i'm informed by mr royce's staff that he believes his life will be full invite even if he misses hearing part of my opening statement so we'll begin these hearings and i'm sure that in fact that assumption is incorrect and many of you in the audience will advise mr royce of the emptiness in his life having missed the least the beginning of this this  rendition in advance of the group of twenty meeting in london this subcommittee held a hearing to explore the foreign policy implications of the possible commitments that would be made there president obama then went to the g twenty where along with the other g twenty summit leaders he committed five hundred billion dollars in contributions to the i m f roughly one hundred nine billion of that to come from the united states he also committed us to joining a two hundred and fifty billion dollar expansion of special drawing rights monetary reserves for all members i should point out that nearly two billion dollars of this two hundred fifty billion will go to iran that hundreds of millions will go to sudan and that sudan has already used its prior receipt of special drawing rights by  borrowing against it turning it into cash in financing its military additionally the world leaders pledged to at least one hundred billion dollars of additional lending by lateral development banks including a commitment to the world bank which would triple its lending to thirty five billion dollars no effort was made that i'm aware of to say that before we make additional commitments to the world bank we get that organization to cease and desist its dispersed months on loans previously approved to the government of iran it also seems that as the president was making these commitments he did not adequately explain to foreign leaders that in our country and with our constitution the president speaks for the executive branch and that where legislation or appropriations are necessary there is a co equal branch of government is right there in article one of the constitution and foreign leaders are often misled into believing that a president speaks for all branches of the federal government in fact they need to be warned that a commitment of the executive branch is a commitment to use the executive branch's power and a commitment to come to congress and to try to persuade us to move in the same direction  y concern is that the policies reached at the g twenty agreement aimed at serving the world's solving the world's economic problems or at least a million rating them seem to have been utterly blind to our anti genocide anti proliferation and anti terrorism policies that may be the decision of the executive branch it does not have to be the decision of the legislative branch it appears that a number of our friends in europe simply don't agree with us on anti gun aside anti proliferation or anti terrorism that doesn't mean they're pro terrorist or pro genocide it just means they think that we should conduct business as usual while turning a blind eye to those concerns and it is clear that those who wish to be applauded by european leaders best ignore those considerations the question is whether ignoring those considerations is also a way to be applauded lauded by congress and the american people last week and i'm glad he got here in time for this favorable mention  institutions specifically we want to prevent countries that are identified as supporting terrorism or involved in nuclear proliferation most notably iran from benefiting from policies of the i m f and the world bank at the same time that the u s government is transferring billions of dollars to those institutions i should point out that the  e war appropriations bill includes one hundred nine billion dollars of transfer or author a commitment of funds if you will to the math and also over three billion dollars is authorized for the world bank and nothing in that bill asks those institutions in return for a large s to alter their policy of business as usual to sudan and other terrorist regimes now these concerns are not new as i have pointed out before from two thousand to two thousand and five the world bank approved one point four billion in loans to iran  some half billion is yet to be dispersed and i believe the united states should not provide additional funds to the world bank in till those  stopped similarly according to a may twenty sixth report in the financial times hezbollah in anticipation of potential success the lebanese election began meeting with i m f officials fortunately the lebanese people were unwilling to embrace hezbollah unfortunately what these discussions show is that the i m f administrators were willing to embrace hezbollah should it have been successful in these in these elections the international community should not expect americans to contribute or put at risk more than one hundred billion dollars without focusing on the demands of the american people that these international organizations do not benefit terrorism proliferation and genocide as noted in the c r s report the most effective way that congress can influence u s policies toward the multilevel lateral institutions is by attaching in forcible conditions to new funding arrangements now our discussion goes at these hearings goes beyond the multilateral institutions are don't mastic or at least called mystic stimulus efforts and bailouts through tarp talf in the stimulus bill play a major role in the world economy the four known and one focus of this is the i g bailout for known institutions have benefited from the bailout of what are called u s companies most notably was our two hundred nearly two hundred billion dollars committed to a g let me focus a little bit on the i g bailout the word is clear to investors worldwide if you loan money to an american auto company like chrysler you may get only twenty cents on the dollar but if you take your money and quote invest it at the i g casino not putting it into anything productive not actually building anything you just play the casino the american taxpayer will be squeezed into making sure you get every penny and so while the chrysler bondholders are getting about twenty cents on the dollar the i g counter parties have a lost a penny and i realize i've gone a little bit long but i know that mr royce would want to hear at least a full a full contingent of this opening statement so in deference to him i will continue  one billion dollars u s government money on their credit default swap they didn't have to give up a penny and it's alarming and unacceptable that we sent this money to an institution  received eight hundred million dollars of u s taxpayer money in the i g bailout while this is sort of this with of the while the swiss authorities have provided us with the details on three hundred american suspected of tax fraud s and the swiss government officials have failed to identify more than fifty thousand u s account holders claiming that further cooperation would violate the law they are unwilling to change so s tax money goes to support a bank that makes it much much more difficult to collect u s tax money from those who owe it placing the burden of that u tax collection on working families who do not have swiss bank accounts now there are american values and there are what i would call the accepted values of wall street and the world economic elite sometimes these values coincide and were reflected ajeet at the g twenty conference a dedication to alleviating goal global problem poverty and effort to stimulate the world economy but there are three p's where wall street values and world economic elite values clash with american values i call them the three ts tax evasion terrorism and total protection of the biggest financial institutions whether u s or foreign at the expense of the u s taxpayer i would hope that american foreign economic policy will reflect american values and i hope that at least this branch of government keeps that in mind and asserts its authority rather than serving as a rubber stamp for the administration with that i yield to our ranking member mr royce thank you very much chairman and i thank you not only for calling this hearing but as you know the international financial crisis has impacted the full range of our foreign policy and national security  that's part of the objective here is to hear from our witnesses on that let me let me begin by saying i share the chairman's concern about i m f aiding iran and i very much appreciate the letter mr chairman that you you led in which i signed calling for this funding to be pulled out of the pending supplemental and i think it's very very important that at a time when we should squeezing iran because of its nuclear program and recognizing that the iranian economy frankly is hurting that this policy of allowing iran to receive new i mean i m f money and some suggest chairman that this could go as high as one point seven billion dollars one point seven billion dollars a lot of this at u s taxpayer expense this is clearly nonsense and that's just one concern we also have sudan we also have syria we have the other beneficiaries frankly that that we need to be worried about as well now admittedly i am not i'm not big on i m f spending to begin with and i don't see ramping up its lending as central to the global economic recovery i certainly don't trust it to play a critical regulatory role as some advocate and i suspect the level of lending plummeting over the last five years the i m f is probably desperate for a new mission and i think that this is part of that push but i think this opaque institution certainly hasn't made the claim made the case for a claim on u s resources and i think it's especially important that we consider the fact that these are resources that were when i have to go out and borrow it's not as though we have reserves ready to fund this this this will be done through borrowing and i think the popular media enjoys labeling the financial crisis by the way as a crisis of free markets it rarely explains the harmful impact of government actions such as policies and political pressure to sacrifice lending standards to resist meaningful reform i'd recommend tom souls book for those interested the economist book the housing boom and bust that gives you a full range of government interventions made in the domestic market here where congress was pushing in one way while the regulators were saying wait a minute wait a minute or over leveraged one hundred to one  know why why are we allowed to go in and deal leveraged why can't we put some limits on the government sponsored enterprises fannie and freddie why why should we have these three percent loans or zero down payment loans what was political pressure that drove that c r a driving subprime lending here there's a lot of the issues that in fact emanate from government intervention in the market and congress is access to all of the information at the federal level in order to be able to get past this patchwork of regulation but how does the fed's bad decision to keep interest rates now for four years running how does that have anything to do with free markets howdo the central banks in europe following the fed's lead and having interest rates negative in europe for four years running when adjusted for inflation and the resulting bubble that that created in terms of housing terms of an economic bubble how does that have anything