`[Senate Hearing 118-523]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 118-523

                    FINANCIAL SERVICES AND GENERAL GOVERNMENT 
                      APPROPRIATIONS FOR FISCAL YEAR 2024

=======================================================================

                                HEARINGS

                                BEFORE A

                          SUBCOMMITTEE OF THE

                     COMMITTEE ON APPROPRIATIONS 
                         UNITED STATES SENATE

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                                   on

                           H.R. 4664/S. 2309

        AN ACT MAKING APPROPRIATIONS FOR FINANCIAL SERVICES AND 
          GENERAL GOVERNMENT FOR THE FISCAL YEAR ENDING SEPTEMBER 
          30, 2024, AND FOR OTHER PURPOSES

                               __________

                       Department of the Treasury
                       Nondepartmental Witnesses
                 U.S. Federal Communications Commission
                U.S. Securities and Exchange Commission

                               __________

         Printed for the use of the Committee on Appropriations
         
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]         


        Available via the World Wide Web: http://www.govinfo.gov

                               __________
                               

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
50-515 PDF                  WASHINGTON : 2024                    
          
-----------------------------------------------------------------------------------                                    
                               
                      COMMITTEE ON APPROPRIATIONS

                    PATTY MURRAY, Washington, Chair
                    
DIANNE FEINSTEIN, California \1\     SUSAN M. COLLINS, Maine, Vice 
RICHARD J. DURBIN, Illinois              Chair
JACK REED, Rhode Island              MITCH McCONNELL, Kentucky
JON TESTER, Montana                  LISA MURKOWSKI, Alaska
JEANNE SHAHEEN, New Hampshire        LINDSEY GRAHAM, South Carolina
JEFF MERKLEY, Oregon                 JERRY MORAN, Kansas
CHRISTOPHER A. COONS, Delaware       JOHN HOEVEN, North Dakota
BRIAN SCHATZ, Hawaii                 JOHN BOOZMAN, Arkansas
TAMMY BALDWIN, Wisconsin             SHELLEY MOORE CAPITO, West 
CHRISTOPHER MURPHY, Connecticut          Virginia
JOE MANCHIN, III, West Virginia      JOHN KENNEDY, Louisiana
CHRIS VAN HOLLEN, Maryland           CINDY HYDE-SMITH, Mississippi
MARTIN HEINRICH, New Mexico          BILL HAGERTY, Tennessee
GARY PETERS, Michigan                KATIE BRITT, Alabama
KYRSTEN SINEMA, Arizona \2\          MARCO RUBIO, Florida
                                     DEB FISCHER, Nebraska

                      Evan Schatz, Staff Director
              Elizabeth McDonnell, Minority Staff Director
                                 ------                                

       Subcommittee on Financial Services and General Government

                  CHRIS VAN HOLLEN, Maryland, Chairman

RICHARD J. DURBIN, Illinois          BILL HAGERTY, Tennessee, Ranking 
CHRISTOPHER A. COONS, Delaware           Member
JOE MANCHIN, III, West Virginia      JOHN BOOZMAN, Arkansas
MARTIN HEINRICH, New Mexico          JOHN KENNEDY, Louisiana
                                     MARCO RUBIO, Florida

                           Professional Staff

                              Ellen Murray
                              Maddie Dunn
                         Diana Gourlay Hamilton

                         Dan Brandt (Minority)
                        Winnie Chang (Minority)

                         Administrative Support

                             Maria Calderon
                         Alex Shultz (Minority)


    \1\ Died September 29, 2023.
    \2\ Appointed to Committee October 18, 2023.
    \3\ Appointed to Subcommittee November 2, 2023. deg.
                            
                            
                            C O N T E N T S

                              ----------                              

                                hearings

                       Wednesday, March 22, 2023

                                                                   Page

U.S. Department of the Treasury..................................     1

                        Wednesday, July 19, 2023

U.S. Securities and Exchange Commission..........................    37

                      Tuesday, September 19, 2023

U.S. Securities and Exchange Commission..........................    67

                              ----------                              

                              back matter

List of Witnesses, Communications, and Prepared Statements.......   103

Nondepartmental Witnesses........................................    99

Subject Index:

    U.S. Securities and Exchange Commission......................   105

 
  FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL 
                               YEAR 2024

                              ----------                              


                       WEDNESDAY, MARCH 22, 2023

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.

    The subcommittee met at 2:30 p.m., in room SD-124, Dirksen 
Senate Office Building, Hon. Chris Van Hollen (Chairman), 
presiding.
    Present: Senators Van Hollen, Murray, Manchin, Heinrich, 
Hagerty, Collins, Boozman, and Kennedy.

                    U.S. DEPARTMENT OF THE TREASURY


             opening statement of senator chris van hollen


    Senator Van Hollen. Welcome, everybody. This hearing will 
come to order. And I want to start by welcoming Senator Hagerty 
as the Ranking Member of the Financial Services and General 
Government (FSGG) Subcommittee of the Appropriations Committee.
    Also pleased to continue to have Senator Kennedy on the 
subcommittee, and newly having Senator Heinrich on the 
subcommittee. And Madam Secretary, thank you for your service. 
Thank you for being here today to talk about the 2024 Treasury 
budget and related matters.
    Since its very inception, the Department of Treasury has 
played a central role in maintaining a strong economy, spurring 
growth and promoting opportunity. Secretary Yellen, I suspect 
that much of your attention in recent days has been focused on 
the situation with the banking system.
    I give you and the Biden Administration, the FDIC, and 
others, high marks for the way you responded quickly and 
decisively to the Silicon Valley Bank default and the issues 
with Signature Bank as well as others. First of all, making it 
crystal clear that the United States Government is not going to 
bail out the owners and investors of the bank, but also 
assuring depositors that they would be held harmless.
    That was a very important measure to take to make sure that 
the workers at small businesses and other companies that bank 
with Silicon Valley Bank got paid and also to prevent the 
contagion within the system.
    I also want to commend you and your team on the efforts you 
made in implementing the sanctions on Russia, including efforts 
to place a price cap on Russian oil and Russian petroleum 
products. We have worked with the Deputy Secretary as well as 
you on these issues. I do believe we could go even further in 
terms of ratcheting down the price cap in that area.
    I also want to applaud your efforts to move toward a global 
minimum tax rate for corporations to stop the current race to 
the bottom that we have seen between countries. A little later, 
I am going to ask you about the debt ceiling. The United States 
of America pays its bills on time.
    We always have. And because of that, the United States has 
earned a reputation as a reliable, credible, and trustworthy 
partner here and around the world. And that reputation helps 
every single American and our entire economy. We need, speaking 
of the deficit, to make sure that the IRS has the capacity and 
the resources needed to collect revenues that are due and 
owing, including from very wealthy tax cheats.
    Now, that is why the IRS received $80 billion over 10 years 
in the Inflation Reduction Act, and we will be asking you some 
questions about implementation and use of those resources. 
Obviously, they also go toward trying to improve, dramatically 
improve IRS customer service, which we are already seen results 
from, as well as dealing with outdated technology, including 
the COBOL system, which the IRS continues to use.
    We know that there are over somewhere between $500 billion 
and $1 trillion in taxes each year that are owed and not paid. 
Those are just some of the issues under the purview of the 
Department of Treasury.
    Madam Secretary, again, I would like to commend you and 
your staff on being responsive to questions from Members of the 
Committee. And let me now turn it over to Senator Hagerty for 
his opening statement.


               opening statement of senator bill hagerty


    Senator Hagerty. Thank you, Chairman, Van Hollen, and thank 
you for holding this hearing today. As the new Ranking Member 
of the Committee, I look forward to working alongside you and 
all of our colleagues.
    We have an exceptional job ahead of us. We are challenged 
in conducting rigorous oversight to strengthen U.S. financial 
systems and ensure that the dollars that taxpayers have 
entrusted to us with are spent responsibly. I also want to 
welcome our witness today, Secretary Yellen.
    Thank you for appearing before the subcommittee, Secretary, 
at such a critical time for our economy, and I look forward to 
your testimony. Secretary Yellen, the Department of Treasury 
has a fundamental role in managing our Nation's debt and 
collecting its taxes. The President, with the advice and 
consent of the Senate, has conferred upon you a great 
responsibility and obligation to provide sound economic 
guidance.
    At this same time, it is your duty to respect the rights of 
taxpayers who rely on you to treat them fairly. Unfortunately, 
our Nation has accumulated an unprecedented amount of debt at 
levels that are unsustainable at this point.
    One of our Nation's greatest strengths is the depth and 
liquidity of our financial markets that has allowed us to 
capitalize our economy with large amounts of money at a 
relatively low cost, a significant competitive advantage for 
our Nation.
    Further, our historic commitment to the rule of law and our 
commitment to repay our debts underpins this strength. While I 
understand the desire to raise the debt limit, repaying our 
debts is not just a matter of periodically increasing the 
amount we can borrow.
    We are on an unsustainable path for which the bill will 
ultimately come due. Our ability to repay our debts requires us 
to live within our means, which means we must put our economy 
on track to eliminate the annual deficit.
    In my view, we either take serious steps toward addressing 
our fiscal house now, or we allow the global financial markets, 
who will not ignore our fiscal peril, to make those decisions 
for us, and it won't be pretty. The country is looking for 
leadership from you, Madam Secretary, to navigate this 
difficult fiscal path.
    However, I was disappointed to see the President's budget 
put forward a series of tax increases that have been largely 
rejected by both Republicans and Democrats in Congress. The tax 
increases proposed in the President's budget would make 
American businesses less competitive and ultimately weaken our 
economy at a time when we desperately need it to be strong.
    Combating inflation remains a priority for me. Many basic 
goods and services are too expensive for most American 
families. Again, I believe that too much spending has placed 
upward pressure on prices. Very simply, there are too many 
dollars chasing too few goods and services. My constituents' 
purchasing power has steadily and dramatically eroded over the 
course of this Administration.
    One way we can both rein in inflation and expand the 
economy is by extending tax reform, which contrary to forecast 
at the time, resulted in booming corporate tax receipts for the 
Federal Government, allowing manufacturers to deduct the full 
cost of their capital expenditures in the year that they are 
made, encourages businesses to build more factories, help 
workers to become more productive, raise wages, and it expands 
economic output.
    When we expand supply, we put downward pressure on the 
system to meet demand. In that manner, businesses provide more 
goods and services to their customers at a lower price. The 
problem with more government spending is it just redistributes 
private resources from one group to another, generating 
economic friction and inefficiency.
    Its primary effect is to increase demand, not to increase 
supply, further adding to inflationary pressures. Rather than 
helping individuals and businesses during these challenging 
times, taxpayers are facing greater tax burdens, reduced 
customer service from the IRS, and endless amounts of paperwork 
and bookkeeping requirements.
    I have reintroduced my Snoop Act, which would strike the 
Biden Administration's requirement that third party platforms 
report businesses gross transaction volumes totaling more than 
$600 per year to the IRS. This requirement is cumbersome, is 
difficult to comply with, and it needlessly intrudes into 
Americans' privacy.
    While I was glad to see your department is temporarily 
delaying the implementation of this provision, I will continue 
to stand up for small business owners with an aim to put an end 
to this egregious and unwanted overreach.
    And finally, as a lifelong businessman, I have been 
following the developments over the past week as we have seen 
unfold a pair of spectacular bank failures. To me, this entire 
situation was a series of failures that should have been 
foreseen. First, it is a massive failure on the part of 
management.
    Silicon Valley Bank's board and management seem to have 
been asleep at the wheel. It has become--beyond comprehension 
that they could have allowed the Chief Risk Officer position to 
remain vacant for 8 months during the period leading up to this 
collapse. It is malpractice, plain and simple.
    Second, it was a massive failure of oversight from the San 
Francisco Federal Reserve Bank who in their position--who in 
their possession had the detailed liquidity reports that should 
have made it clear that this was a real issue. But perhaps the 
biggest failure of all is how this Administration mishandled 
the crisis, particularly the decision to take Silicon Valley 
Bank and Signature Bank into receivership instead of 
expeditiously expediting an auction.
    By failing the auction process, we find ourselves now in a 
completely new environment where no one knows the limits of the 
taxpayer backstop. The decision made by the FDIC, the Federal 
Reserve Board, and by yourself to guarantee all deposits of 
both banks, even though those exceeding--even those exceeding 
the $250,000 insured limit sets a dangerous and uncertain 
precedent, one that would not have been necessary had a 
successful auction occurred.
    And it sets up American taxpayers to foot the bill, 
regardless of the Administration's claims to the contrary. As 
we saw on Sunday with the FDIC's announcement of the sale of a 
significant portion of Signature Bank's assets, losses are 
already being accumulated and those losses will be forced upon 
the entire banking system, and by extension, U.S. taxpayers.
    Secretary Yellen, I hope you can address these concerns 
today in both your testimony and during the period of 
questions. Thank you.
    Senator Van Hollen. Thank you, Senator Hagerty. The 
Appropriations Committee has two new strong leaders. We have a 
new Chair, Senator Murray, and a new Ranking Member, Senator 
Susan Collins, who is with us today. Senator Collins, Ranking 
Member Collins, do you have any opening comments?
    Senator Collins. I do not--thanks----
    Senator Van Hollen. Okay. Thank you. Madam Secretary, it is 
great to be with you. Your biography and experience is well 
known to Members of the Committee, so I won't go on for a long 
time.
    I will note that you are the first person to have led the 
White House Council of Economic Advisors, the Federal Reserve, 
and the Treasury Department. It is also great to see your 
signature on our currency.
    So, without objection, Madam Secretary, your full written 
testimony will be entered into the record. I ask you to please 
summarize your opening statement in approximately 5 minutes.
STATEMENT OF HON. JANET YELLEN, SECRETARY, U.S. 
            DEPARTMENT OF TREASURY
    Secretary Yellen. Chairman Van Hollen and Ranking Member 
Hagerty, thank you for inviting me to join you today. I would 
also like to thank you for your leadership of this subcommittee 
in support of the Treasury Department.
    Two years into this Administration, Treasury continues to 
serve at the forefront of our Nation's response to some of its 
most urgent challenges. We have advanced our country's domestic 
and international economic priorities thanks to the resources 
that you have provided us. Our top priority is to protect the 
health of the U.S. economy.
    Two weeks ago, we learned of problems at two banks that 
could have had significant impacts on the broader banking 
system and the American economy. In the days that followed, 
Treasury worked with the Federal Reserve and the FDIC to take 
decisive, and forceful actions to strengthen public confidence 
in the U.S. banking system.
    We took actions to protect all depositors of the two failed 
institutions and provide additional liquidity for banks. This 
was designed to mitigate risks to the banking system. It is 
important to be clear, shareholders and debt holders of the 
failed banks are not being protected by the government, and no 
losses from the resolution of these banks are being borne by 
the taxpayer.
    Deposit protection is provided by the Deposit Insurance 
Fund, which is funded by fees from insured banks. As I said 
last week, the U.S. banking system is sound. The Federal 
Government's recent actions have demonstrated our resolute 
commitment to take the necessary steps to ensure that 
depositors savings remain safe.
    Beyond our work on the financial system, Treasury has also 
led our Administration's broader efforts to recover and 
stabilize our economy from a once in a century pandemic shock. 
Our Office of Recovery Programs help drive the fastest and most 
inclusive labor market recovery in history by coordinating the 
effective implementation of the American Rescue Plan relief.
    Today, the unemployment rate is near historic lows. Our 
economy has added over 12 million jobs since 2021. Our 
Administration is now building on that progress by effectively 
implementing long term investments enacted by Congress. 
Internationally, Treasury continues to mount a swift, bold, and 
enduring response to Russia's illegal war against Ukraine. In 
my visit to Kyiv a month ago, Ukrainian officials told me 
firsthand about the critical impact of our work.
    As part of a broad coalition, we are responsibly disbursing 
vital economic assistance to Ukraine. Since last February, 
Treasury has also implemented over 2,500 Russia related 
sanctions. We have degraded the Kremlin's ability to replace 
more than 9,000 pieces of heavy military equipment that it has 
lost on the battlefield.
    We have also stabilized global energy markets and cut into 
the Kremlin's revenues by implementing innovative caps on the 
price of Russian oil. The President's fiscal year 2024 budget 
requests the necessary resources to continue advancing our 
Nation's priorities. I will highlight three imperatives. First, 
the budget requests $14 billion in discretionary resources for 
the IRS.
    For too long, the IRS has been woefully underfunded. We are 
changing that. Our budget request provides steady State 
operational funding that will allow taxpayers to receive the 
best service possible. It will complement the one-time long-
term investment in the IRS from the Inflation Reduction Act.
    We have already seen our investments pay off. For example, 
the IRS has answered a million more phone calls during this 
filing season than at this time last year, and now is the time 
to build on this progress. Second, our budget request shores up 
our capacity to respond to Russia's immoral war in advance of 
our national security priorities.
    It includes $244 million for the Office of Terrorism and 
Financial Intelligence to continue to administer, enforce, and 
modernize our sanctions regime. It also allows the office to 
expand financial intelligence in sanctions related economic 
analysis. Further, the budget request $229 million for FinCEN 
to support its efforts to address deficiencies that illicit 
actors exploit to evade scrutiny.
    Third, this request enables us to continue our work to 
bolster the long-term foundations of the American economy. We 
are requesting $332 million for Treasury's Departmental 
Offices, which craft and implement policies to advance our 
economic priorities and coordinate Government wide efforts to 
promote financial stability and growth.
    We are also asking for an increase for the Community 
Development Financial Institutions (CDFI) Fund, which expands 
credit and financial support to historically underserved 
communities.
    I want to end by thanking the men and women of the Treasury 
Department for their service. Their dedication and commitment 
inspire me every day, and I could not be prouder to call them 
my colleagues. With that, I am happy to take your questions.

