tv [untitled] April 2, 2012 12:00pm-12:30pm EDT
accounts for almost 15% of u.s. goods and services exports. the national export initiative has ambitious goal of doubling exports by the year 2015. which is right around the corner. if economic growth in the euro area declines, so will the demand for u.s. products and services. how will we continue on a path to achieving the nai's export goal with reduced european need. i think people don't understand how important it is for us here in the united states for our businesses, for our small business, certainly on long island we do a lot of exporting. how do you see that future coming? >> you're absolutely right that europe has a big impact on the united states. because it's so large, and because we have such a huge network of trade and financial ties with europe. the effects come through a variety of channels.
if they grow more slowly, or fall into recession, then the direct demand for things american companies create and produce is reduced. that hurts us directionally. the effect goes beyond that because when europe slows the rest of the world slows too. so that means growth outside europe is weaker, that hurts american business exporters. when europe's in crisis as we've seen over the last 18 months, you tend to see stock prices fall around the world, that's damaging the confidence here and around the world. the typical pattern has been when europe has been in crisis, this is a good sign of confidence in the united states but the dollar has risen relative to the euro so that's another effects on the united states. but you're right to say the effects are very significant, it's one of the major factors that has kept growth in the united states slower than we would like. not the only factor but one of the most important. if they are stronger in the future that will be stronger for us and why again it's so important that we encourage them and work with them to help them get their arms around this
problem. >> i think that's what the american people need to understand, because you know, go back home and everybody says why are we giving all of this money overseas but it's actually for our benefit and being that we do take money in on both project imf export, it's money coming back into our pockets. >> and no risk to the taxpayer in that assistance because as does the fed, very careful safeguards tested over a long period of time through lots of crises in this kind of context. there's overwhelming and compelling economic and secured national security interest we have in working carefully through the imf and what the sfed doing to help them manage this crisis. >> thank you. my time is up. >> chair now recognizes the gentle lady from illinois for five minutes. >> thank you, mr. chairman. and welcome. secretary geithner. title 5 of the dodd frank act created the federal insurance
office at treasury and in conjunction with state regulators and the u.s. trade representatives one of their most important missions is to strengthen the international competitiveness of the u.s. insurers and reinsurers and to represent the united states in international for ups and increase development of international insurance standards. in your opinion does fido have the adequate staffing and other resources to successfully carry out this international mission? >> i believe so. but if that were not the case we'd fix it. we've listened carefully to concerns. i'm personally committed to making sure that office has the resources it needs. >> fido was required to submit two reports in september and one in january, and they are late and when will we see those? >> you are right they are late.
we've been busy but that's not really a resource question. it's just that they want to do it carefully. >> i'd like to go back to mr. miller was talking about the volcker rule. and i know that there have been associations like sipma that have commented, their comment letter dated february 13, 2012, and regarding how the volcker rule proposal is prohibiting proprietary training presumption and saying it's inconsistent with intent to allow useful principle activity. >> again, there has been a lot of concerns exappreciationed about the initial proposed rule. when the law was passed, congress required the treasury department to gut guidance out to rule writers in how the rule should be designed t the rg should be designed. that was met by really quite a lot of support on all sides of
the political spectrum. but when the rule came out as drafted by those four regulators, as you've seen there's been a broad set of concern, both sides, too tight, too loose, too weak, too complex. and you know, it is the strength of our system that the way this and the congress is designed we are required to put these out for public comment. you get to learn from these rules. i in my view has been that the stakes in this are very high and we should take the time necessary to get these rules right and i think that's the case in this context. i'm sure that they are going to carefully evaluate those comments and i am very confident they have the ability to address those concerns is within the way the law is drafted. >> thank you. then one last question. china stands as one of the few major markets pose substantial barriers for american business including financial services
firms. though you have stated publicly that the u.s. needs to level the playing field with china, they continue to have the most restrictive market. for financial services in the g-20. the the newly released development research center of the state council world bank newly called china 2030 report agrees and calls for significant changes to the chinese domestic financial system. as they become more active internationally. as the chinese financial services firms expand into the u.s. what steps are you taking to ensure that u.s. financial firm zrs the same access to china. >> very important point and important to us amend thank you for highlighting that world bank report. it's a very sweeping constructive set of suggestions for reform in china including opening the financial sector. i think it's very important china move further to expand the opportunities for u.s. firms