to do with the free market no no these are mistakes made at the governmental level and these are examples of interventions where we didn't get the regulation right that is what this is about in the fact is that free markets have done more to eliminate poverty then all of the government programs that free markets combined fund because it's ultimately the market through taxation that funds the programs that we're passing out of here such as the funding that we're that goes to the i at least the g twenty has agreed on a hopeful note here in my view to reject protectionism yet too many countries are moving toward protectionism the obama middle administration is willing to spend aid money for trade the g twenty agreed to spend two hundred fifty billion on trade but it is unwilling to get an actual trade deal done it is tied in knots over the panama deal is a deal of very minor economic consequences but it sends enormous signals worldwide in terms of liberalized trade or resistance to it in terms of protections it is setting on a korea deal it is finishing the doha trade round could boost the global economy by at least one hundred fifty billion a year yet there is no american leadership on getting that nothing would more advance our interests abroad than an economic recovery at home it is hard to see how today's massive deficit spending is go help on that if we look at government's attempt to spend this year alone we will have somewhere we want hit a two trillion dollar deficit but i by the end of the year will come close does anyone really believe this administration's claim that will get deficits under control i don't see the political understanding nor discipline to do that and the fed chairman again raised a warning last week meanwhile government bureaucrats and politicians are assuming ever greater economic power who knows the powers of the massively expansive obama health proposal will transfer into public hands tarp has brought the american people government motors fifty billion dollars g m being government motors the political economy is only beginning the hell reports that one prominent member of congress quote was able to get g m to undo a plan parts distribution center closure in his district so political poll is beginning to replace market forces one witness suggests that next will come graft and corruption as venezuela and others nationalize companies and embrace statism their economic demise is going to intensify let's not join that club let's try to embrace markets let's try to keep politics out of it  and let's try the regulators want to take effective action against institutions whether it be government sponsored enterprises like fannie or freddie let's not have politicians stand in the way and prevent that proper regulatory role from occurring mr chairman thank you again for this hearing thank you mr royce i should point out that as scheduling has worked out on the hill the foreign affairs authorization bill is on the floor now i'm watching it here on the screen just just for a second full attention to mr royce and that is why so few of our colleagues can be here almost our entire committee is  down on the floor this hearing was scheduled first but the floor needs need to needs to go forward i'm going to resist and it's very difficult for me commenting on mr royce's views on trade and instead recognize the vice chair of this committee mr scott i really can't think of any more single threatening issue for the future welfare of our country than our financial situation not just here at home but abroad i've just returned from europe from our nato meetings and needless to say the financial crisis the world financial crisis was center stage but the greater amount of attention was paid to what's going on in the united  states and surprisingly that which got more attention than the domestic side was our debt and the part of our debt that got the greatest tension was the debt that is being held in the hands of foreign countries and many of you may not no but just in the last nine years our country has borrowed more money from foreign governments than and the entire preceding  two hundred and eleven years just think about that that means sense the foundation of the united states of america all  money that was borrowed up through from seventeen eighty nine up through two thousand and two does not come up to the amount of money we have borrowed from foreign countries in the last nine years that is an extraordinarily threatening situation now yesterday i was on the voice of america television program and it aired exclusively and to china and to china and you know what the question the chinese were asking me over and over and over again well north korea is certainly in the news and they're right next door the chinese were concerned about that but they were more concerned about whether or not they should continue to buy our debt that is an amazing situation so so so and just today rogers has reported that russia is beginning  question there are a continuance at the level of purchasing our debt and so i think with that backdrop this hearing is extraordinarily important and so i want to thank you mr chairman for examining the foreign policy implications of the united states response to our current financial crisis the united states has been and certainly still is the financial backstop of the world make no mistake about it we're still number one hanging on by our fingernails but we're still number one we still provide the lion's share of funding for most multinational financial and development is to to sions the u s dollar has been the currency of choice for international transactions and investments for decades investing in u s treasuries has been the safe this form of investment for even longer and more where the american consumer has been the driver of economic engines not just in this country but the numerous developing countries through our ports purchasing power this is what makes and will continue to make america the greatest nation in the world some say it is our military strength and it's certainly there but it is our financial capacity it is our economic capacity that drives the world we have historically been able to wailed our tremendous economic power alongside our military might to undergird our diplomatic efforts and achieve our foreign policy objectives but it's been not just military's been economic power however it seems that in the wake of our ongoing financial crisis our economic power or at least the perception of that power as i alluded to at the very beginning with my remarks on china and russia is beginning to unravel and so while much of the discussion today will focus on multinational financial institutions such as i m f and world bank i think it is worth examining this fact that a changed perception of u financial prowess will have on our efforts to influence events around the world everything is image it's not what we think of ourselves it's what other people think about us so much like the view of our military strength has been lessened by the quagmires in iraq and afghanistan so too it seems the view of our economic might has become more negative as we are bogged down in this recession we've already seen talk from opec about shifting away from dollar based pricing of oil so our economic leverage is beginning to wane some so as we move forward with our domestic financial rescue plans and with finding multinationals to sions in an effort to spark a global recovery i feel that we must keep in mind that our ability to influence other nations lies largely and our economic might real and perceived thank you mr chairman thank the vice chairman  without objection the full each witness will be entered into the record we'll ask each witness to summarize that statement orally in five minutes i will once we hear from the witnesses will be asking right ahead thank you for i didn't know you had one but i look forward to hearing it thank you i'm sorry i'm late but i was on the floor of the state department authorization bill so i as i pointed out to our colleagues that's why so many people they all want to be here  lighting for the state department the floor of the house yes thank you mr chairman thank you so much mr chairman if if this crisis has taught us anything it is that our economies are linked but our ability and one system can have global effects last fall's collapse of lehman brothers for example displayed the ripple effect one catastrophic event can have on the global economic landscape the ripple effect of course is not confined to just the financial sector we have all seen the effects in our respective districts here in congress fairfax county my home county for example is home to more than three hundred sixty four known firms representing nearly forty countries these international companies are dealing with financial challenges and both fronts the us federal reserve in the bank of england have taken necessary steps to insulate our economies further damaged by buying debt the u s and u k are sharing much of the burden for insulating the rest of the world from further damage though the situation is far from ideal in a report released this week the f warned that economic recovery in europe specifically the euro zone could be stymied by banks burdened with bad assets i fear that some european nations are not doing their fair share with regard to properly questioning the international economy f or the damage for example last the i m f call for european authorities to follow the u s and conducting stress tests the e u stress test which will be national and not european wide will not even take place until september european banks must be on the same page as the united states when it comes to cleaning up this mess according to an i m f report published monday the lack of a coordinated and aggressive clean up plan for european banks could hamper economic recovery in the sixteen countries that share the euro the same report discusses the need for more decisive and thorough action on the part of european authorities mr chairman the german chancellor merkel has expressed skepticism about the effectiveness of major economic stimulus packages earlier this week she stated that quote the independence of the central bank must be preserved in the things that other central banks are doing now must be reversed unquote though there are more conservative approaches lead to political gains perhaps for her party i at the long term consequences in terms of economic recovery in the western hemisphere i look forward to hearing from our witnesses today thank you m all the gentleman from arkansas does not have an opening statement and so we will hear from our witnesses the first of which is damon silvers who serves as associate general counsel for the f l c i a o mr silvers is also deputy chairman of the three member congressional oversight panel there are many over the congressional oversight panel this one is not made up of members of congress but is perhaps the most important of the oversight panel since that oversight sees the tarp program mr silver you won't mind if i mention that we have five members and one of them is actually a member of congress jeb hensarling i think you would be i would be remiss if i didn't correct the record on that going on i was going to address two issues one is the interaction of tarp with foreign institutions and the second is the g