    [The statement follows:]
               Prepared Statement of Hon. Janet L. Yellen
    Chairman Van Hollen and Ranking Member Hagerty: thank you for 
inviting me to join you today. I would also like to thank you for your 
leadership of this subcommittee and support of the Treasury Department.
    Two years into this Administration, Treasury continues to serve at 
the forefront of our Nation's response to some of its most urgent 
challenges. We have advanced our country's domestic and international 
economic priorities--thanks to the resources that you have provided us.
    Our top priority is to protect the health of the U.S. economy. Two 
weeks ago, we learned of problems at two banks that could have had 
significant impacts on the broader banking system and the American 
economy. In the days that followed, Treasury worked with the Federal 
Reserve and the FDIC to take decisive and forceful actions to 
strengthen public confidence in the U.S. banking system.
    We took actions to protect all depositors at the two failed 
institutions and provide additional liquidity for banks. This was 
designed to mitigate risks to the banking system. It's important to be 
clear: shareholders and debtholders of the failed banks are not being 
protected by the government. And no losses from the resolution of these 
banks are being borne by the taxpayer. Deposit protection is provided 
by the Deposit Insurance Fund, which is funded by fees on insured 
banks.
    As I said last week, the U.S. banking system is sound. The Federal 
Government's recent actions have demonstrated our resolute commitment 
to take the necessary steps to ensure that depositors' savings remain 
safe.
    Beyond our work on the financial system, Treasury has also led our 
Administration's broader efforts to recover and stabilize our economy 
from a once-in-a-century pandemic shock. Our Office of Recovery 
Programs helped drive the fastest and most inclusive labor market 
recovery in history by coordinating the effective implementation of 
American Rescue Plan relief. Today, the unemployment rate is near 
historic lows. Our economy has added over 12 million jobs since the 
start of 2021. Our Administration is now building on that progress by 
effectively implementing long-term investments enacted by Congress.
    Internationally, Treasury continues to mount a swift, bold, and 
enduring response to Russia's illegal war against Ukraine. In my visit 
to Kyiv a month ago, Ukrainian officials told me firsthand about the 
critical impact of our work. As part of a broad coalition, we are 
responsibly disbursing vital economic assistance to Ukraine. Since last 
February, Treasury has also implemented over 2,500 Russia-related 
sanctions. We have degraded the Kremlin's ability to replace more than 
9,000 pieces of heavy military equipment that it has lost on the 
battlefield. We have also stabilized global energy markets and cut into 
the Kremlin's revenues by implementing innovative caps on the price of 
Russian oil.
    The President's fiscal year 2024 Budget requests the necessary 
resources to continue advancing our nation's priorities. I will 
highlight three imperatives.
    First, the budget requests $14 billion in discretionary resources 
for the IRS. For too long, the IRS had been woefully underfunded. We 
are changing that. Our budget request provides steady-state operational 
funding that will allow taxpayers to receive the best service possible. 
It will complement the one-time, long-term investment in the IRS from 
the Inflation Reduction Act. We have already seen our investments pay 
off. For example, the IRS has answered a million more phone calls 
during this filing season than at this time last year. Now is the time 
to build on this progress.
    Second, our budget request shores up our capacity to respond to 
Russia's immoral war and advance other national security priorities. It 
includes $244 million for the Office of Terrorism and Financial 
Intelligence to continue to administer, enforce, and modernize our 
sanctions regime. It also allows the office to expand financial 
intelligence and sanctions-related economic analysis. Further, the 
budget requests $229 million for FinCEN to support its efforts to 
address deficiencies that illicit actors exploit to evade scrutiny.
    Third, this request enables us to continue our work to bolster the 
long-term foundations of the American economy. We are requesting $332 
million for Treasury's Departmental Offices, which craft and implement 
policies to advance our economic priorities and coordinate government- 
wide efforts to promote financial stability and growth. We are also 
asking for an increase for the Community Development Financial 
Institutions Fund, which expands credit and financial support to 
historically underserved communities.
    I want to end by thanking the men and women of the Treasury 
Department for their service. Their dedication and commitment inspire 
me every day, and I could not be prouder to call them my colleagues.
    With that, I'm happy to take your questions.

