THE ANNUAL TESTIMONY OF THE SECRETARY OF THE TREASURY ON THE STATE OF THE INTERNATIONAL FINANCIAL SYSTEM, PARTS I AND II HEARINGS BEFORE THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED SIXTEENTH CONGRESS FIRST SESSION APRIL 9 AND MAY 22, 2019 Printed for the use of the Committee on Financial Services Serial No. 116–17 ( U.S. GOVERNMENT PUBLISHING OFFICE 37–448 PDF WASHINGTON : 2020 VerDate Nov 24 2008 15:55 Jan 16, 2020 Jkt 095071 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 K:\DOCS\37448.TXT TERRI HOUSE COMMITTEE ON FINANCIAL SERVICES MAXINE WATERS, California, Chairwoman CAROLYN B. MALONEY, New York PATRICK MCHENRY, North Carolina, NYDIA M. VELA´ ZQUEZ, New York Ranking Member BRAD SHERMAN, California PETER T. KING, New York GREGORY W. MEEKS, New York FRANK D. LUCAS, Oklahoma WM. LACY CLAY, Missouri BILL POSEY, Florida DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri AL GREEN, Texas BILL HUIZENGA, Michigan EMANUEL CLEAVER, Missouri SEAN P. DUFFY, Wisconsin ED PERLMUTTER, Colorado STEVE STIVERS, Ohio JIM A. HIMES, Connecticut ANN WAGNER, Missouri BILL FOSTER, Illinois ANDY BARR, Kentucky JOYCE BEATTY, Ohio SCOTT TIPTON, Colorado DENNY HECK, Washington ROGER WILLIAMS, Texas JUAN VARGAS, California FRENCH HILL, Arkansas JOSH GOTTHEIMER, New Jersey TOM EMMER, Minnesota VICENTE GONZALEZ, Texas LEE M. ZELDIN, New York AL LAWSON, Florida BARRY LOUDERMILK, Georgia MICHAEL SAN NICOLAS, Guam ALEXANDER X. MOONEY, West Virginia RASHIDA TLAIB, Michigan WARREN DAVIDSON, Ohio KATIE PORTER, California TED BUDD, North Carolina CINDY AXNE, Iowa DAVID KUSTOFF, Tennessee SEAN CASTEN, Illinois TREY HOLLINGSWORTH, Indiana AYANNA PRESSLEY, Massachusetts ANTHONY GONZALEZ, Ohio BEN MCADAMS, Utah JOHN ROSE, Tennessee ALEXANDRIA OCASIO-CORTEZ, New York BRYAN STEIL, Wisconsin JENNIFER WEXTON, Virginia LANCE GOODEN, Texas STEPHEN F. LYNCH, Massachusetts DENVER RIGGLEMAN, Virginia TULSI GABBARD, Hawaii ALMA ADAMS, North Carolina MADELEINE DEAN, Pennsylvania JESU´ S ‘‘CHUY’’ GARCIA, Illinois SYLVIA GARCIA, Texas DEAN PHILLIPS, Minnesota CHARLA OUERTATANI, Staff Director (II) VerDate Nov 24 2008 15:55 Jan 16, 2020 Jkt 095071 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 K:\DOCS\37448.TXT TERRI C O N T E N T S Page Hearing held on: April 9, 2019 ..................................................................................................... 1 Hearing held on: May 22, 2019 ..................................................................................................... 53 Appendix: April 9 and May 22, 2019 ................................................................................ 99 WITNESSES TUESDAY, APRIL 9, 2019 Mnuchin, Hon. Steven T., Secretary, U.S. Department of the Treasury ............ 4 APPENDIX Prepared statements: Mnuchin, Hon. Steven T. ................................................................................. 100 ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD Waters, Hon. Maxine: ‘‘Congressional Committee’s Request for the President’s Tax Returns Under 26 U.S.C. § 6103(f)’’, dated June 13, 2019 ...................................... 102 Beatty, Hon. Joyce: Letter to Inspector General Eric M. Thorson, U.S. Department of the Treasury, dated February 14, 2018 ............................................................. 135 McHenry, Hon. Patrick: Letter to Director Kenneth Blanco, Financial Crimes Enforcement Net- work, U.S. Department of the Treasury, dated May 6, 2019 .................... 139 Letter to Treasury Secretary Steven Mnuchin, dated September 12, 2018 140 Mnuchin, Hon. Steven T.: Written responses to questions for the record submitted by Representa- tive Budd ....................................................................................................... 143 Written responses to questions for the record submitted by Representa- tive Cleaver ................................................................................................... 145 Written responses to questions for the record submitted by Representa- tive Chuy Garcia ........................................................................................... 155 Written responses to questions for the record submitted by Representa- tive Anthony Gonzalez .................................................................................. 155 Written responses to questions for the record submitted by Representa- tive Green ...................................................................................................... 158 Written responses to questions for the record submitted by Representa- tive Kustoff .................................................................................................... 161 Written responses to questions for the record submitted by Representa- tive Lucas ...................................................................................................... 