twenty from the perspective of the global labor movement when congress and acted the emergency economic stabilization act of two thousand and eight  congress provided that funds under that act could only be explained expanded to support u s based financial institutions built into the definition of the term financial institution however congress did not bar foreign financial institutions from indirectly benefiting from expenditures and in particular as you noted mr chairman in your opening statement a large portion of the funds provided to one of the primary beneficiaries of the have been transferred directly to foreign bank counter information in this area includes sufficient information to clearly understand the basic question of how the economic relationship between ai g and its derivative counter parties evolved during the critical month of september two thousand and eight which led to the bailout of aig as a result it is really impossible to responsibly express with any certainty an opinion about these transactions or provide answers to questions such as what these transactions in the form undertak unavoidable or were they in the public interest i think we can say however that none of the institutions on the i g counterparty list as disclosed earlier this year would appear to have been bankrupted had they not received that money now more broadly the national intelligence director in the annual threat assessment presented to the senate select committee on intelligence in february of this year identified the economic and financial crisis as quote the primary near term security concern of the united states unquote and the activities of the treasury department the f d i c and the federal reserve which constitute collectively the financial bailout a set of activities larger than the activities under the panel oversees re several questions in relation to the global interest of the united states first the question what is the impact of the approach we are taking to refinancing our banking system on the perception among foreign investors of the strength of our currency the state of the federal reserve's balance sheet and the extent to which we have or have not actually dealt with the capital shortfalls in our major banks secondly to the extent to which our approach to resolving our banking crisis is succeeding through providing low cost liquidity and an implicit guarantee to our major banks with an international presence is this approach causing u s banks operating overseas to be perceived as having an unfair advantage over their domestic competitors with obvious foreign policy and potentially national security consequences thirdly are we seeking to perpetuate the basic international financial arrangements that appear to have contributed to the bubble and the subsequent crisis namely high degrees of leverage funded by cheap debt financed by global trading currency imbalances and fourthly is it true of some of  we today have no means of resolving an insolvent global financial institution now the global labor movement has urged the governments of the g twenty countries to quote put employment and fairness on quote at the center of the vermont's response to the crisis london communique at the international level may be too weak secondly that banks in key countries are being propped up rather than restructured risking a japanese lost decade scenario globally thirdly that the governance of multinational bodies such as the financial stability forum on the i m f charged with addressing the crisis is both opaque and two now in terms of who is involved globally and fourthly that despite the very positive statements coming out of the london meeting that the resources committed to fiscal stimulus particularly in the euro zone and job creation are not increasing while the downward spiral globally is increasing and i have attached to my testimony a detailed commentary from the global labor movement on the g twenty meeting in london thank you  conclusion thank you for the opportunity to appear before you today obviously these subjects are somewhat more complex than the five minutes allow and though i do not speak for the oversight panel in any respect i hope i speak in the respect of offering the panel s assistance to the committee in any way you would find useful i can say with certainty that the a f l cio and the global labor movement do so offer that assistance thank you thank you makes you wonder whether some of these institutions were too big to fail and said they were too interconnected to fail arguably they just too well connected to fail with that we welcome kevin kearns president of the united states business and industry council which represents the interests of family owned and closely held u s manufacturing companies mr prince thank you mr chairman mr ranking member other members of the committee it's a very timely hearing five minutes isn't much time i'm going to take a five hundred foot that it's trillions for banks financial institutions insurance companies but really not much for manufacturing and if we give general motors and chrysler some money who else is going to line up we americans just seem to love to hate our manufacturers but i would ask the question where is the wealth generation coming from to pay off this debt we've already incurred that mr scott referred to and the massive debt we're incurring now there are three and any basic economic textbook will tell you there are three ways you create wealth created by making it mining it a resource extraction and growing it banks and financial institutions properly understood a opposed to creating derivatives and complex instruments that no one can understand should make money on a spread you know they pay their depositors such and such and they take in a little bit more from customers they lend to even if we were to straight now wave a wand and straighten out the financial institutions today i can guarantee you that no domestic manufacture given our trade policies given the unfair advantages the currency cheating the vat tax inequity hundred fifty of our train to subsidize their companies faster than we can address them in you know years and years of negotiation when i was in the foreign service in japan i saw teaching competitive incentives talks went on forever the most talks went on forever jim real tried to turn the japanese fair trade commission into a antitrust division of the justice department etc etc it was a time for chitchat diplomacy is over our situation right now reminds me of  hundred six you know they thought they had all the experience but they lost all their money they lost their industrial base during the war they thought they were going to run the world and the americans were going to pay for it well guess what that didn't happen and it's not going to happen to us so we need to find ways to reenergize our industrial base we need to do so unilaterally if necessary because sometimes power and unilateralism are necessary to bring other nations the table obama administration as far as we're concerned is trying to restore the status quo ante everyone up here yelped at seven hundred eighty nine billion dollars stimulus bill i didn't hear any yelping or from certain quarters i did but  about seven hundred fifty billion dollars trade deficits year after year after year i mean we've had almost forty years of trade deficits how many years do we have to keep going down that path whether it's panama mr royce  or you're right it's small potatoes but how long do we have to follow a failed model before we stop and reevaluated as opposed to rushing ahead with more manufacturing does sixty percent of the r and d in this country it provides the best paying jobs it is critical to our defense technology base it is what we need so when congress has for instance the big three terry of state signed on to what was funding stabbing our staff now bunning by the president signed on to that bill there were one hundred eighty co sponsors in the house why isn't that on the president's desk today what are we doing about other trade cheating intellectual property theft subsidies every other nation the world seems to think it's important to have a car industry a steel industry chemical industry industries other heavy industries we don't seem to care we seem indifferent but any basic economics textbook will tell you that it's important who owns the rents or the profits they make the decisions they're the ones in control and we're not in control of our destiny anymore we may think we are but i associate myself with mr scott's remarks except to the extent that the economic power is not there we're not generating the wealth and there's no plan that i can see either in the congress or the administration to get our wealth generating industries back on track to spend the money on that no none of the one thousand nine hundred businesses i represent knowledge just say this in conclusion no business owner is going to expand his factory or build a new factory in the united states until we change our trade policy until we call our allies and other trading partners on their trade cheating  you're throwing you know your flushing your money down the toilet so from the point of view of manufacturers nothing is going right in washington and they're pulling their money out of their businesses and they're preparing to fail birdsall founding president of the center for global development the center for global development is an independent nonprofit policy research organization that is dedicated to reducing global poverty as  and other members of the committee i'm going to concentrate on the g twenty agenda and in particular its implications for u s support to the i m f package and essentially my statement has to do with saying that i support fully the idea that congress would go ahead and indoors that package in the upcoming supplemental bill let me start by saying that as some of you have already indicated in your remarks in this century we're seeing really big shifts in the landscape we're seeing the rise of china and other powers in asia in particular and we see more and more that we face trans national threats today squabble challenges do not respect borders they threaten security globally and they threaten our own security here at home and the fact is as some of your remarks have indicated the u s cannot hide these problems and we cannot manage these challenges any more by ourselves that's what the g twenty leaders as a group recognized at the london summit let me quote from something that former undersecretary tim adams said at a house hearing of the house financial services subcommittee on an international monetary policy and trade in which i also participated quote failed states and extreme poverty breed unrest and instability and create the types of conditions that allowed dictators extremists and terrorists to thrive in short it is in our national security interest to ensure that angeline economic crises don't destabilized fragile states he pointed out that in the last in the recent period recipients of i m f loans have included mexico colombia poland ukraine pakistan all key allies and are crucial players in the success or failure of u s foreign policy and in addressing our national security objectives we have a global village that we constructed we live in the center of that village we're in the biggest house but there a fires spreading and