    Senator Van Hollen. Thank you, Madam Secretary. I think 
your testimony underscored the depth and breadth of the 
responsibilities of the Department of Treasury. Thank you for 
listing those priorities, including, importantly, CDFIs.
    Going back to the banking situation, I saw you gave some 
remarks just the other day indicating that we are still 
determining the root causes of the recent crisis. And I also 
serve on the Banking and Housing Committee, and we are going to 
be having hearings next week to try to get to the bottom of 
exactly what happened in Silicon Valley Bank and other banks.
    But there is one area where I think we can agree, I hope we 
can agree to move forward now on the issue of accountability, 
and that is the need for legislation to empower Federal 
regulators like the FDIC to claw back compensation packages and 
stock profits that were gained by executives at failing banks 
in close proximity to the bank's failure.
    I know that under the Dodd-Frank Law, that authority exists 
for executives of the biggest banks, but apparently it does not 
exist with respect to banks the size of Silicon Valley Bank. 
And we also know from reports that the CEO of Silicon Valley 
Bank sold about $3 million worth of shares just a short time 
before the collapse.
    I know President Biden has called upon Congress to change 
the law so that we can hold executives accountable. This is 
whether or not there is criminal wrongdoing or not. That is a 
separate matter.
    I know the Justice Department, the FBI will be looking into 
that. But just as a basis of accountability, would you, Madam 
Secretary, you and the Treasury Department, work with me and 
others in the Senate who are interested in fashioning 
legislation along the lines that President Biden also supports?
    Secretary Yellen. Certainly, Senator Van Hollen, we, of 
course, agree with President Biden that those who were 
responsible for the failure of a bank should not be profiting 
when stockholders and investors in the bank are taking--forced 
to take losses. And when the Deposit Insurance Fund is working 
to save the depositors in stem runs, that this is an important 
form of accountability. And we would be glad to work with you 
on that legislation.
    Senator Van Hollen. Thank you. I look forward to doing that 
and hopefully we can get it passed on a bipartisan basis and 
support accountability in the system. I think American 
consumers are sort of looking at the situation here where those 
who were clearly responsible for the failure in their banks are 
running away with major profits.
    And that doesn't seem right, especially at a time, as you 
said, when we are asking, we are going to be asking other banks 
to help support those depositors.
    I am somewhat concerned that perceptions and a sense that 
there is riskiness in the bank system because of these failures 
will lead some people potentially to go to the shadow banking 
system, which, as you know, is a much more risky proposition 
and not subject to much of the regulation that currently 
exists, including the kind of capital requirements that apply 
in the banking system.
    As Secretary of the Treasury, you serve as the chair of the 
Financial Stability Oversight Board, which has the authority to 
designate non-banks as systemically important financial 
institutions.
    Last November, in the Banking Committee, I asked the 
Federal bank regulators that were before us as witnesses, 
including the vice chair of the Federal Reserve Bar and the 
heads of the Office of the Comptroller of the Currency (OCC) 
and the FDIC, if they would support a repeal of the Trump era 
guidance that made it much more difficult to regulate the much 
riskier shadow banking sector.
    The answer from all three of those witnesses who are 
responsible for it and who sit on the board with you was yes, 
they would vote to repeal that limitation on the ability to 
provide prudent regulation over the non-banking sector.
    So, my question to you, Madam Secretary, is can we move 
forward and hold that vote on the Financial Stability Oversight 
Council (FSOC)? And if so, when.
    Secretary Yellen. I am working very closely with FSOC. We 
are considering and drafting revised guidance on designation 
that would restore FSOC's lost capacity to designate non-bank 
financial institutions as systemic and subject them to 
regulation.
    I would say that more generally the risks that you 
mentioned in the non-bank financial sector, sometimes other 
forms of intervention can be appropriate and I have made it a 
priority since I became Treasury Secretary, as Chair of FSOC, 
to look at a number of different risks in the non-bank 
financial sector. In some cases, for example, the case of money 
market mutual funds or open-end bond funds, where I believe 
there are risks, the Securities and Exchange Commission (SEC) 
has the authority, and FSOC has worked with the SEC.
    The SEC is in the process of taking appropriate action. So 
FSOC has a number of different tools to deal with these risks, 
but I agree with you that risks have migrated to that sector 
and designation is an important power that needs to be in the 
toolkit of FSOC.
    Senator Van Hollen. Well, thank you, Madam Secretary. Look 
forward to working with you and I hope you will schedule that 
as soon as possible. My last question for this round relates to 
the debt ceiling.
    My head was spinning this morning when I saw the speaker of 
the House say that the recent banking crisis made it even more 
important that we threaten the debt ceiling in order to achieve 
major budget cuts, the kind of cuts that have been outlined in 
the House, by House Republicans.
    You are very aware, I think, of what the risks would be if 
the United States does not meet its full faith and credit. Do 
you believe that the recent uncertainty in the banking system 
means that we should threaten the full faith and credit of the 
United States in order to pass budgets that one of us on one 
side of the Capitol or the other may like?
    Secretary Yellen. The failure to raise the debt ceiling 
would cause an economic and financial catastrophe.
    It would be a failure of the U.S. Government for the first 
time since 1789 to fail to pay bills that it had incurred, and 
it would cause a loss of confidence in the United States as the 
safest country, that our currency as a reserve currency used by 
the world--it would bring untold, unbelievable economic damage.
    I think this is something that just can't be contemplated. 
It is a fundamental, basic responsibility of Congress to pay 
the Government's bills. And I call on Congress to expeditiously 
raise the debt ceiling.
    Senator Van Hollen. Well, thank you, Madam Secretary. 
Senator Hagerty.
    Senator Hagerty. Thank you, Chairman Van Hollen. Before I 
get into my line of questioning, I just want to clarify on the 
debt ceiling piece. Secretary Yellen, do you think it is not 
possible to negotiate in any respect the spending package that 
has been put forward? Is it possible to set aside and agree 
that our Nation's debts will be paid, that we will pay the 
interest on our debt, and set that component aside and agree to 
that before we get to any discussion on specific spending 
reductions?
    Secretary Yellen. I am not sure exactly what you are 
suggesting here. President Biden has indicated that he is more 
than willing to discuss an appropriate path for spending in 
taxes in the overall deficit, that it is important to have a 
fiscally responsible budget plan, and that these are certainly 
appropriate matters for discussion between the White House and 
Democrats and Republicans in the Congress, and he looks forward 
to doing that, but not under the specter of destroying the 
country's economic and financial----
    Senator Hagerty. I think the specter of this being 
presented is a false choice. And the specter that you present 
does not have to be that. We are facing an unprecedented 
spending epidemic. We are in a deficit spending situation.
    We have $31 trillion of debt moving higher that we are 
parking on the backs of the shoulders of our children. If we 
don't address it in a responsible manner ourselves, the capital 
markets will address it eventually, and I think that will be 
far more catastrophic. So, we have to find a way to talk about 
this that doesn't pit ourselves of this doom and gloom scenario 
and that we find a way to actually address that.
    Secretary Yellen. Senator Hagerty, President Biden has 
submitted to Congress a budget that has, over the next decade, 
$3 trillion of deficit reduction. It invests in our workforce, 
in our economy----
    Senator Hagerty. And massively increases taxes at a time 
when we are trying to recover our economy. It is a nonstarter 
on both sides of the aisle, as you know, Madam Secretary. Let 
me get back to the questions that I wanted to entertain with 
you, though, today.
    As I mentioned in my opening statement, I have been 
tracking the Silicon Valley and Signature Bank situation in 
very close detail. The situation was caused by a remarkable set 
of failures, in particular the Silicon Valley Bank situation, 
failures of management, failures of Federal oversight, and 
failures of how we responded to it.
    Both President Biden and in your opening remarks just a few 
minutes ago, you unequivocally stated that no losses will be 
borne by the taxpayer for the actions that have been taken by 
the Fed, the Treasury, and the FDIC in guaranteeing that all 
insured deposits at Silicon Valley Bank and Signature Bank that 
followed the failed auction of SVB, that none of those will be 
borne by the taxpayer.
    I understand why that claim is politically appealing, but 
it is impossible to square with how these programs actually 
work. As you know, the systemic designation used in the 
guarantee of SVB and Signature Banks' deposits relies on the 
FDIC, Federal Deposit Insurance Fund, which will be replenished 
in the case of a loss with a special assessment on banks across 
the Nation, which inevitably will be passed along to all bank 
customers, which, last time I checked, were American taxpayers.
    So, as we saw with Signature Bank, the estimated cost to 
the Deposit Insurance Fund for this resolution alone is $2.5 
billion, which will be paid for by fees assessed to banks 
across the Nation. Is that correct?
    Secretary Yellen. There will be a special assessment to--so 
it is only an estimate, the $2.5 billion. We don't really know 
what the final cost----
    Senator Hagerty. I understand.
    Secretary Yellen [continuing]. Will be but there will be a 
special assessment----
    Senator Hagerty [continuing]. If you add SVB, it is going 
to become much, much larger. And when you increase the cost of 
doing business, that cost is going to get passed on to 
customers. So, this number, $2.5 billion plus and any future 
losses will be in fact borne by bank customers across the 
United States. Again, American taxpayers, the last time I 
checked, is that correct?
    Secretary Yellen. But they may be borne by shareholders of 
the firms.
    Senator Hagerty. I think the fees tend to be passed on to 
the consumers. I would like to turn to news reports yesterday. 
The Treasury is considering whether the Administration can 
order an unprecedented expansion of FDIC coverage to guarantee 
all in insured deposits.
    As was reported, this facility would be backed by the 
Exchange Stabilization Fund, which was created to support the 
value of the U.S. dollar in international markets, not as a 
slush fund when consulting Congress may be inconvenient.
    I am deeply concerned by these reports, that such a program 
would not only constitute a misuse of the ESF, but it would 
circumvent Congress's role in approving such an action. So, 
Madam Secretary, does insuring every deposit, every FDIC 
insured bank in the Nation over $250,000 require Congressional 
approval?
    Secretary Yellen. This is not something that we have looked 
at. It is not something that we are considering. All that I 
have said is that when the failure of a bank is judged by 
supermajorities of the FDIC board, the Fed board, and myself in 
consultation with the President, when such a failure is deemed 
to create systemic risk, which I think of as the risk of a 
contagious bank run, then we are likely to invoke this systemic 
risk exception which permits the FDIC to protect all 
depositors, and that that would be a case by case 
determination----
    Senator Hagerty. I understand, and that----
    Secretary Yellen. We have not considered or discussed 
anything having to do with blanket insurance or guarantees of 
deposits.
    Senator Hagerty. Two points, Madam Secretary. One, I would 
encourage you, if you do consider something broader than the 
basic $250,000, that you remind--to remind you that 
Congressional approval is required in the form of a joint 
resolution.
    Two, the program that you just stated really suggests to 
many people in America, certainly people in my home State, that 
there is a two-tier system of insurance here in America. For 
those that are deemed to be systemically important at the time 
and those that are not. I think many Tennessee banks are 
concerned that they would not be deemed----
    Secretary Yellen. I would disagree with that, Senator 
Hagerty. And I said explicitly in remarks I gave yesterday to 
the American Bankers Association, which is mainly consists of 
community banks, that this is not a question of invoking it for 
large or medium sized banks only. That the failure of a small 
bank, of a community bank could likewise trigger a run-on other 
banks and lead to the same judgment that the failure of that 
community bank creates systemic----
    Senator Hagerty. I think more clarity here would be 
appreciated. Thank you. And I want to turn to one more point 
that you and I have discussed in a number of times before in a 
very short period of time that I have. This has to do with the 
ProPublica leak of taxpayer information.
    We have met now, this is the fourth time you and I met 
about this. The fact is that ProPublica was a leaker, or 
somebody at the IRS, or somehow, they have--ProPublica has 
leaked confidential taxpayer information. It has been nearly 2 
years since this occurred. Has anyone been held to account?
    Secretary Yellen. I am just as frustrated by the situation 
as you are. I would love to know who is responsible for that. 
And I am afraid that I know no more about this than I did when 
the leak first occurred.
    We did what I believe is the appropriate thing, which is to 
refer this matter to independent investigators, the Treasury 
Inspector General, the IRS Inspector General, and the 
Department of Justice. And there are a lot of----
    Senator Hagerty. And no new reports?
    Secretary Yellen [continuing]. Independent investigations 
that follow their own timelines, and I can't tell you when they 
are going to be concluded. I would suggest that you ask those 
investigators when they think it might be concluded.
    I would really like to get a report, and I think this was a 
very serious matter and deserves an independent and thorough 
investigation.
    Senator Hagerty. It damages the confidence of taxpayers in 
America.
    Senator Van Hollen. Thank you, Madam Secretary. As I said 
at the outset, the Appropriations Committee has a new Chair, 
and I am pleased that she is joining us today. Senator Murray.
    Senator Murray. Well, thank you very much, Chair Van Hollen 
and Ranking Member Hagerty. As Vice Chair Collins, who is also 
here with us today, and I made clear when we announced our plan 
to return this Committee to regular order, we have a 
responsibility to deliver for the American people by working 
together to draft and pass funding bills that strengthen our 
economy and keep America competitive on the world stage, and 
make sure that our families here at home are financially secure 
and thriving.
    This is no small feat, as we all know. But this hearing is 
really an important reminder that when it comes to keeping our 
Nation strong, secure, and competitive, it is not just about 
how much we spend on defense, which is important.
    It is also important how strong our economy is, and I mean, 
on Main Street, not just on Wall Street. And as we have seen, 
the collapse of the Silicon Valley Bank and Signature Bank have 
been a really stark reminder of the important role Treasury 
does play regulating our banks, ensuring our economy is sound, 
and protecting American workers and savers from paying the 
price for Wall Street's mistakes.
    And that is really critical because working families are 
the backbone of this economy. And that means when our families 
are less financially secure, our Nation is less financially 
secure. Strong funding for Treasury means strong enforcement of 
our sanctions against Russia and Iran, the drug cartels, and 
other dangerous actors. It also means when my constituents call 
the IRS with a question about their taxes, they can actually 
get a real person on the other end of the line.
    And thanks to the funding the Democrats passed, the IRS is 
now answering 90 percent of its phone calls. That is a dramatic 
improvement from the 13 percent last year. But we still are 
playing catch up on these investments. The technology that 
handles Americans' tax returns, for example, is over 60 years 
old.
    So, we need a modern IRS. And that won't just mean fewer 
tax cheats, stifling families when it comes to paying their 
fair share. It means that Americans' personal financial 
information is safer from cyber-attacks or nefarious actors.
    And it will mean we could put more money back in families' 
pockets when it comes to the tax refunds and relief that they 
are entitled to, like the childcare tax credit President Biden 
proposes reinstating in this budget. Secretary Yellen, I asked 
you about the IRS spend plan for the IRA funding in our call 
when we talked last month.
    Congress still doesn't have that. And I want to join Chair 
Van Hollen in saying the department has had enough time to 
produce it and we expect to see it. And lastly, families, of 
course, are also counting on us to raise the debt limit, you 
just talked about this, without drama, without delay.
    And let me just be clear, as you were, that the full faith 
and credit of the United States, that is to pay our bills on 
time like every families expected to, is not something that 
should ever be held hostage to score cheap political points at 
the expense of working people in this country.
    Not getting that done would be catastrophic for our 
economy, so I hope we can do this in a straightforward, 
bipartisan way, as we have many times under both Republican and 
Democratic leadership.
    So, again, thank you for being here today and I just want 
to say I am going to be very closely paying attention to the 
work on the issues raised by the Silicon Valley Bank and 
Signature Bank, and I expect that you will keep us updated on 
this as we move along.
    Secretary Yellen. Yes, of course. I would be glad to.
    Senator Murray. Thank you. In terms of questions, last 
year, I was able to pass a sweeping bipartisan retirement bill, 
in our SECURE 2.0 Act, that will increase families' financial 
resiliency and help more families save for a dignified 
retirement and make it easier for businesses to offer 
retirement plans. Can you tell us what resources Treasury will 
need to implement all of the SECURE directives in a timely 
manner?
    Secretary Yellen. Yes, there are some resources the 
Treasury will need, and they are included in the 2024 budget. 
My understanding is that the Bureau of Fiscal Services will 
need about $10 million to complete their effort to digitize 
savings bonds.
    The Office of Tax Policy will need about $1.5 million to 
hire additional OTP, Office of Tax Policy Staff to write the 
regulations and rules. And IRS will be faced with 
implementation of many of the features of this.
    And there is money included in the budget. I believe an 
additional $10.5 million for IT funds. And an additional 
roughly $5.5 million, and this would go from fiscal year 2023 
through 2027 for additional lawyers in the Chief Counsel staff.
    Senator Murray. Okay. Thank you for that summary, and I 
will be following that very carefully as we put this bill 
together. As I mentioned, I do expect from you a detailed plan 
about how the IRS is intending to use IRA money. Without that, 
we are hearing all kinds of conflated things about 87,000 
people and an army kind of thing. But tell us when we are going 
to see that plan so we can see the detail of----
    Secretary Yellen. In a matter of weeks. I have seen a draft 
of the plan. It is not final, but you should see it very 
shortly.
    Senator Murray. Okay, we need to see that because it is 
really important----
    Secretary Yellen. Of course.
    Senator Murray [continuing]. For taxpayers to be able to 
call the IRS and get a response. It is really important for us 
to be able to have the new technology we need, but we need to 
see your spend plans so we have a real concrete----
    Secretary Yellen. You will see that.
    Senator Murray. Okay. And finally, I know President Biden's 
2024 budget is rightly called a blue collar blueprint to 
rebuild America, and that blueprint would not only help 
families with lower health care costs, but also invest in 
quality child care, ensure giant corporations and billionaires 
pay their fair share a lot more, but I wanted to ask you, do 
you think that the President's budget would increase inflation 
or put us on a fast path to fiscal ruin, as some of our 
colleagues have suggested?
    Secretary Yellen. No, I don't. It is--it does invest in 
America, in our people, in our economy, in ways that will make 
it more productive, but it proposes ways to pay for that. And, 
in fact, over 10 years, it involves deficit reduction amounting 
to $3 trillion, so it puts us on a more secure and prudent 
fiscal path.
    It--many of the investments that are proposed could be 
viewed as expanding supply. Senator Hagerty mentioned the 
importance of supply and inflation as a matter of supply and 
demand. And the supply side of our economy is important.
    We know that private investment capital formation matters, 
and that is what traditional supply side economics has always 
focused on. I have coined the term modern supply side 
economics. I believe the supply side of the economy is 
important, but there are other kinds of investments that are 
also critical, and that is what is included in this budget.
    Funding for education, human capital, investing in people, 
investing in cares for children, in childcare, early childhood 
education, enabling more people to work, investing in research 
and development that improve our technology and productivity.
    So, there are some very significant investments in our 
economy that will expand its capacity and ability to supply 
goods and services.
    Senator Murray. Thank you very much. Thank you, Mr. 
Chairman.
    Senator Van Hollen. Thank you, Madam Chair. And now we will 
turn to the Ranking Member of the full Committee, Senator 
Collins.
    Senator Collins. Thank you very much, Mr. Chairman. It is 
great to be here with you and the Ranking Member and appreciate 
it. Secretary Yellen, I want to talk with you about the 
consequences of the decision that was made by Treasury in 
consultation with the Federal Reserve and the FDIC to use a 
systemic risk exception in the Federal Deposit Insurance Act to 
insure all of the deposits of Silicon Valley Bank.
    Last Wednesday, the new CEO of this bank held a conference 
call for concerned clients, and he urged them to return all of 
their deposits to the bank. And here is what he said on that 
call, and I am going to quote it. ``There is no safer place in 
the U.S. banking system to put your deposits.''
    I am very troubled by that comment because it invites 
deposit flows from well-managed, prudently invested community 
banks to a bank that was poorly managed, that took excessive 
risks.
    And it seems to me by guaranteeing all of the deposits, 
that you are creating a situation where they are immune from 
losses, draw in deposits from well-managed banks in a way that 
puts the well-managed community bank at a competitive 
disadvantage.
    So, I guess my question to you is, how is this fair?
    Secretary Yellen. Well, look, we invoked the systemic risk 
exception because Silicon Valley Bank had experienced a 
calamitous run, a run that was so enormous that it overwhelmed 
the liquidity of this bank, its ability to arrange liquidity.
    And it created the potential for fear about the safety of 
uninsured depositors in many other banks. And a failure to 
protect those who were uninsured depositors in this bank at the 
time it was put into receivership would have led to fears by 
uninsured depositors at many other banks who really have no 
easy way of knowing what the status of their banks are and 
whether or not their funds are at risk.
    It risked contagion throughout the banking system. We 
invoked this exception in order to try to contain the contagion 
that seemed to all of us to be inherent in these uninsured 
depositors being wiped out or severely gutted.
    So, it wasn't a question of protecting that bank or that 
group of uninsured depositors, but rather the implications for 
the broader banking system because of the contagion potential.
    Senator Collins. Well, I want to switch to relate it by 
different topics. But to me, it creates a situation where you 
are rewarding very wealthy depositors and you are creating the 
need for a special assessment that is going to be imposed on 
those well-managed community banks that don't take--didn't take 
those risks.
    And from what the bankers I have talked to tell me, the 
majority of their depositors fall under the $250,000 limit. 
Well, at Silicon Valley Bank, the opposite was true. But let me 
follow up on a point that Senator Hegarty made.
    He asked you about the level of FDIC insurance. I remember 
in 2008 when it was raised from $100,000 to $250,000 during 
that financial crisis. Now, some of our colleagues, including 
Senator Elizabeth Warren, has recommended that we raise up to 
$2 million or even up to $10 million. Do you agree with that?
    Secretary Yellen. You know, what I am focused on right now 
is trying to stabilize the banking system. And I know our 
banking system to be sound, and I think right now we need to 
focus on improving the confidence of the public that we do have 
a sound banking system. And we can debate in the days ahead 
whether or not $250,000 is the right level for deposit 
insurance, or whether that system could be--should be changed 
in some way. I am not going to weigh in on it.
    I believe there is plenty of time to have reasoned 
discussions about that. For now, I want to use the tools that 
we do have at our disposal to improve confidence and make sure 
the banks that are faced with deposit outflows have adequate 
access to liquidity.
    The steps that the Federal Reserve took in the aftermath of 
that bank failure to make liquidity more broadly available to 
support deposits, that is an important step that went with the 
steps that we took as well.
    Senator Collins. Let me very quickly switch to a different 
issue. You said in your statement that the IRS is answering a 
million more calls than last year. That sounds good.
    But the fact is that the Inspector General for Tax 
Administration calculates their own collar response figure 
based on the data they collect from the IRS, and for this 
filing season through March 4, the Inspector General calculates 
that the IRS has only responded to 52 percent of calls, and 