162 Written responses to questions for the record submitted by Representa- tive Posey ....................................................................................................... 162 Written responses to questions for the record submitted by Representa- tive Stivers .................................................................................................... 166 Written responses to questions for the record submitted by Representa- tive Wagner ................................................................................................... 166 Written responses to questions for the record submitted by Chairwoman Waters ............................................................................................................ 170 (III) VerDate Nov 24 2008 15:55 Jan 16, 2020 Jkt 095071 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 K:\DOCS\37448.TXT TERRI VerDate Nov 24 2008 15:55 Jan 16, 2020 Jkt 095071 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 K:\DOCS\37448.TXT TERRI THE ANNUAL TESTIMONY OF THE SECRETARY OF THE TREASURY ON THE STATE OF THE INTERNATIONAL FINANCIAL SYSTEM Tuesday, April 9, 2019 U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. The committee met, pursuant to notice, at 2:04 p.m., in room 2128, Rayburn House Office Building, Hon. Maxine Waters [chair- woman of the committee] presiding. Members present: Representatives Waters, Maloney, Velazquez, Sherman, Meeks, Clay, Scott, Green, Cleaver, Perlmutter, Himes, Foster, Beatty, Heck, Vargas, Gottheimer, Lawson, San Nicolas, Tlaib, Porter, Axne, Casten, Pressley, McAdams, Ocasio-Cortez, Wexton, Lynch, Adams, Dean, Garcia of Illinois, Garcia of Texas, Phillips; McHenry, Wagner, King, Lucas, Posey, Luetkemeyer, Huizenga, Duffy, Stivers, Barr, Tipton, Williams, Hill, Zeldin, Loudermilk, Mooney, Davidson, Budd, Kustoff, Hollingsworth, Gon- zalez of Ohio, Rose, Steil, Gooden, and Riggleman. Chairwoman WATERS. The Financial Services Committee will come to order. Without objection, the Chair is authorized to declare a recess of the committee at any time. At today’s hearing, we are receiving the annual testimony of the Secretary of the Treasury on the state of the international financial system. And I will now recognize myself for 4 minutes to give an opening statement. Today, this committee convenes for a hearing to receive the an- nual testimony of the Secretary of the Treasury on the state of the international financial system. I would like to start by talking about the International Development Association, or IDA, which is the arm of the World Bank that provides grants and highly concessional loans to the world’s poorest countries. I am concerned that IDA, through its new private sector window (PSW) today is transferring $2.5 billion to the World Bank’s private sector investment arm, the International Finance Corporation (IFC), and is subsidizing private firms selected without competition on the basis of unsolicited proposals. The PSW is likely to prioritize financial returns over positive de- velopment impacts which will be difficult to monitor. The PSW also stands in conflict with the World Bank’s own principles that call (1) VerDate Nov 24 2008 15:55 Jan 16, 2020 Jkt 095071 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 K:\DOCS\37448.TXT TERRI 2 for subsidies to be justified, transparent, competitively based, fo- cused on impact, and guarded against rent-seeking opportunities. So my message to Treasury and to the World Bank is that unless these transfers stop, or at a minimum are competitively based and fully transparent down to the amounts and purpose of aid going to which firms and projects, the Administration’s request for Congress to authorize the IFC’s general capital increase will not be a com- mittee priority. Now, I would like to turn to Treasury’s implementation of U.S. sanctions. The Secretary also must provide this committee with complete answers today regarding the Treasury Department’s ac- tions to delist companies associated with Russian oligarch Oleg Deripaska. Deripaska is a criminal, and Vladimir Putin’s confidant, who should not be let off the hook from sanctions that were put in place to punish bad actors. I am very concerned that the delisting agreement that Treasury implemented sends exactly the wrong message to Deripaska, other Russian oligarchs, and Putin himself, because Deripaska will still wield a great deal of influence over his previously sanctioned com- panies. Trump has shown a deference to and a fondness for Vladimir Putin, including at the Helsinki summit last summer when Trump inexplicably sided with Putin over his own Justice Department, when the FBI indicted 12 Russian intelligence officers for con- spiracy to interfere