had a weapon, suggesting he was culpable in his own killing. Today, would you like to retract that statement?
▶ 1:00:42Sec. Bessent: I would not. Would you like to express remorse for the death of ashli babbitt here in the capitol?
▶ 1:00:53Sen. Van Hollen: I have expressed remorse over that, I have done that. Mr. secretary, please don't. I have other questions but I would've expected you to take this opportunity to rephrase your response to that question. You think the fact that he legally had a gun justified his killing?
▶ 1:01:13Sec. Bessent: I didn't say that at all.
▶ 1:01:19Sen. Van Hollen: Do think he was culpable because he had a gun?
▶ 1:01:21Sec. Bessent: I did not say that.
▶ 1:01:26Sen. Van Hollen: I'm asking you a question now. Do you believe he was in any way culpable for his own killing because he legally carried a gun? You are the secretary of the treasury.
▶ 1:01:37Sec. Bessent: Why don't we talk about financial stability and oversight.
▶ 1:01:42Sen. Van Hollen: I'm happy to but your credibility is important. In that response you really relent down -- let down the country. We expect honesty after that kind of terrible tragedy. I'm glad you all established a household resilience committee. People are being financially squeezed from every side.
▶ 1:02:09Sen. Van Hollen: I have a whole bunch of quotes here from canada, the campaign trail. Starting the day I take office I will drive down prices and make america affordable again. It's interesting you use that phrase since he has been making fun of the affordability phrase recently. I listen to your exchange with senator warren and the facts show very clearly that inflation has not been limited.
▶ 1:02:35Sec. Bessent: It is undesirable to completely eliminate inflation. For the past three months we have been at 2.1%. 20 1.5% under the biden administration.
▶ 1:02:52Sen. Van Hollen: You are playing games, you are doing the aggregate.
▶ 1:03:01Sen. Van Hollen: The number 2.7 is your own.
▶ 1:03:03Sec. Bessent: And you are being a deconstructionist.
▶ 1:03:11Sen. Van Hollen: I'm just leaving the inflation side. I ask that the statements be placed into the record. Look, you use believe that tariffs would increase prices.
▶ 1:03:33Sec. Bessent: I wrote that in a letter to my investors. A year before I also wrote I thought senator warren would be the democratic presidential nominee.
▶ 1:03:48Sen. Van Hollen: It was january, 2024 you said increase tariffs would do this.
▶ 1:03:53Sec. Bessent: I also said it has strengthened the dollar. The opposite has happened. 150 years of data from the san francisco fed.
▶ 1:04:07Sen. Van Hollen: Your cherry picking numbers. The prices continue to go up. I understand that you said building costs are down. I just want to point out for the record the national association of homebuilders said on january 29 the costs are up, it accounts for about 65% of average home prices in 2024.
▶ 1:04:34Sen. Van Hollen: They say record highs and construction costs since the instruction -- induction of these hearings in 1998. Not the biden administration, 1998.
▶ 1:04:48Chair Scott: Senator hagerty.
▶ 1:04:55Sen. Hagerty: Thank you, always great to have you here. There's not a day that goes by that I don't get someone complementing on the great work you and your team are doing. If you would like an extra moment to respond I would be more than welcome to.
▶ 1:05:12Sec. Bessent: No he speaks for himself.
▶ 1:05:19Sen. Hagerty: Distorted markets have caused undue costs on the american people. I'm concerned about the banking system. As you and I rode together, dodd frank sought to end too big to fail. It created a regulatory environment that said they were too small to succeed. Policy errors have entrenched the largest banks and made it even more difficult for community banks which lacked the perception of being too big to fail.
▶ 1:05:49Sen. Hagerty: Smaller banks the result has been a bloodbath. The U.S. has lost 3600 community banks since 2010, nearly a 50% decline. Sec., I propose bipartisan legislation to increase the limit. This is not a wholesale increase . It is a narrow reform targeting non-interest-bearing accounts, typically payroll accounts.
▶ 1:06:19Sen. Hagerty: How does this bill, this targeted expansion of coverage fit into the vision for supporting community banks?
▶ 1:06:25Sec. Bessent: As you know I along with you and another member of the committee, a great advocate of this. What we have seen is depositors, investors believe the large banks have implicit guarantee on all of the deposits with prices. As we saw in march of 2023 the deposits from small banks because they are not believed to have that implicit guarantee.
▶ 1:06:57Sec. Bessent: If we do not have an account forward small businesses, normally the payroll account could deposit funds with insured that they could be returned. It will allow main street to flourish. What we have seen since the great financial crisis due to overregulation, 50, 50% of community and small banks have disappeared. That is what is harming main street.
▶ 1:07:26Sen. Hagerty: Thank you. I think that is precisely why the association of community banks have supported my legislation and the legislation I wrote about in the wall street journal. Last year president trump signed by bill, the genius act into law. Stable pointed option may reach between $1 trillion and $3 trillion. The genius act requires stable coins to be backed by liquid assets such as U.S. treasuries. How does the U.S.
▶ 1:07:55Sen. Hagerty: Leadership in crypto and stable coins maintain the dollar's role in the center of the global financial system?
▶ 1:08:02Sec. Bessent: I want to congratulate you and your colleague, thank you for your leadership on this. This could be an affordable source of funding for the U.S. government as we push down the funding for the U.S. government that helps everyday americans whether it is with mortgages or any other borrowing with climates that keeps taxes low. We believe that with the U.S.
▶ 1:08:30Sec. Bessent: Having the safest, soundest, best practices, we could draw in new sources to be at the stable coin mechanism.
▶ 1:08:47Sen. Hagerty: , I would like to get your perspective in terms of the stability and clarity that we'd provide with the genius act and what that means for keeping innovative capacity.
▶ 1:08:58Sec. Bessent: It is innovative capacity and digital assets and remaining a leader. What we don't want to have is a central bank digital asset. As you and I have often discussed, we will see a choice between american private sector assets with our best practices and regulation or between central bank digital assets weather in europe, china, the rest of the world.
▶ 1:09:28Sec. Bessent: I think the world is going to choose the U.S. dollar and the private sector well-regulated choice that U.S. stable coin could provide.
▶ 1:09:39Sen. Hagerty: I couldn't agree more and that underscores my sensitivity to not undo the xo fecteau good work that we did in genius. Resumes that work, I'm going to encourage my colleagues to preserve the genius act and all of the hard work that went into it.
▶ 1:10:04Chair Scott: Senator cortez masto.
▶ 1:10:09Sen. Cortez Masto: Thank you. Secretary, thank you for being here. I appreciate your opening comments and your reported financial stability oversight council's on the annual report.
▶ 1:10:28Sen. Cortez Masto: You stated in your opening comments the treasury has tirelessly pursued policies to unlock the potential available to all americans when they are free to save, invest, build businesses and drive their own economic destiny. Let's talk about building businesses under this administration. This is nothing new to you. We have been talking about this for the last year.
▶ 1:10:55Sen. Cortez Masto: Tourism makes up nearly 30% of nevada's economy generating 24.4 billion dollars in total wages. This administration's blanket tariffs and in soloing rhetoric towards our -- insulting rhetoric towards our closest allies are damaging america's tourism economy. The U.S. on 12 straight months of declining visitors.
▶ 1:11:24Sen. Cortez Masto: It is roughly a 20% decrease with countless dollars, jobs, pay checks that won't go to nevada residents including the over 400,000 hospitality workers across the state who are dealing with this issue. My question to you, will you apologize for driving away visitors and hurting working families?
▶ 1:11:50Sec. Bessent: A couple of things, one, the canadian economy is doing poorly. Maybe we should construct why the tourism is down. It is a choice by the canadians.
▶ 1:12:13Sec. Bessent: If you think should be pulled down all of our trade areas with china so 1.4 billion people could fill the hope -- 14 -- 1.4 million people could fill the hotel rooms in las vegas.
▶ 1:12:30Sen. Cortez Masto: This is on the national travel and tourism office year-over-year declines with travelers from october 24, it is not just from canada, it is germany, netherlands, new zealand, it is india, vietnam, philippines. We are seeing under this administration a U.S. travel associate travel forecast that is dealing with a 70 billion travel trade deficit for 2025.
▶ 1:13:03Sen. Cortez Masto: How do you address the tourism travel issue that we are losing money in this country because of the administration? I'm talking about internationally, it is not just me, it is florida, it is other states dealing with a decline in tourism.