the g twenty leaders essentially said we need the i m f as a fire brigade to deal with these spreading fires and i think the obama administration and the congress need to in a sense make the commitments that will help ensure that the fire doesn't come back to haunt us here at home let me make four points very quickly first is that the u s economic security recovery and our national security do depend in part on substantially increasing those resources at the i m f and at the multilateral banks in a sense i've said that already but i just want to emphasize that stimulating the global economy is absolutely vital for our own domestic recovery emerging markets are important in terms of our exports in two thousand and eight burchill all of our growth was export driven and one third of those exports went to emerging markets and developing countries there's also a security issue here i want to be positive about it and say that this crisis risks undermining tremendous six percent rate of economic growth over the last decade very good macro economic management in most countries all of that is put it risk now by this crisis which is leading to the withdrawal of capital the reduction of foreign aid tremendous fiscal shortfalls fifteen billion dollars alone for sub for africa in lost trade taxes  which they'll have to make up to pay doctors to pay health workers to keep their educate their teachers and school and so on so it's in our interests on the security side to lock in those kinds of gains what does the i m f have to do with this as i suggested it's the fire brigade in our global village the g twenty basically endorsed the idea that there should be a trillion dollars available for emerging markets and poor countries that includes and needs to include one hundred billion dollars from the u s for the new arrangements to  borrow the idea the c b o a has suggested that the school board at five billion dollars the five billion dollars will leverage five hundred billion dollars the cost to the u s tax payer would be five billion dollars and there would be no cost to the u s taxpayer through the issuance of additional special drawing rights i'd be happy to answer questions about that now the second point i want to make is the i m f today not the i we'll get louder next time we'll move on to ambassador miller director of the center for international trade and economic at the heritage foundation he's previously served as ambassador to the united nations economic and social council and bester miller thank you very much mr chairman for the opportunity to testify here today the views i express on my own and do not represent official position of the heritage foundation i think there are three issues here mr chairman the first is the nature of the globalized international trade and financial system i'm going to talk a little bit about that the second of the institutions of that system the i m f the world bank the world trade organization you yourself mr chairman expressed some concerns about those institutions and some of their flaws i share those flaws  particularly the possibility that financing might go through those institutions to rogue states or others that support terrorism but the final issue is the impact of the u s government actions our current actions interventions in economic activity both in the u s and other countries and i do want to talk about that what we do to keep our economic house in order here is far more important to our well being than anything we do through international organizations are through cooperation and act in groups like the g twenty first about the overall system mr chairman the we're in a recession today it's important to remember that in recent decades our world economic system has been producing strong broad based growth that has increased prosperity and reduce poverty around the world over the last ten years average world incomes have increased by over one third some criticize the free market system that has produced this growth is good for the rich but not for the poor the data show otherwise countries that move towards greater economic freedom in the last decade reduced poverty significantly while those that turned their backs on freedom saw poverty levels increase economic freedoms positive impact is also evident in areas like education health maternal mortality life expectancy as well as in protection of the environment where countries that are more economically free do a far better job than their less free counterparts the free market system works the record of government interference and economies is not so pretty the tarp program an issue aided under the previous administration is a good example of the problems of government interference in markets the tarp in particular is created confusion interfered with the establishment of market clearing price is for the assets in question and this been a lack of transparency in the program it's done little to get the troubled assets off the books of financial institutions the fiscal stimulus package passed under the current administration is even worse one estimate is only that only about thirty seven billion of that money has actually been spent most of it's going to be spent far in the future at a time when government stimulus will no longer be appropriate but will lead only to inflation in the u s economy the cost of these programs is creating a huge debt for our children and we're going to have to finance that somehow if we continue them we're going to see either inflation or increased taxes are both as well as a fall in the value of the dollar decreased foreign investment in the united states lower productivity overall and reduced economic growth some of expressed the hope that international cooperation such as among the g twenty could speed recovery this isn't realistic the most important macro variables the money supply and spending levels are going to remain in the control of individual governments there was also a lot of talk about regulatory reform at the recent g twenty summit our current regulations are overly complex and subject to manipulation we don't need more of them but reforms to improve trends to improve transparency and clarity could do a lot to improve competition and decrease risk there are other eminent risks to the u s and world economies policies that would greatly and artificially increase the cost of energy will decrease u s and world growth and lead to increased poverty actions that would restrict trade flows would also have a devastating impact trade restrictions go by the name of protectionism mr chairman but what they protect are the unfair privileges and politically connected special interests finally as the size and reach of the federal government increases in the u s there's the ever present risk of increased corruption which thrives where government regulations are complex and pervasive mr chairman a time of crisis may be a time to examine what has been done and what might be done better but it surely not the time to fundamentally undo the policies and practices that have brought so much benefit to so many thank you very much thank you one scheduling note you'll be happy to know that while we're up here we're missing the opportunity to debate an additional twenty seven amendments that are there debating on the floor to the foreign affairs authorization bill so the good news  that we will not be interrupted by votes on the floor and the other news is that other colleagues on our subcommittee have a perfect excuse for not being here finally i want to welcome roger robinson jr president and c e o of the conflict securities advisory group is over twenty five years of experience in identifying and analyzing international security risks m you mr chairman and members of the committee for the opportunity to appear before you today as you mentioned i've been working on that nexus between international security concerns and global finance for some thirty years now the views and i'm expressing today  my own and don't necessarily reflect the views of my firm conflict securities advisory group which is an independent impartial research provider specializing in global security risk today despite the valiant efforts of the treasury department others to curtail financial pose to global bad actors iran sudan syria north korea and other regimes continue to benefit from lawful inflows of hard currency and external financing in this connection i have several observations i'd like to share with the committee first concerning the role of publicly traded foreign companies it's important or stand that these public firms represents the principal source of financial and economic support for iran and certain other countries of concern most americans hold at least some of these companies and their retirement accounts and other investment portfolios mr chairman you have certainly been a leader in addressing this particular concern the second involves the international financial institutions notably the in your opening remarks mr chairman you reviewed the troubling amounts of taxpayer dollars committed to this enterprise including the likely two hundred fifty billion general allocation this summer from which iran will reportedly see more than one seven billion dollars the direct and cash infusions potentially provided by the i m f and other i m f eyes to these governments are legitimate national security issues particularly as these funds are relatively and disciplined and bill the third issue deals with foreign federal contractors we've calculated that among the top one hundred recipients of federal contract awards for fiscal year two thousand and nine roughly twenty percent have engaged in some kind of business activity within the borders of a state sponsor of terrorism during the past three years the congress could play a catalytic role that needs to transcend the traditional name and shame tactics and should be aimed at the mitigation of legitimate business and financial risks should be of interest are foreign conflicts securities has researched the number of publicly traded companies worldwide with business interests in each of the terror response ring states but in the short shortness of time and i am racing the clock i'd like to go to what more could be done i have several recommendations in this connection first strengthen corporate awareness of global security risk it's defined as the risk to share value in corporate reputation stemming from business ties to u s sanctioned countries including the terrorist states the f c c has an office of global security risk that could be leveraged in this connection and could communicate with foreign firms second we could highlight iran's use of foreign correspondent banks that facilitate the money transfers foreign exchange transactions letters of credit enter bank deposits and related financial activities with most of their major trading partners and that's something that should be on the agenda third capitalize on a existing private investment initiatives in the markets by mandating investment options for federal employees that take into account the security concerns urns and finally pass legislation to sanction iran has refined petroleum industry and encouraged the obama administration to for the first time in force the iran sanctions  conclusion without the support of their state sponsors terrorist groups are apt to shrivel like a virus without