competing in china. along side what they are doing to allow the exchange rate move up. that's a critical part of the successful reform process in china and necessary to be more fair to us so we're going to keep encouraging them to move further. we made recent progress even over the last three months in opening part of the insurance sector but we have ways to go and we're going to keep at it. >> thank you. yield back. >> is chair now recognizes gentle lady from california, miss waters. >> thank you very much, mr. treasurer i'd like to thank you for being here today. in your testimony you said the european financial crisis has caused significant damage to economic growth in the united states and around the world and we have a strong interest in a successful resolution of the crisis, and i absolutely agree with you. and having said that, let me commend you and the feds for the work that you have done on this extremely important issue and
crisis. you've been involved in unprecedented policy, consultations, coordination and information sharing between political leaders, central banks and international organizations and i think that you have conducted and represented this country very, very well. there are two policy initiatives that some of my friends on the opposite side of the aisle have criticized you about. i disagree with them, and they were alluded to when you were speaking with barney frank and that is swap lines and the agreement to borrow. i think it's important for people to understand, as you have said, the feds even made a little money on the swap lines. but why those two initiatives are very, very important, what it does in terms of providing liquidity to the central banks, and why we stand to be served
bell by these two initiatives. >> thank you for those questions. let me first, european -- europe has a much larger banking system than the united states, larger share of the economy and european banks borrowed a lot in dollars before the crisis to lend around the world. and when the crisis hit, because of concerns about the stability of europe they lost in dollars. of course the european central bank has -- does not run a dollar-based currency. that's what we do in the united states. so faced with that loss of ability to fund, european banks had to cut lending sharply around the world. even in the u.s. so the swap lines by providing that access to fumding significantly reduced the need and the pressure on europe's institutions to cut lending in the united states and emerging
markets where u.s. companies have big stakes and where growth matters. the swap lines were effective in helping to soften the impact of the crisis on us and on countries around the world, and it would have been much worse for us without those lines and as i said, the feds are into positive returns on those swap lines. what the congress did in the middle of 2009 in authorizesing the imf to have a larger emergency capacity was critical to getting trade around the world restarted, providing financing for countries to borrow to buy american products. we would have been in much worse shape and our economy much weaker without those two steps. >> i appreciate that. and as you have indicated it certainly is in our best interests to have solved this crisis and i believe that in
addition to the cooperation that has been taking place by all of those interested parties, that this is not a bailout and for those who term these initiatives as bailouts don't understand how important these two initiatives are, helping to stabilize this international economy so i want to thank you for the work that you have done and again, i want to reiterate that i think what you have explained, literally helps us to understand and i would hope helps the other side to understand why this cannot be termed bailout but rather cooperation and assistance to make sure that we stabilize the international economy. i yield back. >> chair now recognizes the gentleman from texas. >> thank you, mr. chairman. mr. secretary, good to see you. mr. secretary, i think you're on the record as saying that u.s.
contributions to the imf are secure united states has never experienced a loss on any of its commitments, american taxpayers are never lost a cent from the imf program. i appreciate that but mr. secretary, if you go back and look at testimony that's been brought before this committee and this congress over the years, those were some of the same comments that were made about freddy and fanny, fha, you know, and the list goes on and on. so i think these are unprecedented times that we're in and we would have never thought that the u.s. government would have had to take actions it took in 2008. so i think to say that you know, additional funding or commitments to the imf is not risk-free would you agree? >> well, like you say, i would never have made the comments you referred to on fanny and freddy and fha and people said all sorts of things in the past about us living in a world with no risk. but the imf really is
exceptional in how it's designed. as i said we've got you know, six decades of experience through terrible crisis of looking at what are the -- tested and how did we do. i'm confident those safeguards will protect the interest of the american taxpayer and it would be much riskier for the u.s. economy to try to pull the imf back from helping the needs of its members whether in europe or elsewhere. >> i note in 2009 the cbo when they were analyzing whether the the proposal to increase by $108 billion, they did a net present value risk adjusted and said that the potential cost to the american taxpayers would be $5 billion. what would be your response to that. >> you're right and they departed from decades and decades of practice in reaching that judgment. and i do not agree with it and do not share it. but you could think of that as
an extreme precautionary balance in that context, and doesn't change my basic view that the structure of the imf's financial foundation provides very, very strong protections for the american taxpayer. again, life is about alternatives and the question is would we be better off as a country if the imf could not act in this basic context and i think we'd be much worse off. >> but you didn't paint a very rosie picture about the european situation, and you know, i think a lot of us think that this is just the tip of the iceberg and not the end of the iceberg. and obviously if the imf makes additional commitments to that, increases the risk. >> a good way to think about the question and i agree that one should be very realistic about the challenges europe still faces, a lot of risk is still ahead for them and for us. the question we face is what can we do? what can we best do to protect american interests in that context. i think the things that we are