▶ 1:13:28Sen. Cortez Masto: This is my conversation with you the last year that seems to be this administration keeps ignoring. It is a trillion dollar industry to this country. You don't seem to think of it as important. Let me think about something else. I will give an opportunity. You mentioned how you are trying to help the service industry. No tax on tips. I think more people should keep money in their pocket.
▶ 1:13:55Sen. Cortez Masto: If you are in the service industry and you don't have a job, it doesn't matter if your tips are taxed. There is a problem. You just have to come to my state, talk to the individuals to see. No matter how much you and this administration talk about how wonderful this administration is, they are not seeing that. It is a problem.
▶ 1:14:23Sen. Cortez Masto: All I basking in some of my colleagues, let's fix it. There is an affordability issue in this country and we need to address it working together. Let's solve this problem. Let's not tell the american public something they don't see in their own account. Let's work together to figure it out. That's all I'm asking.
▶ 1:14:51Sen. Cortez Masto: It is not just my service industry, it is small businesses across the country being squeezed. We have seen it time and time again. The facts are there. You can debate the facts about the truth of the matter is many of our small businesses are being squeezed right now. Higher prices, absorbing higher costs. Some of them have better shutter. Small businesses are the backbone of our industry. We have to do a better job. My time is up.
▶ 1:15:18Chair Scott: Senator tillis.
▶ 1:15:21Sen. Tillis: Thank you Mr. chairman. Thank you for the year. I have a statement to make. Mr. chairman, I seek unanimous consent to put into the record the statement of various banking committee members with respect to the testimony of chair powell and in his last hearing.
▶ 1:15:48Chair Scott: Without objection.
▶ 1:15:50Sen. Tillis: Mr. chairman, that is a list of members who indicated that they did not see criminal intent in his comments before he was in the banking committee. I have a reporter yesterday challenge me on why it was inappropriate for a sitting member to question a pending investigation. I never do that.
▶ 1:16:16Sen. Tillis: But I told the reporter that I did it because I was actually a witness at the alleged scene of the crime. The entire case against senator powell is encapsulated in his answers to questions before this committee. Now including the chair we have witnesses at the alleged scene of the crime saying we are disappointed with chair powell.
▶ 1:16:48Sen. Tillis: I actually like kevin warsh as a potential chair. But we have all said that he was testifying and we did not see a crime. I don't know about you all, I watched forensic files and I've been watching it for years. I am thinking about the scene that would go like this, in spite of seven witnesses, eyewitnesses saying that no crime was committed, the prosecutor thinks otherwise.
▶ 1:17:17Sen. Tillis: Then you hear the music and view cut to commercial. I think it is fine for me being a witness at the scene of the elected crime saying we have a majority of people on the side of the aisle that did not think a crime was committed either. If we do this sort of stuff, I believe that future hearings for the treasury secretary and other members will be a lot like that chappell skit on "I plead the
▶ 1:17:49Sen. Tillis: Fifth." they will be flanked with attorneys and any time they think they are in the middle of a perjury trap, they are probably just going to say I will submit it to the record after consultation with my attorneys. Is that really the way we want oversight to go in the future? I don't expect an answer to the question but I didn't want to get that off my chest so I gave a more wholesome answer to that reporter who asked why it was that I was opining on an active investigation.
▶ 1:18:21Sen. Tillis: Mr. secretary, I am thrilled that you are in this role. You are a steady influence. I have been vocal about criticizing certain advisors. You are certainly not one of them. I have a question. I ran into senator warren on the floor and I said my goodness, elizabeth. I call her elizabeth when we are talking on the floor. I said, you have convinced president trump put artificial caps on credit card rates. Good on you.
▶ 1:18:51Sen. Tillis: Now I will do everything I can to kill it but good on you. I think you even talk to the president about that, right? Mr. secretary, what would happen if we put -- I don't know where you are on the policy but what would happen to asset-backed securities if we imposed an artificial 10% cap on interest rates?
▶ 1:19:17Sen. Tillis: If you have time, what would it likely do for credit card issuers who will still have to rate the risk in terms of de-b anking and reducing access to credit? If you can deal with the first one that has to do with asset-backed securities. Thank you.
▶ 1:19:40Sec. Bessent: We at the treasury are still examining what that would do to the asset security market. I think it would depend on the links. The president has called for one year. We would also see if they were able to cut costs. What has happened is we have seen a migration where credit card companies use to compete on a pr -- apr. The rewards go mostly to the upper end.
▶ 1:20:10Sec. Bessent: The probability of credit card companies does not have to be hit if the concentrate more on competing with the than rewards.
▶ 1:20:22Chair Scott: Senator warner.
▶ 1:20:25Sen. Warner: Senator tillis, you are out-kennedying kennedy today. That is a high bar. Mr. secretary, that is a high bar. In a house move, I reclaim my time.
▶ 1:20:46Chair Scott: Four minutes and 38 seconds. Please use them.
▶ 1:20:53Sen. Warner: One of the reason I supported you was your support for city fis. Senator crapo and I have an active bipartisan city if I caucus. Senator crapo got one hundred five members of congress including eight republicans on this committee to say cdfi is a good program. Yet the cdfi funded 224 million dollars in fiscal year 25.
▶ 1:21:21Sen. Warner: It is now february 2026 and none of these funds have been released. I know we have talked about this and some difficulties there. We are hearing from cdfi's how this is dramatically affecting. When can we expect the funds to be released?
▶ 1:21:40Sec. Bessent: I cannot give you an answer. Omb will decide the times of the apportionments.
▶ 1:21:48Sen. Warner: I got you. You are the treasury secretary. We run this program. You had 105 republicans say we need to get the money out.
▶ 1:21:59Please. Sec. Bessent: I cannot print magic money.
▶ 1:22:03Sen. Warner: You have to call the ownby director and say that this is a program that you have legal authority over. This is important. As we talked about president trump in many ways but in 20 he became the godfather of cdfi's when in the last trump-covid relief package he put $12 billion into this program. I urge you Mr. secretary to pick up the phone and call. I know it would be difficult.
▶ 1:22:33Sen. Warner: I would not want to talk to the omb director that much either but please talk to him and see if you can get those dollars released. It is so important and I hope the eight of my republican colleagues will be saying atta b oy, warner on this one. Thank you, Mr. chairman. I reserve my time. I feel like I'm in crypto hell.
▶ 1:23:04Sen. Warner: I know, cynthia. Welcome to it. God bless you. Actually and I really appreciate what you did of the stable coin spill. I think we have a lot of broad bipartisan support. Many of my democratic friends agree we want these products built in america. Crypto is here today and we need clear rules around it.
▶ 1:23:35Sen. Warner: Stable coin was simple compared to market structure but one of the things that we see in crypto and we are working our tails off. The chairman and I and cynthia and others have spent more time on this. I don't want to use up my time. But there are a lot of issues around national security that you have unique perspectives on with vincent -- fincent and the secret service.
▶ 1:24:05Sen. Warner: We don't want to take away some of the tools that they have to go against bad guys. We need to have some areas to close down some of the gaps. There was bipartisan agreement on this but I think we are starting to get some technical assistance.
▶ 1:24:19Sen. Warner: If you can just make clear that this is a real problem and we will deal with yields and rewards and other issues but these national security issues around defi are real and we need to not create a set of rules that leaves huge exemptions and takes away some of the prosecutorial progress -- powers that exist today.
▶ 1:24:42Sec. Bessent: I look forward to working with you on that. Historically there are problems with the technology gets ahead of the legislation so if we can work together on the legislation for both ofac and fincent.
▶ 1:25:06Sen. Warner: I think you will be invited to the next round robin on that. That might be later tomorrow or monday.
▶ 1:25:13Sec. Bessent: There seems to be a nihilist group in the industry who would prefer no regulation over this very good regulation.
▶ 1:25:22Sen. Warner: Amen, brother so weigh in. Weigh in. One last comment. I didn't take a.I., we have to talk about it. -- agentic a.I., we have to talk about it.
▶ 1:25:50Chair Scott: Senator lummis.
▶ 1:25:54Sen. Lummis: Thank you. Is china trying to use digital assets in block chain to build an alternative to american financial leadership?
▶ 1:26:01Sec. Bessent: We don't know that for sure. There are lots of rumors of chinese digital assets, of chinese digital assets that might be backed by something other than the rmb. They have a very large sandbox in hong kong and hkma is actively traveling the world looking at different mechanisms
▶ 1:26:32Sec. Bessent: So I would not be surprised.