a host accordingly the time is past due to take a more serious inventory of financial measures that could be brought to bear to hobble these regimes and change their cost benefit calculations much as happened with libya mr chairman i am persuaded that the market oriented measures referenced above could serve as the most potent nonmilitary means available to the us to curtail terror sponsorship and w m d development political ration in the best of worlds the us would receive robust and cohesive multilateral support for such initiatives support which has traditionally been in short supply if this is not possible the us would be well advised to proceed unilaterally the american financial system remains as was stated by mr scott the dominant force on the global landscape that f responsible foreign financial institutions and companies can live without from a shareholder and reputational perspective regrettably requiring these hard choices on the part of primarily foreign firms and banks is now a necessity postponing this day a financial reckoning will make more likely a nuclear iran and more capable and dangerous us series worldwide thank thank you mr robinson will recognize our vice chair for his questions followed by a ranking member  nk you very much i'd like to follow up on to get your response to a couple of queries that were put to me by the folks from divest or risk losing out on its return of course i'm sure the caller that the treasury is the most safe and sound investment and one could hole there's absolutely no risk that we make not repay our debt but i'm worried that there was soon come a day when that in the case there are people who are thinking that then another caller from china asked whether united states had essentially been bought off by china i e at the united states has become reluctant to focus on the considerable human rights abuses in china out of fear that they may stop supplying financing to us that's the other wrinkle in this this particular question in particular highlights in my mind the dangers of our economic situation we find ourselves and i in no way believe the united states has been bought off nor do i feel that the c commerce around the world but the issue is the u s as it is proceed with some economically weak to what degree will it lose its leverage and holding people to a higher moral standard so i'd like to kind of get your response to that because i think that is really the fundamental question with god what is the measure of this are obviously an earring a somewhat perilous period it's unprecedented in our history and i think that and i very much hope that the administration understands the  urgency of righting the ship this is a very complex question and i confess that it would be difficult to go into all the moving parts so to speak but i would say that for the foreseeable future it's certainly the case that we would be servicing debt without any kind of disruption i think your remarks to your chinese callers were spot on but i at the same time i think all of remedial steps that need to be taken urgently if if the ship's going to be righted so i'd leave it with those more broad remarks if i may mr scott yes  there are think at least two ways of looking at your question the first is central to understanding both how we got here and how we have how we have to get out of here out of this the structural nature of a crisis we're going through  at the heart of our economic crisis is a structural trade deficit which has led to that which has led the chinese rationally to cumulate dollars and lend that lend lend those dollars back into global markets depressing but the global cost of credit in ways that ultimately didn't capture the risks involved in the provision of credit this is at the heart of the bubble and the collapse of that bubble that is not a system that those imbalances that structural trade deficit we run with china is not a sustainable phenomenon that some as paul krugman once said about it something like that that some point has got to end we'll end the it creates a situation where we and the  are sort of in a mutual state of mutually assured destruction if they stop financing us we stop buying from them i think everyone understands this and yet everyone also understands that it can't be sustained over time that the i believe that the focus of the obama administration's stimulus program and budget on not just spending money for its for its own sake but to lay a foundation for a more productive economy and the  to addressing manufacturing the details which have not been worked out are in the directionally correct in terms of dealing with that problem on the other hand those impulses among many different policy makers to essentially try to return to the economic status quo of two thousand and six or two thousand and seven risks a perpetuation of the dynamics you're concerned about to the breaking point there's a second and then one more short term related problem here there have been as a result of the bubble of very last very substantial real losses associated with our financial system those real losses can be found in abandoned tract housing projects across large parts of our country who funds those real losses who takes the hit is deeply connected to the question of the sustainability of our financial relationship with the rest of the world to the extent that we try either explicitly or implicitly hidden or above board to try to have the u s taxpayer absorb those losses in their entirety you know trillions of dollars of these losses rather than looking to as much as we can the people who took the risks the investors in these institutions to absorb those losses if we do that and we at the same time borrow the money to do that  then we again rick run the risk of dramatically increasing the unsustainable dynamics you are concerned about and this brings us back to just as the first point tightest to trade this point brings us back to  fundamental choices about what they are the public or investors in wall street essentially other people who are taking the hit for the investors for the mistakes that were made by financial institutions during the boom just very briefly may i just as i do yes thirty seconds ok thirty seconds i can be more succinct than mr so there's a chinese proverb that you can use mr scott it's the trees don't grow to the trees don't grow to th the export driven model that the rest of the world follows of the i m f the world bank all these international institutions have shoved down their throat has made america the first and last market a resort it's over they're broke we can't absorb their goods so we need a new model and the sooner that the congress and the administration work on inventing what that model is and people in the private sector the better thank you the time of the gentleman has expired we'll go to mr royce thank you mr chairman i'd like to ask mr robinson a couple of questions and one would be what specifically can be done tighten economic pressure right now in north korea i think that a lot of folks in washington are casting about for that answer mr royce and we had the banco delta asia approach in two thousand and five which was shockingly effective you know you know how  and how surprised treasury itself was in the way that it electrocuted money transfers letters or credit in a bank deposits something similar to that could be done by looking at the correspondent banking relations of all of the major north korean financial institutions as well as the banking relationships of their larger state owned enterprises now if these networks of of banks some of which are well known were to likewise feel themselves put at risk in terms of accessing the u s financial system as under secretary levy has done these heavy the iranian banks in many cases this would have a very powerful effect it would be a bank odel to asia times three or four fold some impact i believe and we should also be looking at inner bank deposits because folks don't necessarily appreciate that when banks deposit with one another it can be used or misused as a kind of reserve checking account that are renewed every six months and turn into a five year at near the cost of funds so there are a number of technical aspects to this that we could employ that would in effect scare off not just asian but european and other banks  worldwide not to and other financial institutions from doing this kind of life support business with north korea i'm thinking about some of the reports of the u n development graham and how they helped fund north korea well that we certainly want to include obviously the international financial institutions we've heard the kind of record that's been cited visa v iran and the world bank we can steer suspect that multilateral institutions need to understand that the free lunch for p r niang is over is chinese cooperation critical on this or can we get that cooperation in your opinion i think we can if we but it's not going to necessarily come voluntarily i think that we have to put chinese financial institutions that are insisting on providing life support to the north koreans on notice that it's going to be that activity or normal unfettered access to the united states financial system but it's not going to be that may be an area that the chairman and i can cooperate on in as we move forward but you mention in your written terrorist money that there were fifty publicly traded companies doing business in or with north korea could you give us an example of some of those companies you don't have to do it now if you don't have it at hand we'll get it later but well i certainly can and just put that in perspective there are three hundred fifty publicly traded firms doing business in iran two hundred in sudan one hundred eighty in syria for a total taken together with the north korean example over five hundred public firms with active non humanitarian ties in the terrorist sponsoring states and i course i include north korea among them notwithstanding the fact that it was iran has erroneous lee taken off the list but one of the things that strikes me right now is with the attention the focus that we have on north korea we might be able to make an example of north korea to the next you might say there's the old adage about shots in russia and warning shots the united states russian told me like them here in russia they had them too but it was a warning to the next guy the the idea would be if we could if we could get that kind of cohesion and get that kind of policy developed we might be able to show what cooperation could do it in this particular case we might have enough unified support globally to and libya levy has shown  done on this front it's pretty impressive two thousand and five as you indicated it was an amazing lesson and when you can't pay your generals and you can't continue to manufacture your missiles as one of the  one of the defectors who worked in one of the missile points told me you know he said we are trying to buy gyroscopes on the world market and when you've got no hard currency because everything's been shut down you can't do anything the whole line went dead for months and so now might be a time to try to get the reform the reforms necessary in the regime by deploying that we've done a pretty deep drill on north korea and i'd be pleased to assist with the kind of research that we've done in this