that if you add together both automated calls and calls 
answered by an IRS customer service representative, that the 
number of calls that are answered declines to even more, to 
only 29 percent of the calls are answered by an IRS customer 
service representative.
    So, I hope we will follow up and try to get to the bottom 
of that. I can tell you, based on the casework in my offices in 
Maine, and I have six offices, that they are having an 
extremely difficult time getting answers from the IRS.
    Secretary Yellen. Senator, I would be glad to look into 
that. I am not aware of the report that you just mentioned. We 
have been tracking on a weekly basis the IRS's performance 
during this tax season and it has been running between 80 and 
90 percent. That is a very different number than you mentioned.
    And I would be glad, I will ask my staff to try to 
reconcile that discrepancy. But I personally promise that this 
tax season, that--so I don't know if you are talking--are you 
talking about the entire year or the tax----
    Senator Collins. The tax season through March 4. And it is 
a report by the Inspector General for Tax Administration.
    Secretary Yellen. I will look into that because I have been 
told its average is 85 percent, in line with the promise that I 
personally made.
    Senator Van Hollen. Senator, thank you. Thank you. Senator 
Heinrich.
    Senator Heinrich. Thank you, Chairman. Welcome, Madam 
Secretary. We have had some discussion here on the deficit, and 
I thought it might be helpful if you could remind us of the 
relative role of the Trump tax cuts in creating the current 
structural deficit.
    Secretary Yellen. Well, the Trump tax cuts added hugely to 
the deficit. I wish I recalled, it was something like $2 
trillion over 10 years. And so that is a major contributor to 
the deficits that we have.
    Senator Heinrich. Pivoting quickly to the banking 
situation, as Chair designate of the Joint Economic Committee 
(JEC), I was very pleased that the Administration acted quickly 
to ensure that small banks and depositors don't take the brunt 
of the Silicon Valley Bank failure.
    But I also suspect that this is a disaster that could have 
been prevented. When Congress voted to roll back key regulatory 
provisions back in 2018, I was also Vice Chair of the JEC at 
the time, and I warned that weakening these rules put the 
health of the banking system at risk.
    And in fact, I have released a report, a JEC report, that 
named SVB Financial Group specifically as one of the banks that 
would face nearly none of the enhanced regulations originally 
put in place in the Dodd-Frank legislation.
    How can regulators shore up confidence and stability in 
this asset class of banks? And do they need additional tools in 
order to improve the stability throughout the entire financial 
system?
    Secretary Yellen. So, I absolutely think that it is 
appropriate to conduct a very thorough review of what factors 
were responsible for the failure of these banks. And it is true 
that there was legislation that weakened bank regulation, and 
there were also regulatory decisions by the Federal Reserve and 
other banking agencies.
    There is also a question of supervision in how that is 
conducted. I was pleased to see that Vice Chair for 
Supervision, the Fed's Vice Chair for Supervision, Michael 
Barr, is undertaking and will report by May on an investigation 
of what is involved.
    And certainly, we should be reconsidering what we need to 
shore up regulation to prevent this. This was a very unusual 
set of circumstances the Silicon Valley Bank faced. It appears 
that they had seen a significant interest rate risk that they 
were subject to, and an exceptionally high, over 90 percent of 
their deposits were uninsured. And that is, you know----
    Senator Heinrich. That number is well outside of the norm.
    Secretary Yellen. So, in that sense, this was an unusual 
bank, but I think it is appropriate to review all of that.
    Senator Heinrich. Do you have any thoughts at all on the 
nature of--I mean, this is basically our first digital bank run 
in a way--the way that the fire sort of spread.
    Secretary Yellen. Yes.
    Senator Heinrich. How should we be thinking about that in 
the role of providing proper oversight and de-risking these 
financial institutions going forward, given that that is very 
much the world we live in now?
    Secretary Yellen. So, this was an overwhelmingly rapid run 
on a bank. To the best of my knowledge, we have never seen 
deposits flee at the pace that they did from Silicon Valley 
Bank. Now, many of the depositors were, you know, startup tech 
firms that work with venture capitalists that also bank.
    And there was, as you say, on the Internet essentially 
shouting fire in a movie theater. And it perhaps it is the case 
that now in the world we live in, that although this was a 
small community with a disproportionate share of Silicon Valley 
Bank's deposits, this kind of thing may more readily happen 
now.
    And it means that in general, when we do liquidity stress 
tests on banks, where we think about liquidity requirements, 
perhaps some of the assumptions that go into modeling the pace 
at which deposits might flee, maybe some of those need to be 
updated and rethought. But this is a new phenomenon and we 
haven't seen this before.
    Senator Heinrich. I think it is an important question----
    Secretary Yellen. We need to rethink it.
    Senator Heinrich. It is the world we live in today. Some 
House Republicans recently introduced a bill that would force 
Treasury to prioritize covering debt held by foreign debt 
holders like the Chinese government before financing Department 
of Defense, the VA, really every Federal funding priority 
outside of Social Security and Medicare.
    You have referred to this plan as default by another name 
and have pointed out that it is really not logistically 
feasible for Treasury to prioritize payments given how Treasury 
operates. What do you think of this plan to prioritize things 
like foreign investments over current and former service 
members and other obligations that we have as Federal 
Government?
    Secretary Yellen. Well, we have a set of bills that come 
due, and it is our obligation and my obligation as Treasury 
Secretary to see that those bills are paid, and not some of the 
bills, and to decide which bills are more important than other 
bills, simply to pay the bills for programs in spending that 
Congress has authorized.
    That is why I say prioritization is default by another 
name. Not paying any of our bills is default. And when you 
think about the pain that it would cause to Social Security 
recipients, to food stamp recipients, you name it, people to 
vendors who supply services to the Government and have their 
own payrolls to meet, to be told they are not going to be paid, 
the Government isn't going to honor those bills.
    That is a default. And reading rating agencies, 
particularly Fitch, has already clearly indicated that a 
failure to pay all of the government's bills when they are due 
would certainly compromise our credit rating. So, this has 
never been tried. It has been rejected by all past Treasury 
secretaries.
    And I would say our systems, or payment systems, are simply 
set up to pay all the government's bills when they come due. 
They are not set up to divide payments into different types as 
a general matter and to be able to say, yes, this, this, this 
and this we are paying.
    And these other things we are holding back for many 
agencies, payments of all types are all mixed together in ways 
that couldn't be disentangled.
    Senator Heinrich. Thank you, Chairman.
    Senator Van Hollen. Thank you, Senator Heinrich. Senator 
Kennedy.
    Senator Kennedy. Thank you, Mr. Chairman. Welcome, Madam 
Secretary. Madam Secretary, isn't it a fact that the 
President's proposed budget for next fiscal year is a half a 
trillion dollars more than this fiscal year?
    Secretary Yellen. On the spending side?
    Senator Kennedy. Yes, that is what a budget is.
    Secretary Yellen. Yes. It is about $400 billion----
    Senator Kennedy. It is about $500 billion more, right?
    Secretary Yellen. It is about what?
    Senator Kennedy. $500 billion more, right?
    Secretary Yellen. About that.
    Senator Kennedy. Isn't it a fact that since 2019 until 
today, I am not including the extra $500 billion that you all 
want to spend, since 2019 through today, U.S. population has 
increased 1.8 percent and the Federal Government's budget is up 
55 percent. Isn't that a fact?
    Secretary Yellen. But we had a pandemic.
    Senator Kennedy. Isn't that a fact, though? I mean----
    Secretary Yellen. I don't know those numbers.
    Senator Kennedy. You don't know? You never looked at that?
    Secretary Yellen. I don't have those numbers in my head. 
Well, I am not disputing them.
    Senator Kennedy. Okay. Isn't it a fact that the President's 
proposed budget proposes $4.7 trillion in new taxes?
    Secretary Yellen. It does propose significant additional 
taxes, yes.
    Senator Kennedy. $4.7 trillion.
    Secretary Yellen. Something like that, yes.
    Senator Kennedy. Okay. You talked about reducing deficit. 
Isn't it a fact that under President Biden's proposed budget, 
that gross debt will rise from $32.7 trillion at the close of 
this year to $51 trillion by 2033?
    Secretary Yellen [continuing]. What number did you give me 
for----?
    Senator Kennedy. The President's proposed budget will 
increase gross debt from $33 trillion at the close of this year 
to $51 trillion in 2033? Isn't that correct?
    Secretary Yellen. Well debt held by the public, which is--
--
    Senator Kennedy. No, ma'am, that is gross debt. Isn't that 
a fact?
    Secretary Yellen. That is probably a fact.
    Senator Kennedy. So, you haven't reduced the deficit, have 
you?
    Secretary Yellen. The deficit, the debt and deficits are 
reduced by the President's budget.
    Senator Kennedy. How can you go from $33 trillion to $51 
trillion and call that a reduction in the deficit?
    Secretary Yellen. Because that is a calculation for which 
you need a baseline. And then you compare the budget and the 
deficits and debt in the budget with the baseline in which 
there are none of the changes either in revenues or in spending 
that are----
    Senator Kennedy. Here is my baseline--and here is my 
baseline, at the end of this year, we project--people a lot 
smarter than me, probably not than you but smarter than me--say 
that gross debt is $33 trillion. They say if the President's 
budget is implemented by 2033, it will be $51 trillion. Isn't 
that a fact?
    Secretary Yellen. If the President's budget is not 
implemented and none of the changes are made, it will be worse 
than that. And so, the President's budget has improved the 
fiscal outlook relative to what we would have without the 
President's proposals.
    Senator Kennedy. Even though it raises a gross debt from 
$33 trillion to $51 trillion, you say that is an improvement?
    Secretary Yellen. It is. It is an improvement because it 
raises taxes by more and it leads to----
    Senator Kennedy. That includes taxes. In what world is that 
an improvement other than Washington and la la land?
    Secretary Yellen. It is an improvement in that the revenue 
increases far exceed proposed investments.
    Senator Kennedy. Okay. All right. Let me ask you this, 
isn't it a fact that in January of 2019, the Federal Reserve 
issued a warning to Silicon Valley Bank over its risk 
management systems?
    Secretary Yellen. I have no idea. I am not responsible in 
any way.
    Senator Kennedy. But you are in charge of the banking 
bailouts and the crisis, right?
    Secretary Yellen. I am not involved in banking supervision 
and I don't have access to any information about the 
supervision of Silicon Valley Bank.
    Senator Kennedy. Okay. So, you don't know whether or not 
the Fed, you haven't looked to see whether or not the Fed 
issued a warning, what, 4 years ago to the bank over its risk 
management systems?
    Secretary Yellen. That is not public information and it is 
not for me----
    Senator Kennedy. Sure, it is--Wall Street Journal.
    Secretary Yellen. Well, it may be in The Wall Street 
Journal, but it is not public information and it is not 
information that I have access to.
    Senator Kennedy. Well, I will give you a copy of this 
article.
    Secretary Yellen. I read the article, but----
    Senator Kennedy. The Fed issued a matter requiring 
attention, and it said your risk management practices are 
terrible and you need to improve them.
    Secretary Yellen. That is what the article says.
    Senator Kennedy. All right. Isn't it fact that months 
before SVB went under, that the bank disclosed that its market-
to-market value of its bonds was $16 billion less than their 
balance sheet value?
    Secretary Yellen. They did make such a statement.
    Senator Kennedy. Did the people at the Federal Reserve just 
not read it?
    Secretary Yellen. I am not in the Federal Reserve.
    Senator Kennedy. I know.
    Secretary Yellen. I was at the Federal Reserve----
    Senator Kennedy. But you are in the Treasury and you are in 
charge of the banking crisis. Let me ask you----
    Secretary Yellen. I am not in-charge of the supervision of 
the bank.
    Senator Kennedy. Let me ask you this. Senator Heinrich 
talked about the 2018 amendments to the Dodd-Frank Act. Isn't 
it a fact--now SVB was not stress tested in 2022, 34 banks 
were. Here is the Fed's report. Isn't it a fact that if SVB had 
been stress tested, it would have passed?
    Secretary Yellen. Stress tests look at capital of a bank.
    Senator Kennedy. Here is the--yes, ma'am, under the stress 
test. Isn't it a fact that SVB would have passed?
    Secretary Yellen. I don't know--it wasn't stress----
    Senator Kennedy. Well, you need to look into that, Madam 
Secretary.
    Secretary Yellen. I said this is not my job, this is the 
Federal Reserve's job.
    Senator Kennedy. Isn't it a fact that when the Federal 
Reserve stress tested in 2022, it only stress tested credit 
risk and didn't stress test duration risk. Isn't that a fact?
    Secretary Yellen. You know, I believe the stress tests in 
general partially address and take account of interest rate.
    Senator Kennedy. No, ma'am. I have read it. Here it is, 
bigger than Dallas.
    Secretary Yellen. Well, to the extent that there are assets 
held in an available for sale portfolio that would suffer 
losses due to changing interest rates, that would be captured 
in the banks----
    Senator Kennedy. No, ma'am, it is not there. I have read 
it.
    Senator Van Hollen. Senator Kennedy, I have allowed people 
to--the Secretary to stray over answers that were asked before 
the time went out, but not a series of questions after the time 
went out, but----
    Senator Kennedy. Sure, I get it. I understand, Mr. 
Chairman.
    Senator Van Hollen. Thank you. And thank you, Senator 
Kennedy. And let me, I worked together with Senator Kennedy on 
lots of things. We have got a good working relationship. I am 
pleased to have done it.
    We have some disagreements, and some of those questions 
have prompted me just to ask you some follow up on some of 
these issues. I just want to underscore the point you made, 
that the President's budget, President Biden's budget reduces 
the deficit over the next 10 years by $3 trillion relative to 
if we did nothing. Is that right?
    Secretary Yellen. That is correct. That is what I think I 
said in answer to Senator Kennedy.
    Senator Van Hollen. Right.
    Secretary Yellen. We need a baseline. Then you look at the 
budget, and you compare deficits and debt in the two scenarios. 
And in that sense, there is a $3 trillion reduction in deficits 
relative to the standard.
    Senator Van Hollen. Right. I mean, if the Congress packed 
up its bags and left, which maybe some--lots of people would 
want us to do, and the President took no other action, the 
reality is 10 years from now, the deficit would be $3 trillion 
higher than if than it is today.
    Secretary Yellen. Yes.
    Senator Van Hollen. And isn't it a fact that one quarter of 
the total accumulated national debt was incurred during the 4 
years of the Trump Administration?
    Secretary Yellen. Yes.
    Senator Van Hollen. And isn't it a fact that during the 4 
years of the Trump Administration, Congress passed the debt 
ceiling increase three times without a lot of drama?
    Secretary Yellen. Yes.
    Senator Van Hollen. And Senator Heinrich asked you some 
questions about the proposal coming out of House Republicans 
for some kind of debt prioritization. And you made very clear 
that that is just default by another name, right?
    Secretary Yellen. Yes. Yes. It is not paying our bills.
    Senator Van Hollen. Right. And isn't it true that back in 
2011--I am having a sort of this is flashback on steroids. We 
were just getting close to that waterfall in the debt ceiling--
--
    Secretary Yellen. Yes.
    Senator Van Hollen. Led Senators to lower the rating of 
U.S. credit, right----
    Secretary Yellen. Yes. And that is why I have asked 
Congress to raise the debt ceiling expeditiously. We don't want 
to get to the X-date and push this because damage can occur and 
we could be downgraded if Congress looks like it is not willing 
to.
    Senator Van Hollen. I really hope, Madam Secretary, that we 
won't do that. I do welcome a vigorous debate with my 
colleagues on the budget issues. Whether you make spending 
cuts, whether you make revenue increases, people can have a 
healthy disagreement on that front.
    But that also does raise the issue of the IRS budget and 
the $80 billion that was presented, provided with the IRA for a 
number of functions, one of them being to allow the IRS to 
collect revenues that are already due and owing and not paid.
    Now, I have a couple of questions regarding that, Madam 
Secretary. One is you have directed the IRS and the Treasury 
Department that you will not increase audits above any 
historical level with respect to small businesses or taxpayers 
under $400,000, right?
    Secretary Yellen. I issued an order to that effect. I have 
told the IRS that they must not increase the audit rates on 
either individuals or small businesses earning under $400,000.
    Senator Van Hollen. And I think it was maybe--I think it 
was Jesse James who said when he is right--when he robbed 
banks, he said that is where the money is. Where the money is 
in uncollected taxes is in very wealthy, wealthy folks who are 
not paying their taxes on time, right?
    Secretary Yellen. That is right. It is wealthy individuals, 
complex partnerships, corporations, where there is particularly 
unreported income.
    Senator Van Hollen. Right. And I know that the 
Administration and the IRS have calculated hundreds of billions 
of dollars of lost income annually from this tax gap. But the 
Congressional Budget Office (CBO) has a more conservative 
number, but it has a number nevertheless from the enactment of 
the Inflation Reduction Act.
    And it also calculated that the first act, I think it was 
the first act of the of the House under new leadership of 
Speaker McCarthy when they repealed the Inflation Reduction 
Act, according to CBO, that would increase the deficit relative 
to where we are today by $114 billion, right?
    Secretary Yellen. Yes. The money that we spent on--that you 
appropriate to the IRS, whether it is the discretionary budget 
or the additional long term mandatory investment in the IRS, 
this is money that brings in net more tax revenues.
    In that sense, it is not really costly. It generates more 
money for the taxpayer by enabling the IRS to collect the taxes 
that are owed than you are spending in appropriations on the 
agency.
    Senator Van Hollen. Right. So, you know, I hope in the 
coming weeks we can have a sober conversation up here about the 
budget and deficits, because it is one thing for our House 
colleagues to say they care about the debt ceiling, the 
deficit, and another thing for their very first action to be to 
increase the Federal budget deficit by over $114 billion over 
the next 10 years.
    Senator Kennedy. Mr. Chairman, can I ask a personal----
    Senator Van Hollen. Let me just ask my last question. I am 
happy to entertain the question if my other colleagues are 
willing. So, Madam Secretary, in terms of the IRS funding, in 
addition to trying to collect taxes from wealthy tax cheats, we 
have seen an improvement in IRS performance when it comes to 
answering constituents' calls. Is that not, correct?
    Secretary Yellen. That is certainly the reports that I have 
gotten, that the response rate has been between 80 and 90 
percent this tax year----
    Senator Van Hollen. And we are going to look, as Senator 
Collins raised some important questions here. It has definitely 
improved. Whether it has improved to that extent, according to 
the Inspector General, we will have to take a look at that.
    But I do think that making sure that folks who, especially 
very wealthy folks pay their taxes on time is important. And I 
am just going to, in closing here, refer you to a letter that a 
group of us sent on March 20, myself, Senator Warren, and 
others regarding abuses of trust that allow very, very wealthy 
individuals, billionaires to pass on lots of money without any 
taxation.
    They have very high-priced lawyers, which in our view are 
skirting the law, certainly the intent of the law. And we are 
asking you to take a look at that when you do that.
    Secretary Yellen. Yes, we actually have some proposals in 
the Green Book to clamp down on that type of abuse, and we 
would be glad to discuss further things we can do to prevent 
that kind of abuse.
    Senator Van Hollen. Got it. Senator Kennedy, it is up to 
Senator Hagerty, but I am happy to----
    Senator Kennedy. Well, I just wanted to ask, this is a 
question, not a comment, are we all going to--I mean, my 
colleague here hadn't had a chance to answer and ask any 
questions, but will we have a chance to follow up as well with 
the Secretary?
    Senator Van Hollen. Sure. Everyone is--we are doing another 
round. We have 7 minutes each. Absolutely. Absolutely. Senator 
Boozman.
    Senator Boozman. Thank you. Thanks for the pep talk. Thank 
you, Madam Secretary, for being here. And I would like to ask 
some questions that my community banks in Arkansas are 
concerned about.
    It is important to remember that Silicon Valley Bank and 
Signature Bank took on unique risks and were materially 
different from most U.S. banks, especially rural community 
banks are safe and sound.
    In light of those unique risk profiles, and I'm 
understanding that you aren't the FDIC chair, when determining 
whether to invoke the systemic risk exception, what specific 
data points, metrics, and factors do regulators focus on?
    Secretary Yellen. Well, we were very focused on the 
potential for the failure of these banks and losses to 
uninsured depositors in the banks to trigger runs on other 
banks. And we looked at things like deposit outflows from other 
banks, anecdotal reports that we heard.
    I will say that many mid-sized banks expressed great 
concern that they have uninsured deposits. Often these are 
local businesses that can't operate within the insured deposit 
limits. And these banks felt seeing many uninsured depositors 
having the view, the only place you are safe is in the largest 
banks, many of these banks felt very skittish about their 
potential to suffer runs as well.
    And I have heard this in many banking context that my staff 
and I have had in recent days, that there is concern. We can 
see that banks across the country are shoring up their 
liquidity. They are very worried about contagion from the 
troubles of Silicon Valley Bank and Signature Bank.
    And the steps that we took were designed to improve the 
confidence of all depositors that they are safe in banks. And, 
you know, depositors often don't know about what the specific 
situation is of their bank, whether it is a mid-sized bank or a 
community bank, and if they become worried, they can pick up 
their deposits and go someplace they think is safer.
    And we did not want to see contagious runs that could have 
impacted many banks, including community banks.
    Senator Boozman. Very good. While Silicon Valley and 
Signature's uninsured deposits will be paid for by the Deposit 
Insurance Fund, banks will replenish the fund via a special 
assessment.
    In reality, those costs will be passed down to customers 
via higher banking costs, and I am concerned that Arkansans 
will have to subsidize Silicon Valley Bank and Signature Bank's 
deposits, and maybe others that come forward.
    What specific legal authority exist for Treasury, FDIC, 
and, or the Fed to exclude certain banks from being charged the 
special assessment, and will the community banks get charged 
that special assessment?
    Secretary Yellen. I don't know what the rules are around 
that precisely. I think the FDIC may have some ability to 
determine which banks are charged. I believe it is up to the 
FDIC to make that determination.
    Senator Boozman. And again, absent Congress passing a new 
law, what specific authority does Treasury, FDIC, and, or the 
Fed have to guarantee, even temporarily, all insured deposits 
of open banks?
    Secretary Yellen. Well, I mean, the FDIC, if it wished to 
put a program in place like the Tag Program that I think was 
instituted in 2008, that requires Congressional approval.
    Senator Boozman. Okay. Very good. Thank you. Turning to a 
different issue, can you provide a timeline for when Treasury, 
and, or IRS will write any further rule makings, guidance, or 
notices regarding the Inflation Reduction Act's direct pay 
provisions relating to tax exempt entities?
    Secretary Yellen. Are you referring--you are referring to 
the IRA?
    Senator Boozman. Yes, ma'am.
    Secretary Yellen. We have many rule makings we are required 
to do to implement the features of the IRA, and we are frankly 
working 24/7 to get them done as rapidly as we can. I can't 
give you an exact date, but I can tell you that we are working 
on it very hard. We are full tilt. These are some rather 
complex rules, and we are working very hard to get them out.
    Senator Boozman. Good. Thank you. The CDFI Fund is in the 
process of finalizing changes to its CDFI certification 
application. What analysis has Treasury done to understand the 
impact that the application changes will have on currently 
certified CDFIs? How will the changes impact recipients of 
Emergency Capital Investment Program (ECIP) funds?
    Also, will depository institutions be less likely to meet 
certification requirements under the new standards? And if so, 
what impact will have on the--will that have on the Fund's 
ability to support investment and access to capital in 
underserved communities?
    Secretary Yellen. So, I really need to get back to you on 
that. I am not knowledgeable about the details of the change 
in--that you are referring to. Certainly, the CDFI Fund is 
trying to get money into the hands of CDFIs to lend in 
underserved communities, and certainly not to make it harder. 
And my staff will get back to yours, if that is okay----
    Senator Boozman. Yes, ma'am.
    Secretary Yellen. On the details of the question you asked.
    Senator Boozman. Well, thank you very much. Thank you, Mr. 
Chairman.
    Senator Van Hollen. Thank you, Senator Boozman. Senator 
Hagerty.
    Senator Hagerty. Thank you, Chair. And--just a couple of 
follow up questions. One, I would like to follow up on the 