▶ 1:26:34Sen. Lummis: Based on what you know now, what is your opinion about the importance of having clear rules of the road, market structure legislation in the united states?
▶ 1:26:43Sec. Bessent: I think that it is impossible to proceed without it. We have to get this clarity across the finish line and any market participants who do not want it should move to el salvador.
▶ 1:27:02Sen. Lummis: As an industry, what is the benefit to having this industry embedded in the U.S. economy?
▶ 1:27:10Sec. Bessent: Again, as I said, there seem to be people who want to live in the U.S. but not have rules for this important industry and we've got to bring safe, sound and smart practices and the oversight of the U.S. government. But also allow for the freedom that is crypto and I think it is a balance that is being worked out.
▶ 1:27:39Sec. Bessent: It was worked out in the genius act and I am confident with the leadership of the aisle that we can get clarity across the lawn this year.
▶ 1:27:47Sen. Lummis: Can you see a day when conventional banks and digital asset banking are offering the same types of products, giving each an advantage to offering a broad array of financial products to the american consumer?
▶ 1:28:05Sec. Bessent: I think that can happen over time. We've actually been working with small and committed banks to discuss how they can be part of the digital asset revolution also.
▶ 1:28:17Sen. Lummis: Among the things that have challenged us in these last months is concerned by community banks and big banks that the stable coin bill, the genius act and market structure that could cause a bleeding of of deposits from small banks. What is your reaction to that concern?
▶ 1:28:39Sec. Bessent: I have been a champion of small banks and deposit volatility is very undesirable. It is the stability of those deposits that allows them to lend them to their communities, -- into their communities ag, small business and we will continue to work to assure that there is no asset volatility connected to this.
▶ 1:29:06Sen. Lummis: I commend you on this. I haven't borrowed from community banks on our ag operation for decades and we are dependent on our community banking relationships in rural america to help sustain us and grow our businesses. I very much appreciate that. I want to switch to digital asset taxation for just a minute.
▶ 1:29:29Sen. Lummis: Among the things that I'm exploring, in the senate finance committee there is a package of bills that looks really good to me on digital accent -- digital asset taxation. One of them that is kind of vaccine that I can use guidance on is the issue of de minimis with regard to bitcoin and other digital assets that might be used as a means of exchange.
▶ 1:29:58Sen. Lummis: The issue is will it be a capital gain or will it be exempt from capital gains when it is used as a means of exchange to purchase things and if it is going to be a subject to a capital gain, how do you calculate what the capital gain is?
▶ 1:30:18Sen. Lummis: If somebody has a blended portfolio of bitcoin, some of which were purchased when it was $300, some of which were purchased today at $75,000 and some of which were purchased one year ago at over $100,000, how are you cackling the capital gain? Do you have thoughts about that or who I can consult with?
▶ 1:30:39Sec. Bessent: It is a very complicated subject. We'd be happy to have our office work with your team.
▶ 1:30:46Sen. Lummis: Thank you, Mr. secretary.
▶ 1:30:49Sec. Bessent: We look forward to seeing you.
▶ 1:30:52Chair Scott: Senator smith.
▶ 1:30:53Sen. Smith: Thank you Mr. chair. Mr. secretary, would you consider food and act to be an important part of the U.S. economy?
▶ 1:31:04Sec. Bessent: Extremely.
▶ 1:31:06Sen. Smith: I agree with you on that. The sector is a massive economic force contributing over $9.5 trillion supporting over 24 million jobs. What I would like to do is submit a letter for the record. This is a letter sent on tuesday to the ag committees in the house and the senate signed by 27 former and current leaders in the ag sector from across the country.
▶ 1:31:33Sen. Smith: A very bipartisan letter with folks from renewable fuels, farm bureau, former usda officials from both democratic and republican administrations.
▶ 1:31:44Chair Scott: Without objection.
▶ 1:31:45Sen. Smith: Secretary bessent, as you know farm bankruptcies have doubled. Half of all forms are profitable this year. The U.S. is running a historic agriculture trade deficit which is a soft -- sharp devotional -- reversal. Farmers are paying higher prices for everything from healthcare to grocery and utility bills.
▶ 1:32:11Sen. Smith: I want to read you a piece of this letter which says consider the impact of the china trade war on soybeans alone. In 20 when the china tariffs were initially proposed, whole U.S. soybean exports represented 47% of the world market. Today it is down to 24.4%. The letter goes on.
▶ 1:32:33Sen. Smith: My question for you is when can farmers expect this turbulence and this chaos to stop and input prices to begin to stabilize or at least come down?
▶ 1:32:45Sec. Bessent: Senator as you know input prices spiked under the biden administration.
▶ 1:32:52Sen. Smith: Secretary bessent, when can we expect --
▶ 1:32:56Sec. Bessent: Again, it is market-based. Until the end of last year, I was involved in the ag sector. It was a problem of abundance. Costs are up. We are working to bring them down.
▶ 1:33:13Sen. Smith: The costs are up in large part because tariffs are driving those costs up and this is causing massive uncertainty and chaos in the form sector which is really hurting many farmers in my state and around the country.
▶ 1:33:29Sec. Bessent: It is very unfortunate that the chinese decided to use our soybean farmers as a pawn in trade negotiations. The administration has come out with a 12 million-dollar package and we have guarantees from the chinese who bought $12 billion of soybeans. They are committed to buying 12 million tons.
▶ 1:33:57Sec. Bessent: They will buy 25 million tons for the next three years to stabilize the market.
▶ 1:34:01Sen. Smith: But what is happening for farmers in minnesota is this constant on again, off again. Tariffs on, tariffs off. It is chaotic and confusing.
▶ 1:34:13Sec. Bessent: It has nothing to do with the tariffs --
▶ 1:34:17Sen. Smith: I believe it has a lot to do and these farmers believe it has a lot to do with tariff policy. Mr. chair before I close, I want to link this conversation to some of the challenges that are happening in the ag sector and the larger economic challenges in minnesota caused by the immigration action happening in minnesota right now. The truth is that ag country is heavily impacted by this.
▶ 1:34:45Sen. Smith: This mass deportation plan is having a huge impact on the ability of farmers in my state to be able to get access to labor. I'm talking about people who are here legally. I know my colleagues on both sides of the aisle who represent farm country understand you are hearing this from your farmers and ranchers as well. It is having huge impacts on dairy and fruit and veggies.
▶ 1:35:13Sen. Smith: It is a major problem not just in the farming sector but all across my state. Just in minneapolis along separate from agriculture, small businesses are losing an estimated $20 million per week because of customers not being able to show up. Being afraid. Workers unable to go to work because they were afraid of going out.
▶ 1:35:36Sen. Smith: The bottom line here is that this mass deportation plan was supposed to go after the worst of the worst but what is really happening is that these poorly trained and aggressive agents are breaking families apart. They are hurting children. They are separating from their families. They are targeting and arresting people who have done nothing wrong and that is morally reprehensible. Mr. secretary, it is reprehensible --
▶ 1:36:02Chair Scott: Senator, your time is up.
▶ 1:36:06Sen. Smith: Alex pretti, U.S. citizen, shot in the back --
▶ 1:36:10Chair Scott: Time is up.
▶ 1:36:13Sen. Britt: Thank you Mr. chairman. I would like to respectfully respond to my colleague and I will give you an opportunity to respond as well. When I look back over the last four years of the biden administration, it was failed policies for agriculture industry. Number one, president biden walked away from the trade deals and the gains that president trump had gotten for our ag industry. Number two, with record high inflation, it hit farmers worse than anyone.
▶ 1:36:44Sen. Britt: Both the energy, the war on industry of the biden administration plus the amount and the payment of equipment, plus the fact that input costs has literally been frozen and the biden administration failed to pass a farm bill. Did not even try. Here you have record high costs with energy, equipment, labor, inflation and then you cap what they can make.
▶ 1:37:10Sen. Britt: I don't remember one person on the others are of the aisle saying let's move a farm bill, let's help these people, let's drive down energy costs. I would just like to say, Mr. secretary, I feel like the ag industry is at the forefront of what we are looking at right now and I would like to give you an opportunity to respond.
▶ 1:37:28Sec. Bessent: One of the things I will respond to is that in my first meeting with my chinese counterpart, the vice premier, I asked him under the phase one purchase agreement they were actually exceeded in 2020, signed in january 2020.