connection just keep in mind that when you're dealing with serious financial sanctions which we're now talking about the chance for multilateral support include incorporating the on this in this particular field right let me go to nancy birdsall got some time here i want to ask nancy about an issue what does the g twenty commitment to governance reform in other words allowing developing countries to have a greater voice in the i m f and other international financial institutions actually mean because it seems to me what it means is that the u s clout would obviously be diminished and i guess my concern here do we want to willingly diminish that influence in this regard because many of the countries that we we would be giving that power to  aren't necessarily after the same objectives that you're after dr i'm just thinking about rule of law issues trying to get independent courts set up in different countries we've leveraged a lot to try to bring the rule of law and that's resisted by a lot of governments of the developing world certainly intellectual property is another issue but doing something about intellectual property rights if you diminish our ability to leverage on the f and you empower basically those developing countries where you're trying to institute reforms presuming for a minute that that the values that we're trying to  develop are worthwhile such as an independent court system give me your take on that doctor yes i think the issue is the following that we need to bring countries like china into the club in a meaningful way and in particular into the clubs represented by the international financial institutions the i m f and the world bank why first of all by bringing them into the club where in a position to work with them and in effect push along their inclination increasingly to play a role of global stewardship along with us doctor i was involved in africa chairman of the africa subcommittee for eight years and i have to tell you as we push news europe pushed engagement with africa the african growth and opportunity act conditioned upon the development of the rule of law independent courts the chinese government were sending the opposite message they were telling african leaders no you don't want to go down that road that's not in your interest it certainly isn't in china's interest where they are trying to sole source they weren't trying to open up markets and they certainly weren't trying to improve the betterment of the africans sub saharan africa and i just have to share with you i think your premise about bringing them into the club they're in the w t o and they're trying to wreck the you know i mean if they behaved in a responsible way on some of this i think we could be sold but i think their behavior convinces me that we're on exactly the wrong track if we bring them into the i m f and give them the influence of the i m f when their goal is not the betterment of the developing world it's taking resources from the developing world subverting democratic process there and pushing the idea of dictatorship frankly in african states they've they've been very north korea being removed from the terrorist list i introduced legislation immediately after that was noticed the congress was notified of that intention to prohibit the administration from taking north korea off the terrorist list  for variety of reasons that did not get a vote on the floor speaking of north korea and the ranking members question of what leverage we have and the dragoons and thank you for your excellent focus on on their banking relationships my fear is that any one of a thousand banks could act as a clearing agent for them cash on the barrelhead and that we need to focus in addition to the banks on their real sole lifeline irreplaceable lifeline and that is china and as long as china which subsidizes the regime in north korea it was it will take all of your banking skill and then some to put any real pressure on that regime and as long as china believes it can sell ten issues in the united states and subsidize the north korean nuclear program at the same time they will keep doing it one of the biggest fallacies is that because china holds our debt they have power over us and americans are told it's like your banker holding your mortgage you better be nice to him well imagine a world in which banks are prohibited permanently from foreclosing in the bank or better be nice to you and the fact is that in the world the true power is those who control markets and unfortunately as a number of our witnesses a pointed out the whole world has grown addicted to over selling into the u s market now mr silver's  services agreement obligates the united states and other countries to refrain from placing limits on the size of financial institutions to grant market access to all new financial products as if we don't have enough  tives out there to not add new regulation in new areas and these obligations are enforced through the w t o tribunals empowered to impose trade sanctions against countries if it as if our trade relationship and trade deficit wasn't big enough now it is true that certain prevention measures are excluded from these o sanctions but anything we did to protect consumers would not be and the whole though how round is focused on a further  financial service deregulation what steps should congress take to make sure that our efforts at new regulation are not defeated there is no way you can sell to congress the idea that there shouldn't be regulation of wall street so the way for the world economic elites to achieve their purpose is to disempower congress and one of the more clever ways to do that is through the w t you know a non elected body that could impose trade sanctions against the united states if we dared to not follow their lead so what do we do to make sure that congress is efforts to get a handle on the need for new financial services regulation are not defeated by the world trade provisions to effectively regulate aspects of our financial markets and corporate governance and no one seems to have raised the w t o objection to the basic structure of the and i'm not an expert on the w t o but the but my understanding is that the basic structure of the way in which it remains possible to regulate national financial markets involves not just the language you cited but also sort of extenuating national security  circumstances that sort of thing in the w t mr silver's if i if i can interrupt because i want to illustrate that the w t o is a truly toothless bogeyman used by and this bogeyman is used to scare congress and that is we could simply adopt the policy that if the w t if any country got trade sanctions against us we immediately had double trade sanction against them now that double trade sanction was in violation of the w t o they could take  o and get a triple straight sanction on us so long as our statute said that means we do a quadruple trade sanction on them so we would make it clear that any country that disagreed with our financial regulation was free to end all trade with the united states o member states around the world have effectively both strengthened and weakened financial regulation while subject to the w while subject w i would point out that there is clearly my testimony stated the opinion of the national director of intelligence that the failures to effectively regulate our financial markets have contributed to the primary threat to this country's national security x and in the world today in the opinion of the national director of intelligence so to the extent  that congress agrees with the congressional oversight panel that comprehensive reregulation of our financial markets is necessary there is clearly a national security purpose underlying it secondly i would say that this this argument this  bogeyman frankly goes to the need both politically but also substantively to make sure that there is coordinated reregulation of the financial markets globally and this is why the global labor movement is so concerned that the g twenty language in respect to in particular respect to reregulating shadow markets which is where some of the most slippery actors here are and some of the greatest leverage exists in the world economy that that language is not strong enough we need in the congress needs to work very closely very strong realty in dealing with any action necessary to restore our national security both in the financial and the manufacturing sector turning to mr kerns according to a number of economists and cute occluding simon johnson former chief economist of the i m f the money that is that we're being asked to provide to the i m f hundred nine billion dollars together with a lot more money from other countries is very likely to be used  for bailing out european banks who have lost money some one point five trillion dollars in eastern europe do you think that american taxpayers should provide the money not to deal with the world's poor but to bail out those banks that made one hundred nine half trillion shaky loans to eastern europe i do not  chairman that's the easiest question i've asked the european certainly european bankers certainly knew what they were doing because of the eastern europe and you know we've had a system for the i mean i entered the foreign service in one thousand nine hundred seventy seven i traveled in eighty countries i looked at a lot of government governmental systems financial systems cetera and i became convinced that there were  many many freeriding allies around the world who always depended upon the united states take the leadership to transfer the technology to license a coproduction to make the loans to supply money to the institutions and the sad fact is as as mr scott pointed out it took us until the first year ronald reagan's administration for the national debt to hit one trillion you know and now i don't know what it is twelve thirteen fourteen trillion we don't have the money anymore to do this i don't let me squeeze in one more question i don't think it's all wants a bill and that is i believe the i m f played a major role with the financial crisis in asia isn't it true that one of the effects of their inner in the asian financial crisis was to force those countries to have undervalued currencies which they kept undervalued for many  years have an undervalued asian currencies hurt the united states by causing a huge and persistent trade deficit with those asian countries and contributed to the loss of four million manufacturing jobs here in the united states another that china scooped business from with their devaluation were a lot closer more closely aligned with the united states and more friendly to our foreign policies and security policies et missile is a massive and major problem and it's not going to be the world it's not going to get better the financial crisis is not going to heal until we do something about it and mr silverstein a wreath comment on that or do you generally agree with input you mentioned about reenergizing manufacturing and things i think we all agree that the reality though is that we're in a seventy percent consumption you know market right now the financial services we need to export a lot more goods and services and yet with the global economy the way it is that's that's very difficult to do if i remember i equivalent of that in their country in the trade might be down as