supporting very prudent, cautious, will make us safer. i think for us not to take those actions like the fed's of the imf would make the european crisis more risky. that's why we think it's the right path. >> i want to follow up with some previous -- you're responsible for fsok, chair of that, and you put out some rules and you've been considering it, significantly financial institutions that can cause financial risk to the system. and to your credit i think you put forth some fairly transparent rules. but when we look at the international community right now they are going flew a process where they are not being as transparent and a lot of these entities that are domestic companies looking at complying, determining where they stand
with you, the i want national community has not. so, is that process out of whack and do we need to make sure that, you heard me talk about harmonizing between these rules. where are we in that process. >> very good point, in derivatives we are really a long way ahead of europe in designing that framework for oversight. the fact that they are behind us create as problem because we want to be converged to the basically similar standards. and that's one of the reasons why the rule writers in the u.s. have been slower than the deadlines established by congress. where they are being a little behind because they want to make sure they maximize the chance for alignment as the european regime takes place. very important question. we're concerned about it too. and we want to make sure that we bring them along so we don't put
u.s. markets at a disadvantage and have the risk shift. >> the time of the gentleman has expired. the chair recognizes the gentle lady from new york, miss maloney. >> first of all, thank you mr. secretary for your service. i want to clarify one of the points talking about the bank and it never cost taxpayers absolutely one cent. >> the imf. but that's true of the xm bank. >> have they made a profit and if they do does it go into the treasury? does it go into the general fund? >> when the imf draws on the commitments we make it pays us interest on the drawings. so yes, in that sense it returns our commitments with interest. >> so this is, these are two programs that are creating stability in the economy, and obviously in the xm bank creating exports and jobs and helping us build that 2.5% to a higher percentage gdp so it sounds like a good investment
for the american taxpayer. i wanted to ask you about all things libya. last friday i was in libya with a minority leader pelosi and we were meeting with the transitional government, and there was a great sense of yunlty and great sense of purpose, a great expectation for their elections taking place in june. and oil production is up which is going to help the world economy. and they were very concerned about gadhafi, his family and associates, the great wealth from this oil country was not going into the people or their infrastructure or investing in any way. so for 40 years it has really -- you don't see investment for the people of the country. so my question is what happened to this money? where is it? and the government said they wanted very much to work with
you and the american government and the international community to try to regain and recapture those resources to help rebuild the country and to help with this new democracy. so i'd like to know, are you working in any way, what steps are you taking, what are your plans to help this new emerging democracy? >> excellent question. we worked very quickly with countries around the world to freeze the assets of gadhafi and his associates and the institutions they controlled very, very quickly and we're now working closely with the libyan authorities and countries around the world to figure out how to recover as much of that wealth they essentially stole as possible. and it is what we do know is that there's no meaningful amount of those assets in the united states. the assets that exist reside outside the united states. >> did they have any in the united states? >> i don't think there is any
material amount. not surprising because we have pretty tough protections. but we believe we have frozen a substantial amount of resources. and now we have to figure out a way to help them recover. >> about how much, is it hundreds of billions? >> i don'ts think it's that large in how much we've frozen or identified. but substantial relative to the needs of that country. >> also i've been corresponding with your office and you on the challenges that americans living abroad, i represent many americans that are working abroad and they are reporting that they are having problems gaining access to bank accounts abroad. and i know that we requested a meeting with your office, you granted one in april. i want to publicly thank you for that. so that they can work out on why they are being denied these bank accounts. your sofs saying there is no policy in the american government that in any way denies american citizens or makes it more difficult for them
but the testimonials that are coming into my office tell a very different story and i certainly support all of your efforts to improve tax compliance and determine the ownership of u.s. assets of foreign accounts, that these efforts should not impair or hurt law-abiding american citizens. and my basic question is really on the fact of the u.s. patriot act and the foreign bank and financial services. and basically what are you doing to help accommodate american citizens so that legitimate american citizens are able to access bank accounts abroad and with more and more people in the world economy it's a growing problem across the country. >> very important question. you're right, there has been a lot of concerns with the impact of this set of laws, particularly what we call the fatka and the fr rules.