▶ 1:37:48Sec. Bessent: The level of the agreement was exceeded every time president trump with party chair xi to buy more soybeans, slowly they have tapered off and we said wide. They said, biden did not enforce. Biden did not enforce the purchase agreements.
▶ 1:38:07Sen. Britt: Speaking of something else that was walked away from in the biden administration was being tough on iran when it came to sanctions. I appreciate the maximum pressure that president trump has gone back to you. What more can we be doing as we see us place pressure on the ayatollah, what more can we be doing to make sure that we are placing the pressure that we
▶ 1:38:38Sen. Britt: Need to on the greatest state sponsored terrorism and that is the ayatollah and I ran?
▶ 1:38:43Sec. Bessent: What we can do in treasury and what we have done is created a dollars shortage in the country. In march I outlined the strategy , came to a swift and grand culmination in december when one of the largest banks in iran went under and the central bank had to print money.
▶ 1:39:09Sec. Bessent: The currency went into freefall, an reflection exploded and we have seen the iranian people on the street. We will continue to monitor all the partners, all of the iranian partners. The good news is that we have seen and we have seen it with fincent we have seen iranian leadership wiring money out of the country like crazy. The rats are leaving the ship and that is a good sign that they know the end is near.
▶ 1:39:40Sen. Britt: I want to switch quickly to regulatory tailoring. It is obviously my police -- belief that property healing -- proper tailoring is economic rather than subject to ideology. Can you speak to the work and you and fsoc agencies are doing to calibrate our regulatory framework whether it is capital rules or stress testing or even adjusting to outdated threshold?
▶ 1:40:07Sec. Bessent: Again, we are looking at all of the thresholds. One thing that happened, too big to fail became too small to succeed as senator hagerty said. We don't want to see more small banks go other -- go under. What we want to see before the great financial crisis and the success of regulation on the system is we would see 50 new banks formed every year.
▶ 1:40:35Sec. Bessent: We need to get back to doing that. We need to get back to small banks. I was talking to a community banker. 17 employees, three clients.
▶ 1:40:48Sen. Britt: There have been claims made by the other side of the aisle and tweets put out, some pretty serious accusations saying, we have a tweet from the ranking member that says, and I want you to be able to correct the record, but claims that the irs has got enforcement and dismantled the doj and forced tax fraud investigators to stop doing their job. Does that have any legitimacy?
▶ 1:41:14Sec. Bessent: Complete sophistry. We have identified $10 billion in tax crimes up to 15% since 2024. $4.5 billion in tax fraud, up 110% from last year.
▶ 1:41:29Sen. Britt: Thank you.
▶ 1:41:31Chair Scott: Senator warnock.
▶ 1:41:35Sen. Warnock: , thank you chair scott. Welcome secretary bessent. President promised that his administration would usher in a golden age of american manufacturing. In september 2024 at a rally in my home state of georgia donald trump said, "we are going to have a manufacturing boom.".
▶ 1:41:58Sen. Warnock: Secretary bessent, we are now more than one year into the trump administration, yes or no, has there been a manufacturing boom in the united states?
▶ 1:42:07Sec. Bessent: There are the beginnings of a manufacturing boom. We have intentions, factory groundbreaking's.
▶ 1:42:14Sen. Warnock: So your answer is yes, there has been a manufacturing boom?
▶ 1:42:19Sec. Bessent: We are at the beginning of a manufacturing boom.
▶ 1:42:22Sen. Warnock: We can agree to disagree. More importantly, manufacturers are telling us something different. Manufacturers are struggling because of the president's policies. That is why they keep telling us and the facts keep telling us in fact just this last monday the wall street journal published this article titled, "U.S. manufacturing is in retreat and trump's tariffs are not helping." I request consent to enter this article into the record.
▶ 1:42:51Chair Scott: Without objection.
▶ 1:42:53Sen. Warnock: Secretary bessent, do you know how many manufacturing jobs the U.S. has lost since liberation day in april 2025 when the president first announced his tariffs?
▶ 1:43:04Sec. Bessent: Because you were out of the room, but it was brought up.
▶ 1:43:08Sen. Warnock: We do many things. I don't need to tell me where I was.
▶ 1:43:13Sec. Bessent: 72,000. The wall street journal is not called the main street journal and they care more about wall street than --
▶ 1:43:24Sen. Warnock: I am not asking you to opine on the wall street journal. I have three minutes. Answer the questions I'm asking you. 72,000 manufacturing jobs according to the bank of st. Louis. Manufacturers shed workers in each of the eight months after president trump unveiled his tariffs on what he called liberation day. I would submit that is a strange liberation and a curious freedom that leaves you unemployed.
▶ 1:43:57Sen. Warnock: Even worse, smaller businesses are struggling to keep up with the terror of chaos -- tariff chaos. Big manufacturers have the resources to shift suppliers. I have spent a lot of time talking to the people in georgia who have given me the great honor of representing them in the united states senate. This is about them. Especially our small businesses.
▶ 1:44:28Sen. Warnock: They don't have the ear of the president. They don't have access to mar-a-lago. They are not able to insulate their companies from the worst of the tariffs. Secretary bessent, small businesses the same resources or unfettered access to the president, what should they do for the relief if they cannot get it at mar-a-lago?
▶ 1:44:47Sec. Bessent: Small business confidence is up and we are seeing that the big beautiful bill is in full expensing for equipment, factories and ag structures.
▶ 1:45:03Sen. Warnock: They are telling us that it is more expensive to make basic things. We are moving in the wrong direction. The facts don't lie. The president lies often but the facts don't lie. In fact, if you are saying we are at the beginning, basically your answer to those small businesses is to wait a while? Is that the answer?
▶ 1:45:29Sec. Bessent: You asked about manufacturing.
▶ 1:45:31Sen. Warnock: That's right. I'm asking about this manufacturing boom where we see something different.
▶ 1:45:37Sec. Bessent: We are going to see that. I was just in south carolina and we are seeing a boom there. I believe georgia has very good pro-business policies. I am sure you will see a boom there also. The factory built intentions are quite high.
▶ 1:45:53Sen. Warnock: I will tell you what I see. I see as I talk to folks that it is more expensive to build things in america. We have lost 72,000 jobs one year into this administration. We have lost manufacturing jobs every month since he called for liberation day. Meanwhile folks who are working in these small businesses trying to make their lives work are seeing higher costs for groceries, they are seeing costs go up for electricity.
▶ 1:46:23Sen. Warnock: They are seeing costs go up for health care. I think the american people are still waiting for a solution. So far we have not seen one coming out of this trauma tariffs regime. -- trump tariffs regime. I have no time left. Thank you very much.
▶ 1:46:39Chair Scott: Senator ricketts.
▶ 1:46:42Sen. Ricketts: Thank you very much for this hearing and senator bessent, thank you for being here. I want to commend you for updating the 45 c clean fuel production credit. That is very important. Your guidance incorporates what we put in the working families tax cut like what we ran with the big beautiful bill and supports nebraska farmers. That is really important.
▶ 1:47:14Sen. Ricketts: It ensures that feedstocks from faraway countries will not be allowed to get that credit which means american taxpayer dollars will stay here in america. That was very important. It is a great investment. Appreciate that. I want to comment on one of my colleagues from the other side of the aisle talking about the ag economy. Under the biden administration we had four years in a row of agricultural trade deficits because the biden administration was the first administration going back to jimmy carter not to sign a major trade deal.
▶ 1:47:44Sen. Ricketts: That is one of the reasons why we have such a hard time right now in the ag. We are talking about input prices, under the biden administration in june of 2022 diesel hit $5.75. Now it is three point $52. We need to address the issues to help our economy out but a lot of the seeds of this were started in the biden administration.
▶ 1:48:09Sen. Ricketts: I want to thank you for presenting fsoc's 2025 annual report. In that one of the things that perhaps you already touched on and if I am repeating myself, forgive me. The biden administration, secretary yellen undid all the good work of the trump administration in 2019's fsoc when they change the activity-based designation guidance.
▶ 1:48:39Sen. Ricketts: Secretary yellen replaced it with her own guidance, turning a last resort safeguard into a tool that can be weaponized and stifle integration -- innovation and restrict access to capital that will grow the economy. I sent a letter to secretary yellen about how the 2023 designation guidance was misguided and lacked evidentiary support and increase the likelihood of market distortions.
▶ 1:49:05Sen. Ricketts: Secretary bessent, do you agree with the characterizations of the 2023 guidance that it can do all of these things and calls distortions?
