On July 27, 2017, Treasury Secretary Steven Mnuchin delivered the Department of the Treasury’s annual report on the state of the international financial system. Mnuchin’s testimony covered many topics ranging from the Volcker Rule to tax reform and China equity caps. The hearing was sometimes contentious, with Rep. Maxine Waters (D-CA) sparring with Secretary Mnuchin over his apparent failure to respond to letters of inquiry from Waters. Despite the fireworks, Mnuchin laid out some of his thoughts on the state of domestic and global financial markets as well as the Treasury’s plans for recalibration of Dodd-Frank regulatory reforms.
A key takeaway from the hearing involved Mnuchin's outline of the negative effects he said the Volcker Rule was having on market liquidity and highlighted the Treasury’s plans to “fix” the rule. Mnuchin’s proposed fix follows the path laid out in the Treasury’s recent report laying out its “core principles” for regulatory reform. He also said he would work with regulatory agencies and through the Financial Stability Oversight Council (FSOC) to seek consensus on the best ways to recalibrate and reform the Volcker Rule, while still maintaining the rule’s regulatory goal. In addition, Mnuchin agreed to work with Congress to make further changes.
While the Committee members queried the Treasury Secretary on topics like improving the transparency of the FSOC, cybersecurity, and housing finance reforms, Mnuchin focused the balance of his testimony on how Treasury is taking a leading role to ensure accountability of international financial institutions, such as the International Monetary Fund (IMF), and plans for implementing improvements to the financial regulatory framework in response to the President’s “core principles” Executive Order. Mnuchin’s testimony closely mirrored the Treasury’s report plans to eliminate regulatory overlap, tailor capital requirements to bank size, fix the Volcker Rule, and increase the accountability of the Consumer Financial Protection Bureau (CFPB).
Mnuchin also testified briefly on the importance of housing finance and tax reform. He underscored the Administration’s goals of reducing middle-class tax burdens, lowing corporate tax rates, and simplifying the tax code. He also spoke briefly about the Treasury’s cooperative efforts with Congress to combat terrorism and illicit finance.
An archive of the July 27, 2017 hearing is available via: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=402207