point that Senator Kennedy touched, Secretary Yellen, and that 
has to do with the crisis that we just experienced with the 
banking community here. It is--the mantra of Washington seems 
to be never let a good crisis go to waste.
    There have been calls now that there need to be 
reregulation, that the tapering, I was not here when this was 
passed, but that the tapering that Senator Kennedy mentioned 
back in 2018, S. 2255, it was meant to take the one size fits 
all regulation and try to in some way make that better fit the 
market.
    That that is the reason for the failures that we have seen. 
What we have seen is a failure of management, as I mentioned 
earlier. You have got a management that was asleep at the wheel 
and out to lunch. They left their Chief Risk Officer position 
stay open for 8 months up to the failure.
    I am not aware of anything in S.2255 that would have fixed 
that problem. Are you, Madam Secretary?
    Secretary Yellen. Look, you know, we need to do a thorough 
review of what happened in the case of these bank failures, and 
I am not prepared to weigh in on precisely what the causes were 
at this point.
    Senator Hagerty. I will weigh in a little bit further and 
if you will accommodate me. There was also a failure at the San 
Francisco Fed in terms of the oversight that they should have 
been providing. Again, they were getting detailed liquidity 
reports, I believe, on a monthly basis about what was happening 
in Silicon Valley Bank.
    Yet they didn't seem, you know, they didn't seem to 
identify the problem nor did they address it in time. And I 
think the most disappointing failure of all is what happened 
during the weekend that the auction should have taken place. 
Rumors were rampant about slowness of the process, whether 
people were being encouraged or dissuaded from bidding.
    And at the end of the day, my understanding from FDIC 
official was that they did have a bidder, but they were not 
able to conclude the auction. We would be in a far better place 
right now had the FDIC concluded that auction.
    We were talking about a new buyer of the bank and we were 
in a position at this point to have contained the loss to, 
again this is the example of Silicon Valley Bank, as opposed to 
finding ourselves in a position where we have a much broader 
situation, where there is a precedent has been set now that, 
again, make many people in America wonder whether every deposit 
in America has been, you know, in some agreed to be backstopped 
or guaranteed.
    You have articulated the decision process that you would go 
through on a case-by-case basis, but I think, again, as I 
mentioned earlier, the bankers in my home State of Tennessee 
are very concerned whether they would be included or not.
    And there is a lot of uncertainty that we are going to have 
to get to the bottom of there. From that point, though, I would 
like to turn to just another issue, Secretary, and that has to 
do with the President's budget.
    The new budget lays out another $2.5 trillion of spending 
increases and going to the Treasury Green Book that you just 
mentioned a few minutes earlier, another $4.7 trillion of tax 
increases as well. Those tax increases, in my view, as you look 
at the Green Book, will have a lot more complications.
    We have already got an overcomplicated tax code. I think 
this promises to overcomplicate it further. The most recent 
estimate that I have seen shows that individuals and 
corporations spend 6.5 billion hours on tax filing and 
reporting already, and it is hard to imagine a system as 
complicated, as bureaucratic as it already is, getting more 
simple with the addition of another $4.7 trillion of new taxes.
    And my question of you, and you may need to get back to me 
on this, is how many more forms or instructions are going to be 
required from the IRS to the American public to address this. 
How many more hours will be required to fill out new forms and 
new overhead to address this massive new tax increase?
    Secretary Yellen. Well, I can't give you an estimate at 
this point of the number of hours or forms, but if Congress 
would consider seriously the proposals, we would be able to 
make estimates of those things.
    Senator Hagerty. I will certainly consider it seriously, 
but it is clear to me that it is not going to get any less 
complicated. It is going to be more complicated considerably by 
the way it is moving.
    Now, I just finish with this. I am very concerned again 
that the Green Book calls for more than $100 billion in 
targeted tax increases on fossil fuels, and talking about 
further increases on fossil fuels, further complicating that 
business at a time when our economic security and our national 
security are in such a grave situation.
    I think it really doubles down on the weaponization of our 
tax code against industries that are out of disfavor by this 
Administration, and it weakens us as a Nation. Anything that 
would lower investment in energy production right now will 
weaken our national security, so it is a grave concern.
    Secretary Yellen. I would say that fossil fuels have 
benefited from many special tax features that really are tax 
expenditures. They have benefited from that for decades. And at 
a time when we need to make a shift over time to clean energy, 
to be spending money to subsidize fossil fuels through the tax 
code is something that doesn't seem to our Administration to be 
appropriate.
    Senator Hagerty. Anything that increases the cost of 
producing energy right now, at a point we have had massive 
inflation in energy cost, and we are at a point right now where 
we cannot fulfill our obligations to our allies.
    It is putting our Nation at a point of weaker, weaker 
economic security, weaker national security. I think we should 
not be doing that. Thank you, Madam Secretary. Appreciate you 
being here. Mr. Chairman, thank you.
    Senator Van Hollen. Thank you, Senator Hagerty. And I am 
going to turn it over to Senator Kennedy. Just one piece of 
business before that. If I run out before Senator Kennedy is 
finished asking his questions, I just want scout's honor, you 
will stay within the time limit, number one. I know you will. 
Thank you, my friend.
    And number two, in case I can't get back, let me just say, 
Madam Secretary, thank you for appearing before the 
subcommittee. And members will have one week to submit 
questions for the record due on March 29.
    And we would appreciate if your office could respond to 
those questions as soon as possible. Again, I will be here 
unless I get called up away, right, to get my questions up in 
another hearing. Thank you, Madam Secretary. Senator Kennedy.
    Secretary Yellen. Thank you, Senator.
    Senator Kennedy. Scout's honor, Mr. Chairman. Madam 
Secretary, I thought I understood your proposed budget, and I 
want to walk you through it again. Isn't it a fact that the 
President's proposed budget increases spending by half a 
trillion dollars over the current budget?
    Secretary Yellen. There is an increase in 2024 over 2023 by 
about that much, and at least----
    Senator Kennedy. Isn't it a fact that the President's 
budget proposes new taxes of $4.7 trillion?
    Secretary Yellen. That is probably right. Yes.
    Senator Kennedy. Okay. And isn't it a fact, I am talking 
about gross debt now, not public, not debt held by the public. 
Isn't it a fact that under the President's proposed budget, 
gross debt would go from $32.7 trillion at the close of this 
year to $50.7 trillion by 2033?
    Secretary Yellen. It is subject to statutory limitation. 
Yes, would go, as you said.
    Senator Kennedy. So, the President's budget would increase 
our debt by $18 trillion.
    Secretary Yellen. Which is $3 trillion less----
    Senator Kennedy. Right.
    Secretary Yellen. Than it would increase without the 
proposals in the President's budget.
    Senator Kennedy. So, what the President saying is these 
were my words, not his, because of his budget, we are going to 
have three heart attacks and a stroke instead of four heart 
attacks and a stroke.
    Secretary Yellen. Well, I would not agree that we are going 
to have three heart attacks and a stroke because we have a very 
large economy. And while the numbers that you cite are very big 
numbers, the size of our economy is also extremely large.
    And I think a better metric for assessing what the impact 
of the budget is on our economy and whether or not it is 
manageable is real net interest on--the real net interest 
payments that we have to make relative to the size of our 
economy.
    And those real net interest payments run throughout the 10 
years of the budget at around or under 1 percent of Gross 
Domestic Product (GDP), which is historically normal.
    So, debt is increasing, the size of the economy is 
increasing, interest rates are moving back toward more normal 
levels after a period of many years in which they were 
exceptionally low. And yet overall, what you see in this budget 
is real net interest on the debt, stabilizing at about 1 
percent of GDP, which is a manageable and historically normal 
number.
    Senator Kennedy. So, $51 trillion of debt up from 33 
trillion doesn't bother you?
    Secretary Yellen. I think the path that has been set out in 
the President's budget is fiscally sustainable.
    Senator Kennedy. Okay. How much debt is too much? Tell me 
that.
    Secretary Yellen. Well, I just gave you the metric that I 
think is best for assessing fiscal sustainability.
    Senator Kennedy. Let me ask it in simpler terms. I didn't 
follow you there. It is what percentage of our GDP--what debt 
as a percentage of our GDP is too much?
    Secretary Yellen. So, it depends on what interest rates 
are. And real interest rates have been extremely low. This 
budget and previous budgets have projected that they would move 
up toward more normal levels over time, but certainly not the 
levels that we saw several decades ago. And----
    Senator Kennedy. Could you just answer my question, Madam 
Secretary. What percentage of--what percentage of debt of our 
GDP is too much?
    Secretary Yellen. Well, this budget has debt held by the 
public moving up to around 109 percent of GDP.
    Senator Kennedy. And that is not too much, in your opinion.
    Secretary Yellen. Historically, it is a high level, but on 
the other hand, interest rates, real interest rates have moved 
down substantially in recent decades. And so higher levels of 
debt to GDP are sustainable with lower real interest rates. And 
on balance, as I said, the interest burden of the debt is at a 
level that is quite reasonable in historic terms.
    Senator Kennedy. Madam Secretary, are you a Keynesian?
    Secretary Yellen. Well, I don't quite know what you mean by 
that, but I certainly----
    Senator Kennedy. Do believe that it is acceptable, indeed 
it is admirable for government when you are in a slow period of 
recession or more than a recession to stimulate the economy by 
spending--by borrowing money and spending.
    Secretary Yellen. It certainly can be. I certainly----
    Senator Kennedy. That is what I mean by Keynesian. Do you 
support that?
    Secretary Yellen. Well, there are different tools that can 
be used to stimulate an economy that is in a downturn, and it 
is--monetary policy is an alternative tool. And----
    Senator Kennedy. But let me go back to my question. Keynes 
said that when you are in a recession, you can borrow money and 
spend it, government can, to stimulate the economy and get you 
out of the recession.
    Secretary Yellen. Well, I am not going to make a blanket 
statement that I agree with that.
    Senator Kennedy. Well, let me ask you if you agree with 
this, a lot of people who say they are Keynesians, and based on 
what I have read of your writings you are Keynesian, they 
forget the second part of what Keynes said. He said, after you 
get out of the recession, you pay the money back. Did he not?
    Secretary Yellen. I don't recall that he said that.
    Senator Kennedy. He said it. I will show you that one too.
    Secretary Yellen. Show that to me.
    Senator Kennedy. I promised the Chairman I wouldn't go over 
and I want to yield back 2 seconds.
    Senator Van Hollen. Thank you, Senator Kennedy. And I am 
hoping that you would agree that all economists would agree 
that it is a bad idea to default on our debt. As we still try 
to figure out how to deal with these budget issues, I look 
forward to a conversation. This has been a good, I think, good 
discussion for all.
    Thank you to the Members. Madam Secretary, thank you. And 
the hearing is adjourned. Well, Madam Secretary, I have--
Senator Manchin has just arrived. I am going to give him 
seven--I am going to, as I said earlier, Madam Secretary, I am 
going to have to depart.
    My other colleagues here may have to depart. This is--we 
will give seven--thank you, Senator Kennedy. But, Senator 
Manchin, you have got 7 minutes here, and I am going to--you 
will close out the hearing, all right. Thank you.
    Senator Manchin. Thank you so much. I am so sorry. Hello, 
everybody. I am so sorry. I am glad you stayed. Madam 
Secretary, I know we have an awful lot to talk about, and you 
have been so kind in sharing and giving me some of your time in 
the meeting with you. But I think on the record, I would like 
to have a few things that we can talk about, on the record, and 
make sure that we do.
    First of all, you know, with all this going on and there is 
a lot of talk about the bank and this and that, and I think it 
was Senator Hagerty who was talking about over the $250,000. I 
have been talking to a few colleagues and we were just 
wondering if it is--and, you know, you said you haven't gotten 
to that point yet.
    So, let's say 90 percent of my West Virginia deposits are 
under $250,000. And now they are going to pay a little bit 
higher premiums, I guess, or higher bank fees or somebody is 
going to pay. Is the bank absorbing that or will be passed on 
to the consumer?
    Secretary Yellen. Well, it is not obvious that it would be 
passed on to the consumer. I suppose it could be, but it may 
also be absorbed by the--it is a special one-time assessment--
--
    Senator Manchin. If we are assuming that could happen, and 
maybe it could be the consumers, okay. They understand, you 
know, the bankers, I had all the community bankers in. What 
they believe would be unfair, they said, listen, we are in good 
shape. We move money around.
    So, if we have a depositor that has $1 million, this one 
banker says, you know, I will call three of my friends and say, 
can I move $250,000 to you, $250,000 to you, and $250,000 to 
you. We do that all the time to make sure everyone is covered. 
That is my response.
    He said, that is my risk responsibility, which made all the 
sense in the world. So, I know a lot of tools that we already 
have, but sometimes it is just bad banking practices. They all 
come to the conclusion they felt the San Francisco Feds did not 
do their job.
    They thought they were, you know, laxed in basically what 
they should have enforced. It was 8 months without a risk 
manager at the bank, SVB, that they knew of. Is that factual?
    Secretary Yellen. Senator Manchin, I am not involved--it is 
the Federal Reserve in California that are involved in the 
supervision of that bank. I am not involved. I have read some 
newspaper stories about this, but this is not in the public 
domain and I don't know.
    Senator Manchin. Well, for the record, I think you did the 
right thing when you all made your decision on taking care of 
depositors, but not the bank bailout and not the shareholders 
and all that. And I think there is a claw back. There is--you 
understand there is legislation for claw back.
    Secretary Yellen. Yes.
    Senator Manchin. Because we think that there were nefarious 
acts by those responsible to protect themselves and the heck 
with our depositors and all the other people have fallen prey 
to this. So, we are hoping that you all can look at that, maybe 
give us your blessing.
    Secretary Yellen. Yes, certainly.
    Senator Manchin. And in the $250,000 above, I was just 
going to ask you this, from $250,000 and above, it was--to me 
the reasonability would be if I need to keep about $2 million 
in the bank because of payroll and inventory reasons, and I 
normally secure it at what $250,000.
    I got a $1,750,000 at stake. Could I be able--should I be 
able to buy or pay a little higher bank fee to get protection 
up to the amount with a cap maybe at ten, something--I am 
just--we have been talking, some Senators have been talking 
back and forth. Could the FDIC, and I think they said it would 
take the legislation----
    Secretary Yellen. It would take a legislation.
    Senator Manchin. I don't think we should do it without you 
all involved showing us how to structure that. But if I could 
go back to my bankers and says, for those businesses you might 
have and even rural areas--they have to keep large amounts of 
cash because they need that. Now that they know that they are 
exposed, they would be the first ones to move to the bigger 
banks.
    Secretary Yellen. That is exactly right.
    Senator Manchin. So, they are worried about that. And they 
said if you could offer some type of insurance policy, that 
they would pay for. So, the $250,000, 80 to 90 percent of in 
rural areas, aren't going to be saddled with accommodating 
somebody that needs that type of protection.
    Secretary Yellen. I think often the uninsured depositors, 
especially in community banks, are local businesses that have 
payroll and can't manage with----
    Senator Manchin. Does that type of evaluation make sense to 
you? Does it make----
    Secretary Yellen. I think this is very worthwhile, you 
know, for you and your colleagues to be discussing what is 
appropriate here, and we would be more than willing to work 
with you to think this through. It is worthwhile. Look, we are 
for the moment, we are trying to stabilize the situation using 
the tools at our disposal. But there certainly are----
    Senator Manchin. Yes, I mean, these are questions asked by 
reasonable people in the business and they are just saying----
    Secretary Yellen. Of course, yes----
    Senator Manchin [continuing]. If you are going to do 
something, rather than just now saying--they think if you set a 
precedent now that they are expecting the feds to bail 
everybody out, and I don't think that is what our intentions 
are.
    Secretary Yellen. I don't think that that is going to be 
needed. But we don't want to see contagious bank runs and a 
loss in confidence in our banking system, especially when the 
banking system is overall for the United States, very sound.
    Senator Manchin. And this--this subcommittee hopefully will 
have Mr. Jerome Powell of the Feds telling us basically what 
they have been able to do since the CBB has happened as far as 
to enforce the oversight by the San Francisco Reserve and all 
the different reserves we have around the country. If they are 
looking at their more troubled areas, if you will.
    Secretary Yellen. It has been announced that Vice Chair for 
Supervision, Michael Barr, will do a thorough review of the 
supervision of this bank.
    Senator Manchin. Now, I know this is in your bailiwick, 
okay. I know that the White House is currently working with the 
EU on a limited trade agreement that will allow them to become 
eligible for the first half of the EV credits.
    What we are concerned about is, you know, I know the EU and 
I am fine. I said, I don't have a problem with our allies. What 
I have a problem with is going to countries that we don't have 
what we would call a secure supply chain.
    So, when we wrote the bill, we wrote, as you know I have 
spoken about this before, we wrote it with free trade 
agreements for us to have a free trade agreement, we knew there 
had to be more of a--more of a confidence that we are going to 
have a pretty good supply chain and not be held hostage.
    Some of these other countries where an awful lot of the 
minerals come from are not in the EU. If you are trying to 
expand and the White House tries to expand that beyond, we are 
back in that critical situation where we have unreliable supply 
chains, where the Chinas, the Russias, the Irans, the North 
Koreas, all the different people who have various trade 
activities, they sometimes use unscrupulous tactics to hold 
those people hostage.
    And they have already had a pretty good stake in it. I can 
assure you that was not the intent of how we wrote the bill.
    Secretary Yellen. Senator Manchin, I understand that the 
intent of the bill is that we should have secure supply chains, 
and any agreements that we would look at, and of course we will 
consult closely with you and with Congress, would be meant to 
make sure that we are securing our supply chains as the 
legislation is----
    Senator Manchin. Well, you have been--we might respectfully 
at times agree to disagree on some things, but at least you 
have been kind enough to sit down and work with me, and I 
appreciate that. And we want to keep that going. I think we 
have furnished you with the concerns we had----
    Secretary Yellen. Yes.
    Senator Manchin [continuing]. With production, you know, 
sourcing critical minerals, and processing versus the 
manufacturing, and why we think there is a difference there, 
and why we think it is imperative we keep that difference, 
okay.
    And if we don't keep that difference, then basically this 
material, that they're considering part of the processing, 
which goes in the manufacturing portion, does not go into the 
processing at all. Processing is taking the raw materials, raw 
minerals and processing them into a form, then goes into----
    Secretary Yellen. And using it----
    Senator Manchin. Okay. That is the differences. And we 
think that is very clear. And more, hopefully, that before you 
all come out with the rule and all that, we have more input in 
that or we are on the same page because that one causes a lot 
of problems.
    Secretary Yellen. So, I believe we are on the same page. We 
are working very hard on the rule and have said that we will 
get this rule out by the end of March, where we are certainly 
trying to meet that deadline. And have been consulting with you 
and your staff and broadly understand----
    Senator Manchin. One final question, since I haven't put 
the clock on myself right now, but I am watching them go--don't 
tell on me. One final question. Knowing what we have and how 
critical the financial situation can be and just what the bank 
thing, just that one thing, what it did to our psyche, if you 
will, and our whole, could have unraveled so many things, 
right, with the SVB and all that started.
    When you don't have the financial house in order, right now 
I would venture to say, what would you recommend we evaluate in 
how we operate our Government and our finances of our 
Government right now?
    So, we are looking at all these other things. I hear about 
stress testing and all the things that goes on to evaluate, are 
they in a critical position or not? What do you think we could 
do to look at how we operate here?
    And I want to be very clear, the way that both sides, 
Democrats and Republicans, are approaching the debt ceiling, 
there is not one person as far as out of 100 Senators that I 
truly in their heart believe that we should not hold anything 
hostage about paying our debts, or missing that, or going into 
default.
    I really believe that in my heart. With that, I do not 
believe it is unreasonable for my friends and colleagues on the 
Republican side to say, can we sit down. Now if they are going 
to say, I will not vote to raise the debt ceiling unless you 
pass this, this, and this, I would not agree. That is a wrong 
approach.
    Would we sit down and we can agree that we should be 
looking at these portions of our debt and how we have 
accumulated so much debt so fast. We know what we did with 
COVID. Take COVID out of the picture. We know what--how the 
rest of it. Or do we know how the rest of it accumulated in 
such a short period of time, especially since 2001. But even 
looking at 2013, the last 10 years, it has been unbelievable.
    And the projections from Office of Management and Budget 
(OMB) doesn't quit. So, it scares the bejesus out of me and all 
the trust funds. I am hopefully that we can come to an 
agreement. And if you all would be receptive to considering, 
should we come to an agreement, that we can basically look at 
all of these things and within a 90-day period, come back with 
some recommendations and get a vote either up or down?
    We are not holding anything hostage. We are voting to pay 
our bills. And all we have agreed on is we are going to put a 
bipartisan, bicameral group together to look at trust funds and 
look at the different things that are very vulnerable, the same 
as you do with a bank when you send your examiners in.
    Secretary Yellen. Senator Manchin, I believe being on a 
fiscally sustainable course is critical for our Nation, and we 
should sit down and have a very reasoned discussion about what 
is necessary to accomplish that. The President has offered to 
have discussions, but not with the sword of Damocles----
    Senator Manchin [continuing]. Put forward, if you don't go, 
if we don't--yes----
    Secretary Yellen [continuing]. We are going to not pay your 
bills and have financial and economic chaos.
    Senator Manchin. If I was capable of bringing some people 
together on both sides and says, listen, let's sit down and 
talk about what we think, that we could basically come and look 
at over a 3-month period to come back with a guaranteed vote on 
the floor, if we make recommendations, you don't have to vote 
for it.
    And I they think, oh, it might be too toxic. I don't care 
what you think, let's look and see how we get our finances in 
order, because we are not right now. And knowing what happened 
to the banks, you put all this in a concern, could that happen 
to our country?
    Secretary Yellen. Well, we should be stress testing our 
fiscal just as we stress test banks. We should be looking at 
what we----
    Senator Manchin. But we don't, do we?
    Secretary Yellen [continuing]. Think what will happen in a 
base case, and what happens----
    Senator Manchin. In worst case----
    Secretary Yellen. In alternative better and worse 
scenarios----
    Senator Manchin. But I have been here for 12 years, Madam 
Secretary, and I have not had that happen or anyone approached 
me with that. So, I am glad that you have said that. And I 
think that you are right on.
    Well, I want you to know, I won't participate and will not 
participate by holding anybody hostage. I will vote for the 
debt ceiling. But I would vote with the understanding that at 
least we can have a conversation with a guaranteed vote in 90 
days on changes we think need to be made.
    And I think that is a responsible, reasonable approach. So 
hopefully you can talk to your--to the White House and I will 
be talking to them, too, and seeing if they would agree to 
something such as that.
    Secretary Yellen. I mean, I know the President is open to 
discussions on this topic.
    Senator Manchin. Well, with that, sometimes it pays to be 
late. I had so many--I am so sorry to keep you this--but let me 
just say, I want to thank you, Madam Secretary, and your staff 
for being so accommodating and forthright with us and coming 
before and appearing before the subcommittee.
    Our members will have one week to submit questions for the 
record, which are due March 29. I would appreciate if your 
office can respond to those questions as soon as possible.