▶ 1:49:12Sec. Bessent: I believe in activity-based guidance and we are moving back to that. If I could just point out that fsoc under secretary yellen two weeks before three of the largest bank failures in U.S. history, many of them due to on market portfolios identified climate as the biggest risk to financial stability. They have not overleveraged bond portfolios.
▶ 1:49:39Sen. Ricketts: It seems like misplaced priorities. Secretary yellen rolls out new guidance and stripped the cost benefit analysis. In your view, does cost-benefit analysis matter in evaluating to use fsoc's designation authority?
▶ 1:49:57Sec. Bessent: Again, without that, why would you do it?
▶ 1:50:02Sen. Ricketts: What is your view on the designation approach that was developed through the transparent and methodical process done in 2019?
▶ 1:50:13Sec. Bessent: We believe it is robust and smart minded.
▶ 1:50:17Sen. Ricketts: Thank you very much. Thanks to president trump's leadership and your steady hand as the department of the treasury, the U.S. economy is doing very well. Gdp growth in the third quarter was 4.4% annualized in 2025. The labor markets were made resilient. The unemployment rate is 1.2% below historical average.
▶ 1:50:44Sen. Ricketts: Inflation is down from the highs of the four year high of the biden administration, decreasing from 70% in the peak of the biden administration. American markets are strong. We saw the largest tax cut in history signed into law allowing us to afford a $4.2 trillion tax increase. We have no tax on tips, no tax in overtime, 88% of seniors will not pay federal income tax.
▶ 1:51:07Sen. Ricketts: The average refund as opposed to $1000 higher this year and the average nebraska family will avoid a 2400 dollars tax increase. Despite all of this progress, consumer confidence is not rebounding the way the economy seems to be. In your opinion, what more can we be doing in the senate with regard to consumer confidence? We had four year high inflation under the biden administration.
▶ 1:51:36Sen. Ricketts: What more can we do in the senate to help with confidence of consumers?
▶ 1:51:38Sec. Bessent: Other than telling consumers to turn off msnbc, a large part of it is a survey problem where democrats vote very low and republicans are more realistic.
▶ 1:51:53Chair Scott: Senator kim's time. Appreciate your comments. All members are supposed to vote at 12:05.
▶ 1:52:06Sen. Kim: Thank, chairman. Thank you, secretary. You took part in talks with russia. I wanted to ask you your view of this. Do you agree that russia's invasion of ukraine was illegal and a violation of sovereignty and law?
▶ 1:52:21Sec. Bessent: Senator, I have been saying that since my confirmation.
▶ 1:52:25Sen. Kim: That's right. Would you say that vladimir putin is a war criminal?
▶ 1:52:30Sec. Bessent: I have also been saying that since my confirmation.
▶ 1:52:33Sen. Kim: Before you started, treasury regularly targeted hundreds of networks who send critical goods to russia's war machine with rounds of sanctions every one or two months. The previous administration handed about 297 china based individuals to the sanctions list under the russia sanctions program.
▶ 1:52:58Sen. Kim: Do you know how many you have added and designated as part of the russia sanctions program since you came in as treasury secretary?
▶ 1:53:05Sec. Bessent: I do know but president trump sanctioned oil which was the major sanctions achievement and has brought the russians to the table for the talks that I was at.
▶ 1:53:19Sen. Kim: It will have support for those sanctions but I will say there is bipartisan support on doing everything we can to crack down on russia's war machine, not just on the energy side. As I said, the previous administration has added 297 china based entities. This demonstration is adding zero.
▶ 1:53:38Sec. Bessent: The previous administration was extremely weak on sanctions and it was on record saying they did not want to increase energy sanctions because they are worried about the midterms, will read about the failed election of vice president harris and the display of cowardice --
▶ 1:53:55Sen. Kim: I am not asking you about that right now.
▶ 1:53:58Sec. Bessent: On the way out the door jake sullivan raised some of the energy sanctions. President trump took the most bold action.
▶ 1:54:10Sen. Kim: I'm asking you here, can you commit to this congress that you will take action to sanction russia's shuttle fleet? -- shadow fleet?
▶ 1:54:22Sec. Bessent: I will take it under consideration. We will see where the peace talks go.
▶ 1:54:28Sen. Kim: I can see how this administration has taken this maximalist approach adding pressure when it comes to the shadow fleet of iran. Talking about cutting off venezuela's ships. There needs to be consistency and there is bipartisan support for this. I want to switch gears. Do you agree money-laundering is a national security threat to this country?
▶ 1:54:53Sec. Bessent: Yes.
▶ 1:54:54Sen. Kim: With the bytedance founder pleading guilty to violating anti-money laundering laws and sent to prison, they injected billions of dollars under terms of family business, world liberty financial and he asked for a pardon and received that. Is that a conflict of interest in your opinion?
▶ 1:55:12Sec. Bessent: I'm unfamiliar with that. I wear many hats. The pardon hat is not one of them.
▶ 1:55:18Sen. Kim: I am asking if you see it as a conflict of interest.
▶ 1:55:21Sec. Bessent: I am not going to respond to that.
▶ 1:55:24Sen. Kim: When you have the russia talks, was jared kushner part of the russia talks?
▶ 1:55:29Sec. Bessent: Yes.
▶ 1:55:30Sen. Kim: What is his official role in the U.S. government now?
▶ 1:55:34Sec. Bessent: I believe he is a special envoy.
▶ 1:55:36Sen. Kim: So you think he has a special position that is not an unpaid volunteer position?
▶ 1:55:41Sec. Bessent: I believe it is not an official position. He is designated as lender interlocutor as we bring many people into the talks.
▶ 1:55:51Sen. Kim: I raise this because this is the problem we are seeing right now when it comes to these conflicts of interest. We can see the trump family getting involved in different roles even though they don't have official positions. We can see pakistan announcing they will use trump's family companies crypto for cross-border transactions and trade. Does that not concern you?
▶ 1:56:10Sec. Bessent: I would be especially interested to hear if you have any information on why Mr. kushner is conflicted in the russia talks.
▶ 1:56:19Sen. Kim: What I'm saying is that if he wants to be, if he wants to participate, he should go by the same financial disclosures, getting rid of conflicts of interest that every other senior government official including yourself has to go through.
▶ 1:56:35Sen. Kim: I am just saying that when we see trump pardon the binance founder and instead investigating jerome powell and trump is now suing the treasury and the irs for $10 billion, he even said I am supposed to work out a settlement with myself. Do you think that is a conflict of interest?
▶ 1:56:54Sec. Bessent: That is a justice department issue.
▶ 1:56:56Sen. Kim: It is suing your department.
▶ 1:57:00Sec. Bessent: The justice department represents treasury.
▶ 1:57:06Sen. Kim: With that, I yield back.
▶ 1:57:09Chair Scott: Senator cramer.
▶ 1:57:13Sen. Cramer: . Thank you, Mr. chair. Thank you Mr. secretary for being here. I'm sorry you are no longer a north dakota farmer. You were a good one. Sorry to see you go. We are here to talk about something that is truly bipartisan and that is the adoption tax credit. I know you wake up every morning thinking about it. I'm going to ask you to look into it for me.
▶ 1:57:34Sen. Cramer: During last year's working families tax cut, the reconciliation package, we altered the adoption tax credit to include making it partially refundable up to $5,000. Previously up until 2011 there was no refund ability of part of the credit.
▶ 1:57:57Sen. Cramer: The taxpayers always had this pay it forward provision that allowed families to carry over unused portions into the next tax liability. Our intent in the working families tax cuts was to carry it forward to be eligible for the $5,000 refund. The jtc actually included that in their score which validates the intent of congress.
▶ 1:58:26Sen. Cramer: However, the irs is interpreting the language to mean that the carryforward is not eligible, affecting the adopting families from 2023 to 2024. With the irs did is they interpreted the effective date of december 1, 2024 the same way congress intended but there is a big difference between congress's intent here and the irs's interpretation of it.
▶ 1:58:50Sen. Cramer: I don't believe it was the administration's intent to make this but I believe to be a mistake when the president signed into law. I just want to bring it to your attention to highlight it and to see if you would be willing to look into it.
▶ 1:59:05Sec. Bessent: I believe you are referring to section 7402. My tax office is happy to work with your staff.