much as ten percent so again i'd like to hear your all's kind of take is to we're going in the future and you know what the deal is well i think  of major industries major industrial categories sectors in the us economy so i think the first thing that we have to do is not so much worry about exports but worry about retaking those percentages in our home market we have the world's fastest market it's a market we know the best we don't have state to state regulations that confuse us so let's make sure that  we're the ones making the products here that americans want to need so if you exclude other products in an effort to do that well i would certainly you know there's the myth of the level playing field and i went to frankfurt as a commercial officer in one thousand nine hundred seventy seven in the foreign service and so i've been doing this thirty two years and i haven't found a level playing field yet and it's it's impossible for u s companies to compete against foreign vats foreign subsidies foreign dumping ip theft and on and on and on without strong government actions so if it were up to me i'd use article twelve of the gat and i declare a balance of payments emergency and i would put in tariffs i would put in a border adjustable surcharge for currency manipulation i think the time for talking to these foreign nations and trying to get them to agree over some series of years to do what they want we want them to do is impossible the previous administration talked to the chinese about increasing domestic demand and following a different model disagree with the thrust of what mr kerns is saying i think the issue is that we need to have a mechanism to ensure and hance demand abroad we have to have stimulus not just in this country but around the world the fact is that china has done a relatively large stimulus package in order to increase domestic demand the fact that china is increasingly subject to the worry about the overall global imbalance it is trying to find ways given its political constraints which are problematic admittedly to move away from an export driven mercantile list approach it is also true that the i m f was on able to discipline china on the foreign exchange side it was equally unable to discipline the u s on its fiscal side so we have a world in which it is absolutely critical that the u s retain its leadership in pushing for collective action the deals together with our allies partners on these problems if we start threatening here and they are you know we're going to do this we are going to get ourselves into a big problem we are the masters of the universe in terms of knowing how to exploit an open global liberal trading environment and one part of that package has to be provision of collective that we're having to do all the buying and borrowing we absolutely have to retain the leadership we've had for fifty or sixty years in creating a system of collective insurance and appropriate collective action i also want to disagree strongly with mr kerns i think the kind of restrictive and protectionist measures that he is proposing would set back growth and productivity in the united states and around the world tremendously  he's talking about recreating a trade and commercial production system that we might have had in the past but the jobs that we need here in the united states are the jobs of the future the jobs a new sectors the newly created jobs that will happen in an open environment so i think it would just be very tragic indeed to start to build walls around the u s economy and other countries because that's going in the first instance to hurt american consumers tremendously who are benefiting the average family of four benefiting by about ten thousand dollars each year due to open the open trading but in which we participate so you're going to have that problem and then you're also going to have a problem for us manufacturers who depend on the imports of intermediate goods and their own manufacturing processes and if we put tariffs on those goods coming into the country then our manufacturers aren't going to be able to produce the finished products in a competitive way our productivity will go down our wages will go down it's going to be bad for americans in every aspect of the of the gentleman has expired and i recognize the gentleman from virginia i thank the chair and i'd like to a number of questions if we could be concise in our answers to the extent that's possible let me start with you dr birdsall and i so much appreciated your citing citation of china because actually the not a wild liberal last i checked but should we be concerned at the cleavage between the united states and some of its close allies germany and france to it on the issue of economic stimulus at this time yes i think we should continue to press the europeans to increase their you know their stimulus packages we also have to recognize however that they have more automatic stabilizers built into their system because of their different and stronger social safety net and i believe in the next year as unemployment increases for example in germany and it will because it's been kind of employment has been propped up up until now but as as this thing unfolds and unemployment increases there's their effect of stimulus spending will increase automatically because they are because of the safety net on the on unemployment so you know it's a back and forth there are some estimates that suggest that because of their automatic stabilisers their stimulus has been in effect two percent of g d p already i think it could be more it should be more i think it's it's it's a problem  and my understanding is my assessment is that the treasury and the administration have been pressing hard on that and continue thank you thank you a by the way and that same conversation chairman bernanke was asked about inflation you know these stimulative bills and growing deficits they have an inflationary impact on the road what he said was that in looking at projections over the next ten years the assumption is two percent or below inflation for the next decade  that there are no signs in the market right now of anyone being worried about inflation would you all concur mr s i don't mean to suggest he said there's nothing to worry about he was looking at data that said there are no indications of the market suddenly in year four five getting panicky about inflation i mean i would i would i'm not qualified to second guess the gem of the fed on this  something in relation to your last question if you want told me of course the labor movements in europe in the euro zone i think share your view of the need for further stimulus spending on the on the part of eurozone governments that's a key element of my testimony today ok if i may move to another subject and invite any of you to speak up how important is the new arrangements to borrow and how important is it for the united states to participate miller well i probably don't have the same view as dr birdsall i don't think it's very important at all i think it's important for the us to participate as an equal partner in these international institutions they do good on average but they're not they're not essential to the workings of the world economy and the amounts of money that are given to other countries are provided loaned actually to other countries through these programs are very small compared with the amounts of capital that are moving through the private sector through flows from trade financing that through in foreign direct investment in the united states through the purchase of government securities of the united states by other countries so these are really very modest amounts of resources that are being provided to these international organizations so in the global scheme of things it's not that important on the other hand it is important for the us to be a good international citizen and that means that we do need to participate in an equitable basis with other countries of the world and in the case of the i m f which hasn't had an increase in its resources in a very long time it may be that some sort of increase is in fact appropriate right  now i think it's it's useful to remind everyone that the europeans and the japanese are also contributing one hundred billion that the japanese contribute one hundred billion earlier it's very important to participate both is a good global citizen and also because this is the moment when in many developing countries and emerging markets the private flows aren't happening there's capital withdrawals there's remittances are declining trade flows are declining so the whole point is for the international institutions to play a counter cyclical role and to be there when the private money is insufficient and to play the stimulus role that in this within the domestic economies additional deficit spending p  i'm late here because we were attending a press conference because of what one of our state owned enterprises general motors is doing to the dealers i 've been going over some of the testimony and i think there are some structural issues with the i m f that need to be addressed are is anybody here familiar with the g twenty the global plan for recovery and reform to april of this year i've got a copy here and as i read this i'm absolutely shocked and i said in shock and all that money would go to an organization that could state such things as we started from the belief that prosperity is in the visible will forgive me for the united states want to be profitable apparently everything we have to do in this world is to make sure that every third world country and every country has the same prosperity that we do i'm a citizen of the united states and not of the world and i think we have to take that a consideration in dealing with international bodies that part of being an american we want to prosper in no apology for that but as you get into this agreement especially paragraph fifteen where talks about taking the financial stability forum given that turning  you mental you and i have done business on manufacturing for a number of years nothing shocks i've said before you came in several times and i voted for every free trade agreement but we still agree on the manufacturing base in this country well i think we've come to an end and i think that there's no you know there's no easy solution prosperity can't be shared the notion that we can  pass some stimulus bills and talk our friends and allies and not allies into simulating their economies and everything is going to come out fine after we've been on this consume borrow spend here is to remember that we don't operate in a zero sum game in the international economy doing something that's good for the united states doesn't mean automatically that we're doing something bad for another kind of direct of course in all circumstances we need to do what is absolutely best for the united states but in most cases the vast majority of cases that's going to mean doing things that are also good for other countries not in the first instance but as a result of doing things that are good for ourselves so this really is a case where we can have win win solutions for everyone in the world what about these words i think the words are problematic because certainly the words corporate social responsibility and the talk about compensation corporate compensation that's a very problematic