                     ADDITIONAL COMMITTEE QUESTIONS

    [The following questions were not asked at the hearing, but 
were submitted to the agencies for response subsequent to the 
hearing:]
              Questions Submitted to Hon. Janet L. Yellen
              Questions Submitted by Senator Bill Hagerty
    Question 1. The SEC's ``dealer'' proposal would create a 
quantitative threshold for the amount of Treasuries a firm could trade 
without being forced to register as a dealer. I have significant 
concerns with the negative impact this will have on Treasury liquidity. 
My colleagues and I have sent letters to the SEC and to you on this 
issue, but have not received sufficient responses.

  --Secretary Yellen, may you please lay out the specific steps the 
        Treasury Department is taking to ensure the SEC isn't damaging 
        the Treasury market with this proposal?

    Answer. Treasury is collaborating with its fellow members of the 
Inter-Agency Working Group on Treasury Market Surveillance (IAWG), 
which includes the SEC, to evaluate a range of potential policies to 
enhance the resilience of the Treasury market. In November 2022, the 
IAWG published a Staff Progress Report, outlining the significant 
progress made towards its goals and highlighting ongoing workstreams, 
including a discussion of the SEC's dealer and government securities 
dealer registration rule proposal. As indicated in the Staff Progress 
Report, the SEC's staff is considering comments received on this rule 
proposal in making recommendations for the SEC's consideration. 
Treasury will continue to work with the IAWG on this and other policy 
options to enhance the resilience of the Treasury market.

                                 ______
                                 
              Questions Submitted by Senator John Boozman
    Question 1. FinCEN has received widespread criticism that its 
proposed rule concerning access to the beneficial ownership registry is 
not consistent with congressional intent when drafting the Corporate 
Transparency Act. This criticism has come from across the political 
spectrum and from the financial services industry, among others.

  --Can you give me your commitment that you will work with me to 
        resolve these concerns?
  --Will you ensure that FinCEN works with stakeholders and takes into 
        account the concerns raised by Congress, so they are faithful 
        to Congressional intent?

    Answer. Yes. FinCEN appreciates all the comments submitted in 
response to the beneficial ownership information access notice of 
proposed rulemaking. In total, FinCEN received more than 80 comments on 
the proposed rule and is carefully reviewing them. FinCEN is 
considering the concerns raised in the comments and intends to remain 
faithful to Congressional intent. FinCEN's priority is to implement a 
highly useful beneficial ownership reporting regime, while minimizing 
burden on reporting companies (particularly small businesses) and 
financial institutions, consistent with the Congressional intent set 
out in the Corporate Transparency Act (CTA). Because FinCEN in engaged 
in an active rulemaking process, we are unable to comment further on 
any particular policy decision at this time.

    Question 2. Congress passed the Corporate Transparency Act (CTA) in 
2020 to meet the goal of promoting financial transparency while 
eliminating duplicative reporting requirements and reducing unnecessary 
regulatory costs and burdens for financial institutions. As drafted, 
FinCEN's proposed rule creates a framework in which banks' access to 
the Registry will be so limited that it will effectively be useless, 
resulting in a dual reporting regime for both banks and small 
businesses.

  --Will you work to ensure that FinCEN rectifies the redundancies and 
        inefficiencies proposed under the current rule and establishes 
        a more efficient framework that will allow financial 
        institutions to fulfill regulatory requirements and better 
        support AML/CFT compliance?

    Answer. FinCEN's priority is to implement a highly useful 
beneficial ownership reporting regime, while minimizing burden on 
reporting companies (particularly small businesses) and financial 
institutions, as required by the CTA. FinCEN understands the concerns 
raised by commenters regarding access by financial institutions to 
beneficial ownership information, as well as concerns about the 
permitted uses of such information. FinCEN is reviewing comments to the 
beneficial ownership information (BOI) access notice of proposed 
rulemaking and is considering concerns raised by commenters as it works 
to finalize the rule. FinCEN is engaged in an active rulemaking 
process, so we are unable to comment on any particular policy decision 
at this point.
    FinCEN also expects that many issues raised by commenters will also 
be considered in the future revision of its Customer Due Diligence 
(CDD) Rule. The CTA requires FinCEN to revise the CDD Rule within 1 
year of the effective date of the final beneficial ownership 
information reporting rule. In revising the CDD Rule, the CTA directs 
FinCEN to reduce unnecessary or duplicative burdens on financial 
institutions and legal entity customers. FinCEN will consider revision 
of the CDD Rule through a future rulemaking process that will provide 
the public with an opportunity to comment on the proposal.

                          SUBCOMMITTEE RECESS

    Senator Manchin. The subcommittee meeting will be adjourned 
on that.
    Secretary Yellen. Thank you.
    Senator Manchin. Thank you.
    [Whereupon, at 4:19 p.m., Wednesday, March 22, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]


  FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL 
                               YEAR 2024

                              ----------                              


                        WEDNESDAY, JULY 19, 2023

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.

    The subcommittee met, pursuant to notice, at 2:45 p.m., in 
room SD-124, Dirksen Senate Office Building, Hon. Chris Van 
Hollen (Chairman), presiding.
    Present: Senators Van Hollen, Durbin, Coons, Manchin, 
Hagerty, Collins, Boozman, and Kennedy.

                U.S. SECURITIES AND EXCHANGE COMMISSION

                OPENING STATEMENT OF SENATOR VAN HOLLEN

    Senator Van Hollen. This meeting of the Senate 
Appropriations Committee's Subcommittee on Financial Services 
and General Government will come to order.
    I would like to begin by thanking our Ranking Member, 
Senator Hagerty, and the Members of the subcommittee for their 
input and work in getting the FSGG Appropriations Bill through 
our subcommittee and through the Full Committee last week.
    I also want to take this opportunity to thank the Vice 
Chair of the Full Committee, Senator Collins, for working with 
the Chair, Senator Murray, to create the framework that allows 
us to proceed and conduct our business. So thank you, and to 
all the Members of the subcommittee and Full Committee, thank 
you.
    I think Members of the subcommittee know full well that 
this subcommittee covers a broad array of agencies, lots of 
agencies under our jurisdiction, and while we will not be able 
to have an oversight hearing on every single one of those 
agencies, we will be working to conduct more oversight hearings 
over some of the biggest ones, including today, the SEC.
    As part of the Appropriations process, we did not fully 
fund the SEC's request, but I worked with Ranking Member 
Hagerty to propose what we thought adequately supported the 
SEC's needs to ensure market transparency and ensure the 
integrity of those markets. The fiscal year Bill this Committee 
passed last week includes $2.4 billion for the Commission.
    Today, we welcome the Chairman of the SEC, Chairman Gary 
Gensler. Gary Gensler was born and raised in Baltimore City, 
and besides picking the right State to be born in, just a 
matter of good fortune, Mr. Gensler also has many earned 
qualifications that bring him to the position he now holds.
    Mr. Gensler served as the 11th Chairman of the Commodity 
Futures Trading Commission, CFTC, and has been a leading 
national expert on blockchain and other modern finance issues. 
He served as a professor of the Practice of Global Economics 
and Management at MIT. He also has considerable experience from 
his time in the private sector as a partner and co-head of 
finance at Goldman Sachs. Those are just a few of the 
touchstones of Mr. Gensler's experience that brings him to this 
position.
    Chairman Gensler has led the SEC with a focus on 
transparency and adaption to changing market conditions. I 
particularly appreciate the updates he has made to insider 
trading disclosure with last year's revisions to Rule 10b5-1, 
on insider trading, an issue that Senator Fischer and I have 
worked on together.
    I also appreciate Chairman Gensler's partnership in the 
implementation of the Holding Foreign Companies Accountable 
Act. This was bipartisan legislation. I was pleased to team up 
with Senator Kennedy, also a Member of this Committee, to 
require that all companies that are listed on U.S. exchanges 
comply with the same auditing standards that apply to U.S. 
companies.
    Companies based in China had been playing by their own set 
of rules, and I want to commend Mr. Gensler and the team at the 
Public Company Accounting Oversight Board, PCAOB, for ensuring 
compliance with the requirements of this new law. I know, Mr. 
Chairman, that this is an ongoing effort.
    Senator Kennedy and I also hope to ensure that Chinese 
companies that trade on our exchanges, and all foreign public 
companies trading on our exchanges are held to the same insider 
trading disclosure rules as U.S. companies, and we believe that 
the Holding Foreign Insiders Accountable Act will be part of 
this year's Senate National Defense Authorization Act we hope 
to pass next week. And again, I want to thank Senator Kennedy 
for his leadership in this effort.
    Under the leadership of Chairman Gensler, the SEC has 
responded to changing market conditions, which are only 
becoming more complex. Industries like digital assets and 
crypto currencies have evolved rapidly, growing by billions of 
dollars, in large part due to everyday retail investors seeking 
to grow their wealth. It is critical that the Commission have 
the flexibility to pursue bad actors in our capital markets, 
like FTX, which reportedly profited by improperly acting as an 
exchange platform and defrauding countless investors.
    I also know the SEC is taking lots of public input as it 
seeks to respond to the growing market demand for material 
information about environmental, social, and governance issues. 
Our institutional investment community has also asked for this 
transparency, and markets are responding and evolving, as 
should our regulators.
    There are also many issues regarding new innovations, 
especially AI, that could impact the markets for good or for 
ill. Chairman Gensler gave an important speech about that, I 
believe just yesterday.
    These, colleagues, are just some of the issues I hope we 
can cover today. And before I turn the floor over to Chairman 
Gensler, I recognize Senator Hagerty for his opening remarks. 
And again thank him for his help as we move this legislation 
through the Full Committee and onto the floor.