▶ 1:59:18Sen. Cramer: I look forward to that. The underlying language in this bill is very positive. Amy klobuchar, the adoption caucus and the coalition work on these things closely today -- together. We would love to work with you. On another matter, yesterday in the house my friend and colleague congressman has inga talked about the 3% budget resolution bill that he has.
▶ 1:59:49Sen. Cramer: I am leaving that resolution over here in the senate. The goal is to establish the goal of reducing the federal deficit to 3% of gdp. You referenced in your opening statement that it has already been reduced somewhat to 5.4%.
▶ 2:00:04Sen. Cramer: One of the ways we can get out of a deficit or reduce the deficit is by growing out of it but I would like to work on both sides of the ledger with you because you have said that we don't have a revenue pro blem. We have a spending problem. And I absolutely agree.
▶ 2:00:25Sen. Cramer: Maybe you can speak for the remaining time, productivity sometimes as a result of efficiency which might be a workforce challenge but that is another story. Speak a little bit to that goal, is 3% by 2030, is that realistic?
▶ 2:00:44Sec. Bessent: Senator, my target is for something that begins with a three by the end of president trump's term. In 2024 we are 7% without a recession. We are at 5.4.
▶ 2:01:04Sec. Bessent: What the friends on the other side of I'll did with the tale of woe and gloom, we have averaged 4.1% gdp growth and we had a fiscal contraction last year that brought down the spending which is one of the reasons are bond marketed well so we are at 5.4. As we move that down, we will see the economy improves and everyone can go to the treasury website or the x account.
▶ 2:01:37Sec. Bessent: I'm old school. They can see a study by m.I.t. That shows that the budget deficit that was blown out in 2021 and 2022 created the great inflation of 2022. As we bring down government spending, we will bring down rates and bring down inflation.
▶ 2:01:53Sen. Cramer: At the productivity growth levels we are at right now, who knows how quickly.
▶ 2:01:59Sec. Bessent: I think we are in exciting times. It could be like we saw in the 1990's.
▶ 2:02:06Sen. Cramer: I agree with you, we are at the beginning of the bone. I yield back two seconds.
▶ 2:02:14Sen. Gallego: Thank you for being here today. We touched on this earlier. In addition to treasury secretary, you are acting director of the irs. To follow-up on senator kim's questioning, you are aware that the president is suing your agency for $10 billion?
▶ 2:02:30Sec. Bessent: Yes.
▶ 2:02:31Sen. Gallego: Would you agree that is a good sum of money?
▶ 2:02:34Sec. Bessent: Yes.
▶ 2:02:36Sen. Gallego: What would that be cut from? Where would that $10 billion come from if he wins that lawsuit?
▶ 2:02:42Sec. Bessent: Again, it would come from --
▶ 2:02:47Sen. Gallego: I am not asking if it is right or wrong.
▶ 2:02:52Sec. Bessent: It comes from treasury.
▶ 2:02:53Sen. Gallego: The general fund?
▶ 2:02:55Sec. Bessent: The treasury general account.
▶ 2:02:57Sen. Gallego: Taxpayers?
▶ 2:02:59Sec. Bessent: Yes. Part of the 400 40,000 taxpayers whose returns relate.
▶ 2:03:04Sen. Gallego: They are not suing. If the president prevails in this lawsuit, he will be able to pocket that money. It is the president or anyone in the president's office talking to you about this lawsuit in any regard?
▶ 2:03:16Sec. Bessent: They have not and the president said he will donate the proceeds to charity. You may have missed that.
▶ 2:03:23Sen. Gallego: No one at all has discussed this to you whatsoever? I did not ask anymore more questions. Have you received any advice about how to handle this potential conflict?
▶ 2:03:34Sec. Bessent: This is a justice department matter.
▶ 2:03:37Sen. Gallego: Has someone from the department of justice talks to you saying that this is their purview and you need to stay out of it? Who has discussed to you your role in this?
▶ 2:03:48Sec. Bessent: Our general counsel sitting behind me has told me it is a justice department matter, the justice department defends treasury in matters like this.
▶ 2:03:57Sen. Gallego: So it has been discussed with you. Do you have any final say in the process of this or is the doj going to instruct you to cut a check and settle, you have no independence to make a decision whether or not the president deserves $10 billion?
▶ 2:04:12Sec. Bessent: Again, that is a doj matter.
▶ 2:04:15Sen. Gallego: The doj will make that decision whether or not the president should receive $10 billion. You have no say at all?
▶ 2:04:22Sec. Bessent: Correct. So you would have to write the check if told.
▶ 2:04:29Sec. Bessent: Correct.
▶ 2:04:33Sen. Gallego: From any of this -- for many of us, this is very similar to a shakedown of the american taxpayer. Are you aware that president trump has filed a claim seeking $230 million from the justice department for investigations during his previous candidacy?
▶ 2:04:54Sec. Bessent: I am unaware of the number.
▶ 2:04:59Sen. Gallego: That money will come from the treasury judgment fund which you control. Have you recused yourself from making payments to the president on these claims?
▶ 2:05:07Sec. Bessent: I will follow the law and I am not involved with any of this. It stems from justice.
▶ 2:05:13Sen. Gallego: Even though the treasury judgment fund is called the treasury judgment fund, you have no control over the treasury judgment fund?
▶ 2:05:20Sec. Bessent: We act as paymaster.
▶ 2:05:22Sen. Gallego: So you will sign the check? You are a paymaster, you would be the person whose signature is to the treasury judgment fund?
▶ 2:05:30Sec. Bessent: I assume it would be a wire transfer.
▶ 2:05:33Sen. Gallego: We are not that old school. That being said, you have no say in this whatsoever. You will only follow what the doj says but you are the person who is the final person who pushes send on the wire transfer?
▶ 2:05:48Sec. Bessent: Yes.
▶ 2:05:50Sen. Gallego: Even if you feel that it is unjust the fact that this president is pondering U.S. taxpayer dollars, you will still hit the send button?
▶ 2:06:00Sec. Bessent: Even if I believe that the irs tax code was violated and 440 thousand taxpayers --
▶ 2:06:10Sen. Gallego: Back to this sort of thing. You understand why someone would see a problem with that. Let me ask a very simple question. Do you work for the president of the united states?
▶ 2:06:21Sec. Bessent: I work for the american people.
▶ 2:06:22Sen. Gallego: Cap president are you?
▶ 2:06:24Sec. Bessent: He can.
▶ 2:06:28Sen. Gallego: He can fire you?
▶ 2:06:30Sec. Bessent: Yes.
▶ 2:06:32Sen. Gallego: Is a conflict of interest?
▶ 2:06:34Sec. Bessent: I think you are confused. I am not part of the decision.
▶ 2:06:38Sen. Gallego: Who are the person who sends the wire transfer. That is a clear action. I am controlling the time here. You are not obeying the law. If you are pondering U.S. taxpayer dollars. You are pondering -- plundering U.S. taxpayer dollars. >> senator mccormick is now recognized. >> thank you.
▶ 2:07:09Sen. Gallego: In pennsylvania we are fortunate to have abundant resources as you know when you attended our summit. A skilled workforce of world-class universities. It has attracted in an bessent and spur growth. The working families tax cuts will deliver $600 billion and no relief to the middle class and still there is more to be done.
▶ 2:07:33Sen. Gallego: Permitting reform would unlock billions, perhaps trillions of dollars that sits on the sideline right now. Secretary bessent, when you talk about permitting reform and how important those are to unlock additional growth beyond the fantastic growth we have seen so far?
▶ 2:07:52Sec. Bessent: The president's economic program is a three legged stool, trade, tax and dereg and permitting reform is a very important part of the the regulatory agenda. As we have seen, more supply also pushes down inflation and increases economic growth.
▶ 2:08:19Sec. Bessent: I think it is the deregulatory agenda that is the most on some part of the president's.
▶ 2:08:26Sen. Mccormick: I could not agree more with that. There is going to be a big push from the senate and there is already legislation in the house. We are looking forward to your support for a permitting reform package which could really stimulate further the president's agenda. The working families tax cuts also created trump accounts, a new tool to support families and build wealth for the next generation.
▶ 2:08:53Sen. Mccormick: Can you talk about the motivation for the program and what do you think this will accomplish?
▶ 2:08:59Sec. Bessent: 38% of american households do not have any exposure to the U.S. equity market so for the next four years as investments are made to all newborns, it will bring them into the system and set them on a path.
▶ 2:09:20Sec. Bessent: There can be contributions from family members, from employers, from philanthropies and we believe that over 20 states will do this. It is going to over time allow all families to have a share of the great american innovation and growth economy.