and we are working very closely to try to meet the congressional intent without putting undue burdens on their ability to have a bank account, for example. and we're doing a lot of things to provide more time for banks around the world to adjust. and to try to make sure that we're designing the rules in a way that create a better balance between the important objective you spoke to of preventing tax evasion but making it easier for a lot of americans live overseas and it's legal and needs to be possible for them to have bank accounts overseas. we have work to do on that and happy to work with your office and colleagues how to make sure we're as responsive as we can to those concerns. >> the time has expired. the chair recognizes the gentleman from new jersey, mr. garrett. >> mr. secretary, fanny and
freddy, their losses are close to $200 billion, and this dwarfs all other direct losses associated with the 2008 bailouts. if the gentleman in front of me would step aside. if the gentleman would step aside. and the gentleman in front of me would step aside. thank you. i believe that number would be a lot harder if it wasn't for the work of mr. dimarco over at fha and the efforts he's done and i believe the american taxpayers owe him i think a debt of gratitude for not allowing some of the entities seeking to exploit freddy and fanny as cookie jars to take money out. you know the administration has pushed forward its own idea, some not so effective, some i would say counterproductive as far as housing initiatives. and you recently announced that more may be under way. a month and a half ago the president anouchbsed the taxpayers to essentially pay for people's mortgages.
and mr. dimarco releaseded reports how taxpayer paid principle reductions would be a net loser for the gse and there's also great concern wls the programs about a moral hazard as well. affecting the taxpayers for paying people's mortgages. so my question is simply this. given i think the tremendous job that mr. marco has done at the fha, what will the administration's reaction be or position be if he decides and fails to adopt some of the new provisions of amp 2.0 because he believes it has a tremendous cost to the taxpayers of this country. >> well, we've actually been working closely with mr. dimarco, he has a tough job as you said and he has been supportive of the bulk of the initiatives we propose to help repair the damage in the housing market. there are some areas where we disagree a bit. of course under the mandate congress designed, the
administration, secretary of the treasury has no authority over the choices he makes in this area. but where we believe that the interests of the taxpayer and the broader housing market are best served by additional initiatives, then we're going to continue to work to encourage him to adapt those as we have the last three years. on the issue of principle reduction, there is a very strong economic and financial case to provide principle reduction in some circumstances where people are deeply under water and face a hardship like a loss of job. you see banks and investors across the market doing principle reduction in those areas. we think there is a case for the fha doing it too. >> he has, as i put it, extensive reports why it would be a net loss. do you have a counterpart? not of other banks but of the gse's and how your numbers compare. >> we're exactly in the context
of working through that. that working on the same basis of facts. we look with a neutral independent view about where there's a case for principle reduction and we're working through that. >> can you provide this office or committee with those i'll call them reports to document just where you stand and where he stands? i know you're working through it. >> when we -- let me say it this way. i'd be happy to work through where we think there is a good case for it. >> with regard to the $25 billion settlement agreement that's come out recently, one of the parties that were not at the table so to speak were the investors in the marketplace. the first question is, why in your opinion were they
come? >> there's a variety of efforts about how to resolve those separate claims. >> that's a different issue. in other words, already with the settlement out there this will or could affect those investor, and those are not just huge investors, they are the endowments and what have you which may represent our parents and grandparents and their pension funds. they were not at the table but those individuals who have been affected indirectly or otherwise by this settlement agreement as they are compelled or encouraged to write down those mortgages. >> you're asking have their interests been adversely
affected. i don't believe so but i'll be happy to try to give you some basis for that judgment. >> time of the gentleman has expired. the chair recognizes the gentleman from new york, mr. meeks. >> thank you. mr. secretary, good to see you again. let me just first pick up where my colleague mr. maloney had talked briefly about xm bank. and i they we've been talking a lot about imf. if we are faced, and i think this conversation going on in the senate right now, about the reauthorization of xm bank at a high authorizizing level. describe how the banks help american companies and workers. >> countries around the world subsidize exports. we do it in a way that's very, very careful. protects the taxpayer and by forcing xm to charge companies
for the subsidy they get, that's why over time i think it's true there has been no record of loss to the taxpayers through the programs. if we don't do it then other companies will steal business from american companies and less exports, less jobs, that would be a mistake for the u.s. economy. if we stop they will keep doing. it's not just europe, it's china, brazil, all sorts do it. makes no sense, is not rational for us to unilaterally disarm in the hopes that by doing that somehow the world will stop. i don't think there is a case for that. >> thank you. let me jump to degrees quick. we know it has a negative 9% growth rate and significant unemployment. i believe look at some of your written statement we know there's got to be austerity measures but austerity alone does not do it. there's got to be some