               OPENING STATEMENT OF SENATOR BILL HAGERTY

    Senator Hagerty. Chairman Van Hollen, thank you. And I want 
to thank your staff as well for our partnership through this 
appropriations process. I think we have made a lot of progress 
and I appreciate you holding this important hearing today.
    Chairman Gensler, I want to welcome you. I look forward to 
your opening statement as well.
    Last week, the Full Committee approved the fiscal year 2024 
Financial Services and General Government Appropriations Bill 
by a vote of 29-0, which is no small feat. The last time the 
Committee unanimously approved the FSGG Bill was in September 
of 2019. And interesting, that was the last time that the 
Chairman of the SEC came before this subcommittee. So we are 
pleased to see you here today.
    As I mentioned, the last time the subcommittee met, my top 
priority as Ranking Member is to work with my colleagues to 
conduct rigorous oversight, strengthen U.S. financial markets, 
and ensure that taxpayer dollars are spent responsibly. The 
American Financial system is one of our greatest assets and 
advantages, and having access to deep liquid markets has been 
critical to our role as the world leader in innovation and 
economic prosperity.
    Congress is currently debating the SEC's budget for fiscal 
year 2024, which is significant. I am familiar with the day-to-
day administrative work of the agency and have great respect 
for the career staff. We need to fund that work. My concern, 
however, is when the agency diverts these resources and spends 
these dollars on initiatives not even within the authority of 
the SEC.
    And here are a few specific examples. Chair Gensler, your 
climate change proposal, many sophisticated commentators 
believe that this is well beyond the SEC's authority. We know 
it is costly, meaning tens of billions of dollars, or more, as 
companies struggle to comply. We know small firms will, 
particularly, be hurt. We also know it is unlikely to provide 
meaningful insight for return-oriented investors, but it will 
be a bonanza for the lawyers who will have a new cottage 
industry.
    Yet, the SEC blindly pushes ahead, consuming vast resources 
now, and that will be compounded when the inevitable lawsuits 
come pouring in.
    Then there are the actions concerning shareholder proposals 
and proxy advisors. A study from Harvard Law School showed that 
five individuals account for roughly 40 percent of all 
shareholder proposals here. That is a remarkable concentration 
of power. Fifty million households have to consider the whims 
of five individuals.
    The SEC had made progress on limiting this abuse of power, 
but this was reflexively undone in 2021 with no study, 
increasing the number of PEP proposals flowing in, and even 
allowing shareholder proposals that would require companies to 
break the law, because shareholder proposals are so inexpensive 
to create, because shareholder proposals are now flooding the 
zone, as a result, investors turn to so-called proxy advisors 
for voting recommendations.
    Many, in effect, outsource their voting to these proxy 
advisors. The two leading firms are a duopoly, both foreign-
owned, wielding vast influence over American public companies, 
which creates many obvious conflicts.
    Mr. Chairman, your predecessor, Jay Clayton, after lengthy 
public comment, made changes to the regulation of these proxy 
advisor firms, requiring them to be more transparent and to 
give companies time to correct proposals' errors, including 
those that recommend votes for proposals that would require 
them to break the law. You took away that transparency and the 
opportunity for better information.
    So by virtue of your actions, you increase the business of 
the proxy firms, made them less accountable, and reduced the 
quality of information available to shareholders. This too is 
now being litigated over whether, through this process, you 
failed to follow the Administrative Procedure Act.
    Regardless of the outcome, I can tell you that these so-
called ``proxy advisors'' are making our financial markets 
significantly weaker and less democratic.
    There are other examples: shortened comment periods, 
creating related proposals as separate to avoid considering the 
cumulative and combined effects, introducing new Final Rules 
that include key points not in the proposal subject to public 
comment, the list goes on.
    This issue is not unique to the SEC. Like Lina Khan at the 
FTC, ignoring procedural requirements and losing in court, 
seems to be worth the price to push our markets to the left. In 
fact, in the enforcement arena, it seems willing to bring cases 
that you must know have very high odds of losing. And perhaps 
you think making a statement is worth the loss.
    Well, what do you say to the person who has to defend 
themselves in one of these messaging cases? Do you apologize? 
Do you thank them? There is no good answer here, because in 
America, we should never use our law enforcement authority on 
innocent people to make statements, and we certainly shouldn't 
hamper the efficiency and competitiveness of our capital 
markets to score political points.
    While we need referees that enforce the market rules and 
punish bad actors, I am concerned that the SEC has moved well 
beyond its role as a market regulator, and is seeking to make 
policies that are both beyond its authority and destructive to 
our economy.
    In summary, this Committee's job is to ensure the SEC has 
the resources it needs to fulfill its statutory duties, and 
that it is using those resources appropriately.
    And your job, Mr. Chairman, is to be a responsible steward 
of those resources and stay within your boundaries.
    I am concerned that that is not happening. This requires 
accountability, yet inadequate responses to Congressional 
directives and questions, including many that I have sent 
myself, suggest a resistance to accountability. And that makes 
today's hearing all the more important.
    So I look forward to your opening statement, Mr. Chairman, 
and to the opportunity to discuss these matters further. Thank 
you.
    Senator Van Hollen. Thank you, Senator Hagerty, and I don't 
know if the Vice Chair wants to--okay, thank you.
    So let me just turn the floor over to you now, Chairman 
Gensler, for your statement. If you could keep it within 5 
minutes, that would be helpful to the Committee. And I should 
say, if you see Members popping up and down, we are going to 
have a series of five votes, so we will probably be playing a 
little musical chairs up here. But please begin.
STATEMENT OF HON. GARY GENSLER, CHAIRPERSON
    Chairman Gensler. Thank you and good afternoon, Chair Van 
Hollen, Ranking Member Hagerty, Vice Chair Collins, and Members 
of the subcommittee. Thank you for inviting me here to testify 
today on the Securities and Exchange Commission's fiscal year 
2024 Budget Request.
    And as is customary, I would like to note that my views are 
my own, as Chair of the SEC, I am not speaking on behalf of my 
fellow Commissioners or the SEC staff. I also wrote this 
myself; it was not done by generative AI. Just to make that 
clear.
    I really, I want to thank this Committee for the approval 
last week of the funding the SEC at the levels that you just 
mentioned. While that funding would allow the SEC to continue 
to operate at its current level, it is $73 million less than 
the fiscal 2024 request. Thus, I just want to--the testimony 
that I submitted for the record is the full President's budget 
request.
    Just to put it in context, the difference, what it will 
mean is; we will not be able to hire additional staff. I think 
we put in for about 170 more people, and some additional 
important technologies to watch out for the investing public 
process tips, review public company disclosures. But again, I 
do appreciate it, and if it helps, getting a unanimous vote, I 
will come back any year you want, Chair Van Hollen and Ranking 
Member Hagerty.
    To put all of this in context, the SEC now, though, is just 
about 3 percent larger than it was 7 years ago, in 2016, in 
terms of headcount. The bulk of this year's budget request 
would be to support currently authorized staffing levels given 
inflation. The SEC is critical to the American public. For 90 
years, the Federal Securities Laws, and the work to oversee 
them, have played a crucial role in good times and in bad 
times, in times of stress, and the laws benefit investors, 
issuers, and the markets in the middle.
    I think the core principles of U.S. Securities Regulation 
have contributed to America's economic success and geopolitical 
standing. And that is really the key for our future 
generations. The agency's clients are ultimately 330 million 
Americans, your constituents, who invest in their 401(k)s, 
IRAs, trade through brokerage apps, take out mortgages, auto 
loans, robo-advisers, and the like, and access the capital 
markets with good ideas to build businesses.
    We have seen tremendous growth and change in our markets, 
and more people than ever participating. Just in the last 5 
years, the number of clients of investment advisors grew 70 
percent. During the same period, average daily trading in the 
equity markets have more than doubled.
    Technology is also rapidly transforming our markets and 
business models, whether it is electronic trading, the cloud, 
artificial intelligence, of course, predictive data analytics. 
And the Chair also mentioned things about, what I would call, 
not your words, the Wild West of the Crypto Markets, rife with 
noncompliance, where investors have put hard-earned assets at 
risk in a highly speculative asset class.
    Such growth and rapid change also means more possibility 
for wrongdoing. As the cop on the beat, we must be able to meet 
the match of bad actors. Thus, it takes a sense, takes time, 
and it makes sense for the SEC to grow along with the 
expansion. Again, we are just about the size we were 7 years 
ago.
    With the Committee's help, this year, for fiscal 2023, we 
were able to get appropriated funds to add 400 positions that 
is on a base of about 4,500. And given the Appropriations' 
timing, the bulk of the hires are still being on-boarded during 
the second half of this year. Thus, the fiscal year 2024 
request seeks the full-year funding for those staff, plus 170 
more.
    I also want to mention our efforts to reduce costs. We have 
worked with GSA to right-size our leasing footprint, and we 
will vacate one of our three headquarter buildings here in 
Washington; they are right by each other. But we think this is 
important. This will save about $14 million per year in 
savings. We are looking at other right-sizing around our 11 
Regional Offices.
    As this committee continues its work, it is worth noting 
that the SEC's funding is deficit-neutral. We charge fees, and 
that covers our full cost. And this has been since the 1930s.
    Two years into this role, I am so grateful to work 
alongside remarkable staff and my fellow Commissioners, to help 
maintain America's capital markets, the best in the world. We 
can't take the leadership for granted, though, and so the 
fiscal year 2024 budget request would give the agency the 
resources to better protect the American public.
    I am pleased to take your questions.

    [The statement follows:]
               Prepared Statement of Gary Gensler, Chair,
                   Securities and Exchange Commission
    Good afternoon, Chair Van Hollen, Ranking Member Hagerty, and 
members of the Subcommittee. Thank you for inviting me to testify today 
on the Securities and Exchange Commission's fiscal year 2024 budget 
request. As is customary, I'd like to note that my views are my own as 
Chair of the SEC, and I am not speaking on behalf of my fellow 
Commissioners or the SEC staff.
                   protecting the public for 90 years
    The SEC is critical to the American public. For 90 years, the 
Federal securities laws--and our work to oversee them--have played a 
crucial role in good times and in times of stress. These laws, the 
first of which was enacted in 1933, benefit investors, issuers ranging 
from startups to multinational corporations, and the markets in the 
middle. The core principles of U.S. securities markets regulation have 
contributed to America's economic success and geopolitical standing 
around the globe.
    This agency's clients are the 330 million Americans--your 
constituents--who invest in their 401(k)s and IRAs, trade through 
brokerage apps, take out mortgage or auto loans, or use robo-advisers. 
They're also Americans accessing the capital markets to fund their 
businesses from small to large, their new ideas and innovations. We 
oversee broker-dealers; stock exchanges; clearinghouses; investment 
companies, such as mutual funds and exchange-traded funds; investment 
advisers; and public company issuers, among other participants in our 
financial markets.
    It's for the investing public and issuers that our staff must 
continue to drive efficiencies, help promote for financial stability, 
and modernize our rulesets for today's $100 trillion capital markets as 
well as today's technologies, in a manner consistent with our 
Congressional authorities.
Growth and Change in the Markets
    We've seen tremendous growth and change in our markets. More people 
than ever are participating--trading and using tools and technologies 
that were unavailable even a few years ago.
    For example, from 2017 to 2022, the number of clients of registered 
investment advisers grew nearly 70 percent from 34 million to 57 
million. During that same period, average daily trading in the equity 
markets more than doubled from more than 30 million transactions to 
more than 77 million.
    Technology is rapidly transforming our markets and business models. 
These changes range from electronic trading and the cloud to artificial 
intelligence and predictive data analytics, just to name a few. There 
has been dynamic change in communications to and among investors, from 
Reddit forums to celebrity influencers. Further, we've seen the Wild 
West of the crypto markets, rife with noncompliance, where investors 
have put hard-earned assets at risk in a highly speculative asset 
class.
    Such growth and rapid change also mean more possibility for 
wrongdoing. As the cop on the beat, we must be able to meet the match 
of bad actors. Thus, it makes sense for the SEC to grow along with the 
expansion and increased complexity in the capital markets.
    I am proud of this agency. I am proud of our dedicated staff. It 
has done remarkable work with limited resources. With funding to meet 
the scale of our mission, we can be an even stronger advocate for the 
American public--investors and issuers alike.
    Further, while recent market volatility raises many important 
issues for policymakers and the American public, it is also a reminder 
of the SEC's need to be adequately resourced.
                             budget request
    I am pleased to support the President's fiscal year 2024 request of 
$2.436 billion for SEC operations, to put us on a better track for the 
future. The bulk of the increase would be to support currently 
authorized staffing levels given inflation. In addition, we've 
requested $39.6 million for needs supporting General Services 
Administration (GSA)-led real estate projects.
    Though in this testimony I'm discussing the full request, I want to 
thank this Committee for its bipartisan approval last week on the bill 
that would fund the SEC at $2.364 billion, which would allow the SEC to 
continue operating at its current level.
    To put this in context, with this Committee's help, fiscal year 
2023 funding for the first time would bring the agency's staffing back 
above where we were 7 years ago. The SEC this year is expected to be 
approximately 3 percent larger than it was in fiscal year 2016. 
Meanwhile, the demands on our talented staff have grown dramatically.
    The agency's oversight function is vast. In addition to the 
approximately 40,000 entities I mentioned above, we oversee credit 
rating agencies, the Public Company Accounting Oversight Board, the 
Financial Industry Regulatory Authority, the Municipal Securities 
Rulemaking Board, the Securities Investor Protection Corporation, and 
the Financial Accounting Standards Board.
    In fiscal year 2023, the number of positions funded by Congress was 
5,303, a much-needed increase of 400. We're now in the process of 
filling those positions. The fiscal year 2024 request seeks funding for 
an additional 170 positions, as well as full-year funding for those 
staff hired in fiscal year 2023. Considering full-time equivalents 
(FTEs)--or actual time worked--the fiscal year 2024 request would 
support 5,139 FTEs.
    As this Committee considers its work, it's worth noting the SEC's 
funding is deficit- neutral; appropriations are offset by transaction 
fees.
    The SEC has 30 Divisions and Offices across our 11 regional 
locations and Washington, DC headquarters. I'm summarizing below the 
budget requests for our six Divisions and will briefly touch on 
technology and real estate. For further details as well as a review of 
the other offices of the SEC, please reference the fiscal year 2024 
Congressional Budget Justification.\1\
---------------------------------------------------------------------------
    \1\ See Securities and Exchange Commission, ``Fiscal Year 2024 
Congressional Budget Justification'' (March 10, 2023), available at 
https://www.sec.gov/files/fy-2024-congressional-budget-
justification_final-3-910.pdf.
---------------------------------------------------------------------------
Full-time equivalents (FTEs) at the SEC and in individual Divisions. 
        Overall SEC FTEs include all Offices and Divisions.
        