▶ 2:09:38Sen. Mccormick: As people I meet in pennsylvania hear about this and understand what it means for their kids, their families, it is a really incredible step and I hope it is something we can really formalize and make part of not just this great administration but future ones.
▶ 2:09:53Sec. Bessent: Thank you for your leadership on this. I have been a longtime advocate of financial literacy. I think this will be a real-time experience -- experiment in financial literacy as the families and children are able to look at their accounts and be part of this growth. I think that it will become very real and engaging for them.
▶ 2:10:19Sen. Mccormick: I agree. Final question. As you know the trajectory of U.S. debt is unsustainable. Net interest payments alone account for 14% of total government spending and higher debt levels combined with high interest rates put upward pressure on the cost to service our debt. Further, $10 trillion of government debt will mature and rollover which is a little less than one third of debt outstanding.
▶ 2:10:48Sen. Mccormick: Can you discuss briefly the conditions in the U.S. treasury market and the trends you are monitoring as we entered this period?
▶ 2:10:54Sec. Bessent: Senator, this part of the market has been very resilient. We have had some of our best options in a long time this year. We are seeing very good foreign demand. As you said, the trajectory, we have to get it back under control, as I talked earlier, we need to get back to something with a three in front of it in terms of deficit to gdp.
▶ 2:11:23Sec. Bessent: The reason I came from behind my desk was I was worried that many people, especially as vice president harris was campaigning, were wanting to go into a european-style social democracy, low growth, raise taxes, grow slower, more taxes, unsustainable debt. That is why at fsoc we are focused on growth as desirable but also a lack of growth as a financial stability risk.
▶ 2:11:49Sen. Mccormick: I don't have time for a final question but I will just say I want to compliment you and the administration and ofac for the maximum pressure campaign on iraq and what that means for supporting freedom in around -- iran. >> senator blunt rochester. Sen.
▶ 2:12:10Blunt Rochester: Thank you ranking member warren and for your presentation of the annual report. Mr. secretary, you talked about avoiding regulation by reflex. And focusing on growth instead of reacting to every potential risk. You say fsoc is toning out the white nose to concentrate on issues that matter most.
▶ 2:12:37Blunt Rochester: From my constituent calls and emails and conversations, I know for most families they do not experience economic policy is white noise. They experience it through higher rent, higher medical bills, higher grocery prices and just worrying that the next bill for price increase will push them over the edge. It is why the financial stability oversight council's job is so important and why it cannot wait until markets break.
▶ 2:13:07Blunt Rochester: It's job is to spot problems early before families pay the price. Housing related risks have been showing up for decades. On this committee we have worked on the road to housing in a bipartisan way and my first policy agenda actually as a senator was focused on housing. Today I want to understand what treasury has actually done with these warnings.
▶ 2:13:33Blunt Rochester: In 2024 fsoc issued a report warning of weaknesses in non-bank mortgage services. Company banks handle most U.S. mortgages. On january 31 2025 the gla warned that travel at these firms could disrupt federally backed mortgage markets. In light of these warnings, what has treasury done to address the risks in the housing market?
▶ 2:14:04Sec. Bessent: That was the yellen treasury and they said that everything was a risk. That is why we are more focused. We are focused on the mortgage market through fannie mae and freddie mac and through the non-agency actors.
▶ 2:14:20Sen. Blunt Rochester: So it is treasury's position that this was overstated, this risk was overstated?
▶ 2:14:31Sec. Bessent: As I said in my statement, if everything is a risk, nothing is a risk.
▶ 2:14:33Sen. Blunt Rochester: I'm specifically housing -- asking on the issue of housing.
▶ 2:14:38Sec. Bessent: Part of housing is being able to have tight spreads in the mortgage market and we are at record lows and we had the lowest mortgage rate in the past three years in january.
▶ 2:14:58Sen. Blunt Rochester: You are saying the mortgages and. Know that closures are up 21%. Mortgage delinquencies are a four year high. Your 2025 annual report notes that fsoc created a household resilience working group to identify early warning signs of household financial stress. It is my understanding that this working group was just created in december. Hasn't met yet -- has it met yet and what is it expected to produce?
▶ 2:15:27Sec. Bessent: It is meeting monthly. It did not meet last month. We want to look at the household balance sheet and understand again the question I got on consumer sentiment is that sentiment or is it reality? Where are the pressure points because we do want to spot problems early.
▶ 2:15:51Sen. Blunt Rochester: Do you know what are the outcomes and what is it expected to produce?
▶ 2:15:57Sec. Bessent: As it has not started yet, I look forward to sharing that with you as we move through the year.
▶ 2:16:06Sen. Blunt Rochester: I would hope there is a plan because usually if you set up a group, there is a mission for the working group. There is a plan and set of expectations so look forward to hearing from you on that. You mentioned in your testimony parallel prosperity. You mentioned mainstream and wall street.
▶ 2:16:28Sen. Blunt Rochester: If you were to rate how wall street is doing on a scale of 1-10, 10 meaning it is doing well and main street on a scale of one to 10, what would you rate them?
▶ 2:16:41Sec. Bessent: I am not going to speculate but I will tell you the wall street journal, not the main street journal, criticized me for being a populist on my advocacy of main street. Main street got killed during the biden administration. Wall street did not.
▶ 2:16:57Sen. Blunt Rochester: I only have 10 seconds and in my 10 seconds I just want to say two things. This is now your watch. I know there has been a lot of bringing up the biden administration. This is now your watch one year later. Families are truly hurting in this pheasant -- present moment. I look forward to working with you on housing because it is one of the number one issues in this country across the days. Thank you and I yield back. >> senator moreno.
▶ 2:17:28Sen. Moreno: Thank you Mr. chair. Thank you for being so accessible. You go out and you are on tv and in the media to make certain that the american people are communicating on a regular basis. That is a refreshing change. I noticed that you said that if the democrats win, they will do it again. Can you clarify?
▶ 2:17:52Sec. Bessent: Yes. We saw a spending surge during the biden administration of low out spending and the deficit to gdp numbers lowing out and the spending was responsible for the inflation surge and we saw massive unfettered immigration, 20 million illegal aliens coming into the country and depressing
▶ 2:18:24Sec. Bessent: Wages. They are taking low end housing and a study showed that much of the low end housing inflation came from the 20 million new arrivals. The law of supply and demand applies both for housing and for suppressing wages.
▶ 2:18:46Sec. Bessent: I would say when I talk about that, there will be more out spending which will lead to inflation and the border will be reopened.
▶ 2:18:55Sen. Moreno: Clearly this deportation effort especially the self deportations will lead to lower housing prices and we have already seen it?
▶ 2:19:04Sec. Bessent: We have. Rental properties are ranked a through d and we have seen a substantial decrease but what we are also seeing is because of the supply that is coming on. We are seeing a decrease in rents nationwide. As I said earlier, true inflation, an agency that puts out uses a basket of gathered real-time inflation measures is now below 1%.
▶ 2:19:35Sen. Moreno: Let's talk about that because there are things like federal policy that impact. An underlying cost is the price of gasoline. What has happened in the last 12 months?
▶ 2:19:47Sec. Bessent: The price of gas is down substantially. Nationwide. We expect it to continue going down. Also, diesel which is an input for farmers and truckers. So energy feeds into everything whether it is food costs, whether it is manufacturing.
▶ 2:20:11Sec. Bessent: Again, more supply and being on the side of the energy industry has resulted in lower prices.
▶ 2:20:20Sen. Van Hollen: The same could be said about the question that you got at the beginning of this from somebody about groceries. Exit is an underlying ingredient in a lot of foods. What is happened to the price of eggs?
▶ 2:20:35Sec. Bessent: The price of eggs is down substantially. The president had to wear that for a few months. The price of eggs collapsed things through a lot of measures taken by ag under his direction but we do not hear about egg prices anymore. I will say in my hometown I have noticed that the egg surcharges have gone off the menu at the diner.
▶ 2:21:02Sen. Moreno: There are some things the government can control and we had a conversation about electricity prices. What a would you surmise, what would you surmise which state has the highest cost of kilowatt in the country?
▶ 2:21:16Sec. Bessent: California has the highest cost in everything. The highest taxes, the highest homelessness.
▶ 2:21:22Sen. Moreno: Believe it or not, ohio wins this one at 31 kilowatt hours and ohio is at 17. Would you agree that a lot of that is state policies and policies initiated by those states?
