Ranking Member Crapo's Statement at FSOC Annual Report Hearing
Washington, D.C. - U.S. Senator Mike Crapo (R-ID), Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, today delivered the following remarks during a Banking Committee hearing in which Treasury Secretary Jack Lew testified regarding the Financial Stability Oversight Council's Annual Report to Congress:
Thank you, Mr. Chairman.
Today, Secretary Lew comes before the Committee to testify in his first hearing as Treasury Secretary.
The Secretary wears many hats. He is responsible for formulating and recommending a number of domestic and international financial, economic and tax policies for the Administration.
As Financial Stability Oversight Council (FSOC) Chairman, he is required to appear before this Committee annually to testify on the activities of the Council and to answer questions concerning the Council's most recent annual report.
The Council's 2013 Annual Report covers many areas of the Council's activities and lists a number of potential emerging threats to the financial stability of the United States.
I want to focus my opening statement on one particular area that needs personal attention from Secretary Lew.
The U.S. capital markets must remain the preferred destination for investors throughout the world.
Capital is the lifeblood of U.S. businesses, which in turn are the engines of job creation and economic growth.
Unfortunately, infighting among U.S. financial regulators and their overseas counterparts is causing investors to look elsewhere for productive investment opportunities.
The list of problematic cross-border issues that need to be addressed is growing, and the frustration from foreign regulators over the lack of international coordination on financial reform measures has reached an unprecedented level.
After the so-called Volcker Rule was proposed in 2011, a number of foreign regulators submitted a letter to the Treasury Department expressing concerns that the proposed rule could reduce the liquidity of their sovereign bonds and damage international cooperation efforts.
More recently, a number of foreign regulators have weighed in on the Federal Reserve's rule proposal to implement enhanced prudential standards for foreign banking organizations.
For example, the European commissioner in charge of financial regulation, Michel Barnier, warned in a letter to Federal Reserve Chairman Ben Bernanke that the Fed's proposed rules affecting European banks doing business in the United States will duplicate work already done in Europe and create additional costs.
Commissioner Barnier also warned that the Fed's proposal could risk a protectionist backlash and threaten the global economic recovery.
The frustration reached a new level when nine finance ministers wrote to Secretary Lew expressing their concerns about the lack of progress in developing workable cross-border rules as part of reforms of the over-the-counter (OTC) derivatives markets.
They warned that without clear direction from regulators working together, derivatives markets will recede into localized and less efficient structures.
Derivatives end-users will find it more difficult to manage risk and suffer from burdensome regulatory conditions.
I look forward to hearing from Secretary Lew about the specific steps he will take to avoid cross-border conflicts and the unnecessary costs imposed by them.
Finally, although this hearing is focused on Secretary Lew's role as the Chairman of the FSOC, I would be remiss if I did not take this opportunity to question him about the recent IRS scandal.
The largest bureau within the Treasury Department is the Internal Revenue Service.?
Last week, the Treasury Inspector General for Tax Administration issued a report that documents a number of troubling and disturbing actions regarding the targeting of conservative groups by the IRS.
These actions should never be tolerated.
President Obama has directed Secretary Lew to make sure that all of the Inspector General's recommendations are implemented quickly.
I look forward to hearing how Secretary Lew will carry out the President's directive. I also look forward to hearing what additional steps Secretary Lew is taking to ensure that no future income tax audits will be conducted in a discriminatory manner ever again.
Thank you, Mr. Chairman.