but that's also a rhetorical flourish i think on the part of the leaders there what we're talking about is a consultative forum in this case and importantly a statement of fact a positive as opposed to a normative statement with which i would agree that we are better off here when others are better off there but  that's that's not what it says i mean investor miller just says that the united states prospers of the world maybe not in the first round but somewhere down the why because of the individually i mean they were in their own world for years but we can deal with international bodies responsibly but what i don't like is when the socialists tweak the language but then they turn to america for the check that bothers me more than anything and also it bothers me is the fact that that in one of the statements i think that you made dr bird is the fact that on page  nine monitor but don't micromanage further i m f reforms further and deeper governance reforms are needed the i m f but i worry that the tendency for congress to dictate what the i m f can and cannot do that undermines the u s role in global institutional decision making and ultimately weakens the effects of the i m f the one who writes the check that we write most of it i believe should have the opportunity to dictate the rules under which that check spent cost the american taxpayer at the most five billion dollars which will trigger our our contribution of five hundred billion dollars to end sure that there is prosperity to increase the likelihood that there will not be catastrophic economic losses elsewhere which would balance back like a fire to hurt us so that's the way i think of it five billion dollars let me point out that in the context for example of the i m f and the world bank u s contributions except for the special things at the i m f virtually they're not there except for this sort of special package at the end and at the world bank we are no longer the largest single contributor to the soft money window so we are losing our leadership we are losing our leverage we are losing our influence we are losing our ability to take the normative positions that i think all the support because we are not making the financial contribution thank you i would just want to correct the record factually the most we could lose t the i m f is one hundred nine billion dollars there is a small risk that we will lose anything and the c b i has in effect said there's like a five percent risk of us losing the whole hundred nine billion not a  risk to only five billion i would also point out that the leverage depends upon whether other countries do what their leaders said they would do which may or may not incur in light of the action that manzullo points out was taken by the european bank with that i yield to the woman from california the gentleman from california thank you so much mr chairman then i'll just throw this out and anyone who would like to respond please  both the world trade organization and the world bank have been monitoring trade restrictions for posed and adopted since the beginning of the financial crisis however they have come to different conclusions concerning the number of antidumping cases in two thousand and eight with the world trade organization finding it there has been no dramatic increase and the world bank finding that the numbers surged in two thousand and eight it has any effort been made to resolve the differences between the two reports and anyone who might have information can you respond please bursal i don't i don't know the answer to your question whether there's been any effort to reconcile the two but i think that it is probably important to recognize that it's healthy to have this robustness and some redundancy in these assessments by the international institutions in which the u s is a member and it's probably useful to assume that the greater estimates that the world bank has put are an important warning signal that that we are on the brink potentially of a trade war and the u s needs to take leadership in ensuring that that doesn't happen let me address this one to mr robinson believe that not paying these counter parties at a rate of hundred percent would have posed a systematic risk to the global economy and is there are more appropriate mechanism for providing needed capital there certainly in the case of societe generale and others and we do have a list of those banks that have been obviously obviously recipients of u s government or taxpayer large us  as i may have mentioned in my testimony there is a dearth of due diligence on the security minded or security related side of that equation as well because again some of these banks have international activities including partnering with tehran and a number of other terrorist sponsoring states that almost certainly was never looked at when the due diligence was performed as to as to these recipients and we've never really had security minded conditionality in global finance for this country  until over the last couple of years and this was surface by still just a handful of folks in the u s the chairman among them who is intent on trying to get a better handle not only on where our money is going and how it's being used by some sense of fair play this does not represent given the risk that they knowingly took and going into  is as i say you know in my humble opinion scandalous that they would be made whole in the way they have when you compare it to those bondholders for example in christ or i think was the illustration that the chairman  o i have problems with with this particular issue and i also believe that i hope that will more systematically when we're doing due diligence in the broadest sense of the term will circumvent and you know go to north korea that's feeding their proliferation nuclear proliferation so i think we need to do a little more and i was hoping that maybe to have a hearing on that i did in this it another hearings and i'm relying on the witnesses to let us know whether they have the piff the information it's not enough for us to have a hearing because we've got very interesting questions we have to some reason to think that you folks can come up with interesting answers so i see mr robinson nodding his head and we will certainly check to see whether we can put together a panel again paraphrase the congressional research service when they stated the most effective way that congress can influence u s policies toward international financial institutions is by attaching in forcible conditions to new funding agreements and it strikes me that if we pass a bill providing a hundred and nine billion dollars to the i m f with not a single  condition then we're not in the business of influencing u s policy toward multinational financial institutions which begs the question why do tax there's have to pay money to keep the lights on in this room i would think that if congress doesn't want to be influencing u s policy toward multinational financial institutions the whole idea of having this committee this  no administration has identified a single company that has invested over twenty million dollars in the iran oil sector as you know the the iran sanctions act requires that the administration name and identify such companies and then either impose sanctions or waive those sanctions with an explanation as to why they're being waived the convenient approach taken by the last the last two administrations in this administration may still be reviewing the policy but it's at least continued for the last hundred thirty six days or so is to simply never see such a triggering transaction could you identify for us just a couple of the clearest  investments in the iran oil sector of more than twenty million dollars of the type directly described by the realize i'm hitting you with a specific here my guess is that you can answer now if you can't i'll ask you to answer for the record but go on i have some recollection of such companies if you go back in time in the iran libya sanctions act and the waiver program which it became a kind of program an automatic waiver commenced as you might recall with i believe it was some cases other terrorists pondering states if you look at sign a pac which is traded on the new york stock exchange last time i recall they have about a hundred billion dollar deal in iran that certainly qualifies for over the twenty million mark if you look at royal dutch shell and i believe b p i'm starting to run out of off the cuff examples but i would underscore that that there are there are a number of very prominent firms that are technically in violation of the iran sanctions act today and as that bill has been expanded somewhat to beyond the oil and gas sector to some of the downstream operations you know this this number of companies will increase i believe most of those are legislative proposals that were proposed in blocked in the senate by the former administration well let's let's not count our legislative achievements before their leaders and say i think it's moving in that direction and and again the  signal that's been sent internationally is clear which is that you can invest in the iraq in iran's strategic energy sector with impunity and there's not an executive branch on either side of the aisle who's been willing to step up to science and force or to even as you point out there was first of all it was once the iran libya sinks in fact we had forces against libya we had some international support in similar sanctions and on libya and it worked so well libya gave up its nuclear program and we took him out of the so the act was remarkably successful when applied it's now the iran sanctions act you describe a period of time more than thirteen years ago when administrations would at least identify the company making the investment name and shame and they would at least follow the law even though the law allows them to limit their sanction to naming and shaming and to waive all of their sanctions and what we have experienced for the last thirteen years is an executive branch that deliberately violates american law for the purpose of protecting iran's business partners which shows you that the values of the world economic elite sometimes take precedence over not only american values but even american law i will ask you to furnish for the record not the biggest investments over the last thirteen years but those that are most clearly provable because sometimes there's an announced investment in iran that may or may not reach the point where it constitutes that investment as defined by the law so the issue here is not what's the biggest flashiest announcement but what's the most provable investment of over twenty million dollars and i'd ask you to furnish at least one example  during the last few years of the clinton astray ssion and at least two examples during the bush administration and perhaps you can furnish one or two examples of things that are continuing because something can be an investment during the bush administration but also be an investment during the obama administration as well now i refer to the bush administration i mean the second bush administration not going back to the eight i get so many questions here but we've got on i don't know whether my colleague from california has any additional questions i think we are consistent with the president's declaration that america does not