▶ 2:21:34Sec. Bessent: A huge amount of state policy whether it is kathy hochul, governor of new york, blocking a pipeline. Whether they are sitting next to the shelf and not allowing gas in and the pipelines to new england down from canada. New england has made the decision to de-industrialize. Even when I was a college student in connecticut, it was a hotbed of small manufacturing.
▶ 2:22:01Sen. Moreno: From them to the ohio perspective, we are happy to provide low-cost energy to new england. When you be surprised to know that massachusetts also has twice the national average?
▶ 2:22:12Sec. Bessent: I would not and seeing these statistics for how many people were leaving the state, I understand why.
▶ 2:22:19Sen. Moreno: In conclusion, you would like to see states do more of the things that states like ohio do and less like the things that states like massachusetts do over the last thing we want to do is take those policies and make them national, would you agree?
▶ 2:22:32Sec. Bessent: I agree. >> senator alsobrooks.
▶ 2:22:37Sen. Alsobrooks: I want to thank chair scott and ranking member warren for holding today's hearing. I want to say to you secretary bessent for being here today to discuss our economy which is very much on the minds of marylanders. Before I get to my question I want to make a quick comment on market structure legislation. Mr. secretary, I speak for many of my colleagues when I say that we really want to get a good bipartisan bill done.
▶ 2:23:10Sen. Alsobrooks: I have appreciated working with your team during the genius act and market structure process and appreciate their attention to the issue of stable coin in yield and interest. I am confident that we will get a bipartisan compromise that protects innovation and our community banks. I really encourage her continue to work on that issue -- I really encourage your continue d work on that issue.
▶ 2:23:39Sen. Alsobrooks: 80% of agricultural loans come from community and regional banks. I am proud to be partnering with senator hagerty. He and I have a piece of legislation to increase stability for businesses and their customers by expanding the deposit insurance available for business checking accounts. I join any nearer than business owners, credit unions and small banks will believe a targeted expansion could strengthen confidence in our financial system.
▶ 2:24:07Sen. Alsobrooks: The first question everyone wants answered about changes to the deposit insurance and it is a valid one is who pays for it. I am committed to working across the aisle to make sure we can get this right and I asked your colleagues about costs and benefits in october and chairman hill testified at a targeted expansion of deposit insurance would likely not increase deposit insurance premiums on small banks that any increased
▶ 2:24:37Sen. Alsobrooks: Premiums on large banks would be small or immaterial. You agree with chairman hill and more broadly would you explain to the committee why a targeted expansion of deposit insurance can strengthen our banking system and boost business and consummate -- consumer confidence?
▶ 2:24:53Sec. Bessent: Senator, I want to thank you for your partnership on genius. I am hopeful we can get that across the line this spring. I have been an advocate for small banks because they are being screened. We have seen 50% of our small banks disappear since the great financial crisis. That is one reason mainstream has lagged. A large part of that is overregulation.
▶ 2:25:21Sec. Bessent: Another part of this is that during times of stress like in march 2023 there is deposit volatility, deposits leave things because they believed whether it is the seven largest banks that there is no risk of loss.
▶ 2:25:41Sec. Bessent: If they stay with the community banks and I have met personally with many personally but the 200 I met with tell me that clients have had them and the money goes to wells fargo and does not come back because of exactly what you said because there was not one business checking account, formerly a payroll account. They say I just cant lose this money.
▶ 2:26:10Sec. Bessent: When wells fargo gets it, they don't want to get it back. As you get a decrease in deposits through the banking system, there is a reverse multiplier for lending. The banks lower deposits, less spending available for main street. I think you and senator hagerty, I think this is an extremely important piece of legislation.
▶ 2:26:38Sec. Bessent: I would encourage your colleagues to pass it will be anything I can do to advocate for it, please let me know.
▶ 2:26:44Sen. Alsobrooks: Thank you. Mr. secretary, I want to thank you for your public support for community development financial institutions. I echo concerns about the congressionally appropriated funds being released. Maryland cdfi's include credit unions that provide funding for access to capital in underserved communities.
▶ 2:27:08Sen. Alsobrooks: I want to mention two cdfi's serving in maryland in the banking enterprise program that allows them to provide credit and financial services in some of the most distressed neighborhoods in maryland. The white house office of management and both of us has withheld the notice of funding availability for the program since march of 2025 and that is 11 months. If the notice is not published, cdfi's cannot apply for funding.
▶ 2:27:34Sen. Alsobrooks: In march you said cdfi's are a key component in supporting main street america. Do you still stand by the statement?
▶ 2:27:41Sec. Bessent: I am eagerly awaiting to have it released from omb so we can move it forward. As soon as it is released, we will follow our statutory duty and release the cdfi's Mr. secretary I'm happy to see cdfi's getting back to a core mission of prosperity and resilience for their community.
▶ 2:28:06Sen. Alsobrooks: Thank you so much, Mr. secretary. >> secretary bessent, thank you for your leadership and your service to our country. We have talked about the ongoing burdens and effects of illegal immigration on our country as a result of the open border policies of the biden administration. Last year you said, "if you are here illegally, there is no place for you in our financial system.".
▶ 2:28:35Sen. Alsobrooks: You announce to the treasury department proposed relations to cut off federal benefits and tax credits to illegal aliens. I am wondering if you can give us an update on those rules. How can we protect hard-working americans from illegals who exploit our U.S. financial credit system and what are we doing about it?
▶ 2:28:51Sec. Bessent: Yes. We have moved forward on that. Through the regulators, we had them double down on the kyc know your client,, and to make sure everyone within the regular the banking system is legal.
▶ 2:29:16Sec. Bessent: The other thing we have found out and we saw it in minneapolis is the hotbed of waste, fraud and abuse is outside of the banking system, money service businesses with a lot of money being wired out of the country and we do not know where. We are cracking down on that.
▶ 2:29:44Sec. Bessent: We have also cracked down on the southern border because we have found cartels are using money laundering there. We have done that on a targeted basis rather than increasing costs to all banks.
▶ 2:29:56Sen. Banks: Is it working?
▶ 2:29:58Sec. Bessent: Yes.
▶ 2:30:00Sen. Banks: What else can we do?
▶ 2:30:02Sec. Bessent: We are considering a re-underwriting of clients. Again, many people are familiar with what is called a suspicious activity report, a sar. Many of those come in after the horse has left the barn. We are encouraging banks to be more proactive, notify and re-underwrite.
▶ 2:30:30Sen. Banks: Can you give us an education on why all this matters? How does it affect my dad, a retired factory worker in indiana, the cost of illegal immigrants in our financial system and the credit system? Give us a lesson on why it matters.
▶ 2:30:53Sec. Bessent: Again, it creates instability and it also creates -- I cited earlier, there is a study that shows that it increases rent for working americans. It takes jobs.
▶ 2:31:11Sec. Bessent: We could think that if we look at household resilience for working americans, they got clobbered because the law of supply and demand applies that for low wage earners, as you increase the workforce by 20 million in a very compressed period, then you are going to see wage decreases.
▶ 2:31:32Sen. Banks: Secretary, I wish my parents would have better access to trump accounts when I was born and set something like that up for me and my brothers. What a game changer that can be to help babies today, young kids today achieve the american dream , who grow up on the other side of the tracks and have something, have an option like a trump account.
▶ 2:31:58Sen. Banks: I praise you and president trump and this administration for what you have done to work with congress to create trump accounts. One gentleman who is a native hoosier. A very humble background and now he has given back funding trump accounts for hoosier kids who are born today. It will make a big difference for the next generation.
▶ 2:32:27Sen. Banks: One thing I worry about are the politicians down the road who want to regulate those accounts or they want to put restrictions or rules that prevent those accounts from growing. What can we do to protect this great vision today to make sure that politicians later do not ruin it?
▶ 2:32:42Sec. Bessent: Two things. We are committed to the lowest cost index funds, that it does not become something for social engineering, that his return-based, low cost, and broadly diversified so that everyone earns a share of the U.S. economy. The more people become invested, the smaller the chance meddling is.
▶ 2:33:12Sec. Bessent: I think they will be adamant.
▶ 2:33:14Sen. Banks: Thank you for your leadership. I.
▶ 2:33:18Chair Warren: For senators who want to submit questions for the hearing record, those questions are due one week from today, thursday, february 12th. Secretary bessent you have 45 days from that day to submit your responses to questions from the record. Thank you. This committee is adjourned.