        
                      enforcement and examinations
    The Divisions of Enforcement and Examinations account for about 
half of the SEC's staff. Without examination of compliance with and 
enforcement of our rules and laws, we can't instill the trust necessary 
for our markets to thrive. Stamping out fraud, manipulation, and abuse 
lowers risk in the system. It protects investors and reduces the cost 
of capital. The whole economy benefits from that.
Division of Enforcement
    The SEC received more than 35,000 separate tips, complaints, and 
referrals from whistleblowers and others in fiscal year 2022. To give 
context, this is more than double the number we received in fiscal year 
2016.
    During the same period, the Division shrank 5 percent.
    Even with limited resources, the Division brought more than 750 
enforcement actions in fiscal year 2022, a 9 percent increase over the 
prior year. Our actions resulted in orders for $6.4 billion in 
penalties and disgorgement.
    Meanwhile, rapid technological innovation in the financial markets 
has led to misconduct in emerging and new areas, not least in the 
crypto space. Addressing this requires new tools, expertise, and 
resources.
    The additional staff will provide the Division with more capacity 
to meet these challenges, investigate misconduct on a larger scale, and 
accelerate the pace of enforcement investigations to resolution.
    This year's request would grow the team and get the Division to 
just 4 percent more than it was in fiscal year 2016.
Division of Examinations
    The Division of Examinations serves on the front lines to help 
ensure firms comply with the law.
    In fiscal year 2022, we conducted more than 3,000 examinations 
across our tens of thousands of registrants, from investment advisers 
to broker-dealers to exchanges, to ensure they are following their 
legal obligations to customers, including seniors and other vulnerable 
investors.
    Importantly, the Division is the first line of defense for the 
investing public relying on investment advisers. Their numbers have 
grown significantly in the last 5 years. Registered investment advisers 
grew by 20 percent--to about 15,000, up from approximately 12,500 in 
2017. During the same period, the number of private funds advised by 
registered investment advisers increased by 50 percent to approximately 
50,000. This stretches thin the limited resources of the Division.
    Further, we work in parallel with self-regulatory organizations to 
examine registered broker-dealers; in each of the last 5 years, we 
jointly examined nearly half of them--even as the number of daily 
transactions in the equity markets more than doubled.
    Our fiscal year 2024 request would help the Division grow to 1,144 
FTEs, allowing it to keep pace with the market challenges of the last 
decade. The majority of this increase relates to full-year funding for 
those staff positions authorized and hired in fiscal year 2023.
    These additional resources would strengthen the Division's ability 
to protect American families by addressing risks in the crypto markets, 
cyber and information security, and the resiliency of critical market 
infrastructure.
                         programmatic divisions
    Next, I will turn to our three programmatic Divisions.
Corporation Finance
    The Division of Corporation Finance oversees the disclosures of 
public companies so that investors can make informed investment 
decisions. It's important for investors to receive useful, timely, and 
accurate disclosure.
    During the last 3 years alone, the number of reporting companies 
the Division oversees has increased by 18 percent to 7,836, primarily 
due to initial public offerings. In addition, merger activity has more 
than tripled 2020 levels in the last two fiscal years. In contrast, the 
Division's staff is still approximately 17 percent below fiscal year 
2016.
    Today's budget request would grow the team to 454 FTEs. With this 
increase, the Division still would be 5 percent smaller than it was in 
fiscal year 2016. Nonetheless, additional resources would allow the 
Division to serve investors more ably as markets grow and evolve.
Investment Management
    The Division of Investment Management oversees the funds and 
advisers that steward nest eggs for millions of American investors.
    It oversees more than 30,000 registered entities, including more 
than 17,000 registered funds and 15,000 investment advisers.
    As discussed earlier, we've seen significant growth in the number 
of investment advisers and private funds. Further, the assets managed 
just by private funds, now at approximately $25 trillion in gross 
assets, have surpassed the size of the entire U.S. commercial banking 
industry of approximately $23 trillion.
    Overall, the combined assets managed by registered investment 
companies, private funds, and separately managed accounts the Division 
oversees has surpassed $100 trillion. Given this growth in the markets, 
we've asked for funding to support 238 FTEs.
Trading and Markets
    The Division of Trading and Markets serves on the front line for 
maintaining fair, orderly, and efficient markets. Market monitoring and 
supervision are essential parts of the Division's activity--especially 
during times of market stress.
    The markets and the market participants we oversee represent a 
significant and growing number of market transactions as well as volume 
of trades. The Division oversees more than 3,500 broker-dealers, 24 
national securities exchanges, 99 alternative trading systems, 50 
security-based swap dealers, and seven active registered clearing 
agencies, among other entities. Further, the Division is responding to 
an increasing number of public inquiries, up by more than 67 percent 
since fiscal year 2019 to approximately 20,000 inquiries in fiscal year 
2022.
    In fiscal year 2024, we've requested 309 FTEs to support this 
important function of the Commission.
                       economic risk and analysis
    Economic analysis is critical to all of the agency's work. The 
Division of Economic and Risk Analysis supports the Commission in every 
role, whether it's enforcement or examinations, monitoring the markets, 
or rulemaking.
    In the Enforcement context, the Division's staff is instrumental in 
identifying potential wrongdoing, assessing ill-gotten gains, and 
working to return funds to harmed investors.
    The Division's economists are involved in every aspect of the 
agency's rulemaking. Proposing and adopting releases include economic 
analyses that consider the costs and benefits of our rules as well as 
their effects on efficiency, competition, and capital formation. Those 
analyses are included in proposing releases that are put out for public 
comment, and staff throughout the agency actively engages with the 
public to receive input, including on the economic analyses.
    Fiscal year 2023 has gotten us to modestly above where we were in 
2016 for FTEs. Given the critical nature of the Division's work, 
though, for fiscal year 2024, we've asked for funding to support 198 
FTEs.
                           additional matters
Technology
    We live in transformational times. The amount of data analysis that 
the SEC processes in the Division of Enforcement alone has grown 20 
percent year over year for the last 3 years. Cyber threats have placed 
our financial sector on high alert. As technologies evolve, it is 
important that the SEC's information technologies follow suit.
    Thus, we have requested $393 million to support the Commission's 
data analysis, cybersecurity, and other IT needs. This request assumes 
full use of an additional $50 million from the SEC Reserve Fund for 
multi-year IT projects and programs. To put these figures in context, 
this spending is dwarfed by what some of the biggest market 
participants spend in a month on technology.
Real Estate
    Another important part of our budget is for offices and leases. We 
have offices in Washington, DC, and 11 other places. The total cost in 
fiscal year 2023 was 5 percent of our budget.
    Over the years, we've worked with the GSA to rightsize our leasing 
footprint. In the last 9 years, we have shed 140,000 rentable square 
feet across our facilities. We are in the process of shedding another 
30,000 rentable square feet in our San Francisco and Fort Worth 
regional offices.
    Further, we are preparing to vacate one of our three headquarters 
buildings in Washington, DC, by the end of this fiscal year, resulting 
in a reduction of 210,000 square feet of space and approximately $14 
million per year in savings.
    The GSA also secured a new lease to move the SEC headquarters in 
Washington to another building. The separate fiscal year 24 request of 
$39.6 million would support GSA's work on buildout and move-related 
costs for this effort and for the replacement lease for our Atlanta 
office. The SEC proposes to offset these costs with fee collections and 
return any unused amounts to fee payers or the Treasury after project 
completion.
    With the finalization of a new Collective Bargaining Agreement, we 
look forward to reassessing our facility needs and working with GSA on 
efforts to relinquish additional space it deems marketable in the 
coming years.
                               conclusion
    Two years into this role, I am grateful to work alongside this 
remarkable staff and my fellow Commissioners to help maintain America's 
capital markets--the best in the world. We can't take our leadership in 
capital markets for granted, though.
    The SEC is working hard day in and day out to keep pace with the 
dramatic growth and change in the markets. This fiscal year 2024 budget 
request would give the agency resources to better protect the American 
public.
    I thank the Committee for providing me the opportunity to summarize 
this budget request. I am pleased to take your questions.

    Senator Van Hollen. Thank you, Chairman Gensler. And I 
think what we will do, is we will have 6-minute rounds of 
questions. And if people want more than one round, we will try 
and accommodate that as well.
    So Mr. Gensler, you talked a little bit about the ``Wild 
West of Crypto Currencies''. I would like you just to take a 
few minutes to talk about some of the fundamental issues at 
stake here, and the issues of jurisdiction regarding the SEC, 
the CFTC, which you used to chair, and how we deal with these 
entities that people are trying to figure out whether they are 
fish or fowl.
    Chairman Gensler. I thank you for that. The investing 
public, not just here in this country, but around the globe, 
has taken an interest in these crypto assets, the so-called 
crypto tokens or currencies. And generally speaking, there is 
some, group of entrepreneurs behind those projects.
    And what we have in America is laws that are clear, that 
are on the books, that if you are raising money from the 
public, and the public is anticipating profits based on the 
efforts of others; that comes under the Securities laws. This 
is something that was written in the 1930s, but as recently as 
Supreme Court Justice Thurgood Marshall wrote an opinion about 
40 years ago, that Congress painted with a broad brush to 
protect the investing public.
    And so at the core, that is a question: How many of these 
15- to 20,000 tokens have attributes that they are investment 
contracts under the law? Investment contracts are part of the 
Securities Law, and many of them have a group of entrepreneurs 
in the middle, and investors are anticipating profits based on 
the efforts of that group of parties.
    And then there are the companies that then are facilitating 
investment in it; they can call themselves crypto lending, 
crypto trading, and the like. We at the SEC have very robust 
authorities around these platforms. You asked me about my 
current job--my former job, a great agency, I was so proud to 
chair that agency too, the CFTC, doesn't have similar 
authorities.
    So to the extent that some tokens are not what I might call 
crypto security tokens, but they are non-securities, our sister 
agency, our sibling agency, under Chair Benham, has authorities 
over there, but they are not, they are frankly not as robust as 
what we have.
    We are a disclosure-based regime, and if I can close on 
this, we are a disclosure-based regime, and so when the 
investing public is anticipating profits based on the efforts 
of others, it is best that those others, you know, give full, 
fair, and truthful disclosure. This is a field that has been 
rife with fraud, and scam, and hucksters, there are also good-
faith actors.
    Our goal at the SEC is to bring the field into compliance 
within the Securities Law where these tokens--and not 
prejudging any one of them--where they are securities, and then 
the platforms themselves, that they come into compliance, 
rather than what they are doing, often now, out of compliance, 
is not protecting the investing public against fraud 
manipulation, commingling their functions, and often in 
conflict with their investors, trading against their investors.
    Senator Van Hollen. Well, as you know, I think we, on a 
bipartisan basis, think this is an important, ongoing 
conversation about the contours of policy. I just want to 
express my thanks to you and your team at the SEC, for being 
important cops on the beat, and exercising the authorities that 
you do have under current law, to go after bad actors that are 
attempting to defraud investors and the public. We talked a 
little bit earlier, offline, about the issues of whether or not 
your budget can accommodate new technology investment, right?
    And we are talking about cryptocurrency, which we weren't 
talking about, at least here on the Hill, 10 years ago. 
Technology obviously is always on the move. I guess my question 
to you is where do you see the SEC's budget capacity going when 
it comes to keeping up with technology? And if you could also 
take a moment to comment on the AI, both risks and/or promise.
    Chairman Gensler. So as you mentioned, we have about, for 
2024, looking for about looking for about $2.4 billion, all 
paid for by transaction fees. But only about one out of 6 
dollars, or about $400 million of that is technology. Often to 
keep up with the Legacy systems that we have, and we could, 
certainly, with this Committee's help in Congress' helped, use 
more in the technology area.
    In terms of artificial intelligence, I think it is the most 
transformative technology of our times, every bit as 
transformative as the Internet in the 90s, but the mass 
production of automobiles in the 1920s. I mean, I think it will 
change the job markets, it will be--have to be consideration 
for other members, and other responsibilities around national 
security, and geopolitical competition, and so forth.
    But as it relates to finance, just as it relates to the 
SEC, I would mention three quick things: One, fraud is fraud. 
If you use artificial intelligence to deceive the public, it is 
still under the Securities laws. Two, with the algorithms, 
parties are now thinking about optimizing the communications to 
investors, not just on what is good for the investors, but 
maybe what is good for the advisor or broker-dealer. And it 
will still have to put the investor first, not the robo-
advisor, or robo-broker first.
    And thirdly, I do think, longer-term, it is going to create 
fragility, and the financial crisis of 2028 or 2033, somebody 
is going to turn around and say, well, I didn't realize that 
all these algorithms are based upon some base foundation model, 
and the mortgage market all went one way, maybe, or this 
market.
    I am not trying to predict which market, but these, the 
economics of artificial intelligence, I think, will lead to 
one, two, maybe three base models. And it is simply because it 
takes so much computational power, so much data, and what is 
called network effects. And artificial intelligence is really 
going to drive a lot of efficiency. It will probably boost some 
productivity, boost our economic growth, but there are also 
these challenges.
    Senator Van Hollen. Well, thank you. We hope we can work 
with you to get ahead of them as much as possible.
    Senator Collins.
    Senator Collins. Thank you very much, Mr. Chairman.
    Chairman Gensler, you have stated in the past that you 
believe that there is benefit to being in the office. Today you 
told us that the SEC will be getting rid of one of its three 
buildings in which its employees work. And in February, the 
SEC's employee union reached an agreement with the agency that 
requires employees to return to the office only 2 days for each 
pay period, that is 4 days per month.
    Now, I will quickly concede that there are some jobs that 
can be done remotely, but when you are serving the public, when 
you are helping to protect consumers, when you are dealing with 
large financial firms, you need people to be at work. You need 
people to be in the office. You need people to benefit from the 
conversations that they have with their fellow staff members 
and regulators.
    So I guess my question would be, why did the SEC agree to a 
policy that is going to result in so few employees actually 
coming to work only 4 days a month? That strikes me as not 
serving the public.
    Chairman Gensler. So if I might, I appreciate the question, 
and let me just start with, the workforce, the staff, I 
couldn't be prouder of the SEC workforce. We have had a very 
robust work-from-home policy before COVID that was not as--not 
the one that you just mentioned, but was 6 days in the office 
out of a pay period and so forth. And then COVID came, and we 
actually found that the staff could be quite productive.
    And then the bargaining unit, in good faith, bargaining 
with management, we ended up, this is a matter of record, at 
impasse over these matters, and the impasse panel came out with 
where we are, which you accurately said, 2 days at a minimum in 
the office. But there are also provisions in the arrangements 
that, for examinations, for enforcement, for other parts of the 
agency, where it is appropriate, management can call in and we 
do on-site examinations of financial advisors and--I am sorry--
investment advisors and the like.
    So we have found, during this period, this sort of forced-
upon-us period in 2021 and 2022, that our productivity was 
quite strong, and the staff, the dedicated staff, continued. 
But, as I say, we did end up bargaining in good faith, and this 
is where we landed.
    Senator Collins. Well, this does not strike me as a good 
deal for the taxpayers or for the consumers that you are 
charged with protecting. I understand that some employees are 
at the job site; that makes sense to me. I also understand that 
there are some jobs that can be done effectively, fully remote, 
and under this employee contract, individuals who are in 
positions that are fully remote will not be required to return 
to the office at all. Surely, there is a need even for fully 
remote individuals to come to the office for meetings 
occasionally.
    I am just concerned as we have seen at the IRS, and the 
Social Security Administration, that what happens is consumers 
get the short stick, and that the individuals, the companies, 
and financial advisors whom you are regulating are going to 
find it difficult to get information. And many of them have 
brought their employees back to work, and they are certainly 
back to work more than 4 days per month. So I want to express 
directly, too, my deep concern and disappointment about that 
agreement.
    I want to turn quickly to another issue, and that has to do 
with your rulemaking process. And I would associate myself with 
some of the comments made by the Vice Chair on whether 
stakeholders are being given adequate time to respond to new 
rulemaking, whether provisions are being included in the Final 
Rule that were not in the Proposed Rule, and whether or not 
there is sufficient input going from the public and from the 
regulated into your rulemaking.
    So if you could respond to how your current process tracks 
with your prior SEC practice.
    Chairman Gensler. We put proposed rules out to notice and 
comment, according to the Administrative Procedures Act, and we 
put economic analysis in. On average, I am just looking at some 
notes here, but on average, from the time that we vote on 
something, it has been about 70 to 75 days out to public 
comment.
    What we also find during that two or two-and-a-half months, 
that is kind of the first deadline, but there are some people 
that will continue to send in comments, and we do, as best we 
can, to continue to take meetings and talk about. And this is 
just an average, just to give you a sense. But on average, it 
is about 13 months between proposing a rule and finalizing a 
rule.
    Now, some of them take a-year-and-a-half, some we never 
finalize, but I am just saying, on average, it is about 13 
months. And so, on average it has been about two-and-a-half 
months that the formal period is, and then we continue to take 
meetings and have input. We document it in the file, of course. 
Even these discussions here today, only one of five 
Commissioners, but the discussions we will have here today will 
influence me as a Commissioner, as we think about that Final 
Rule.
    Senator Collins. Thank you, Mr. Chairman.
    Senator Durbin. After the questioning by Senator Collins, I 
want to say for the record that Senator Van Hollen is here 
today. He had to go vote on the floor, and he will be 
returning.
    Senator Manchin.
    Senator Manchin. Thank you, Mr. Chairman. And Chairman 
Gensler, thank you for being here. I think you know, I sent a 
letter to you concerning on the SEC's ruling, if you will, or 
presumed ruling, and we talked briefly about that. So what I 
really wanted to do is make sure that we have the Scope 3 
emissions.
    I have a big--I have really hard concerns about the ESG 
because if ESG is not taken with the same light that, 
basically, geopolitical unrest that we see around the world, 
you are putting us in a very unfair advantage--or 
disadvantage--can be very harmful. I say that because friends 
that I have over the UK, when it came to survival, when it came 
to freezing to death, or basically being able to maintain any 
type of quality of life with all the stresses because of the 
Ukraine war, they threw all caution out the window.
    And I think, you know, because they were just trying to 
survive, so the environment took a way, way far back seat. And 
if we do it properly, if we have a balance between the energy 
and the economy, we should never get in that disproportionate, 
unbelievable situation.
    So on that, really, my letter addresses those concerns, and 
if you all could give it to consideration as far as the Scope 3 
emissions, it could really be devastating to the smaller 
operations; and if I am understanding, you all have already, I 
think, evaluated. You have, of the 500 largest Russell 1000 
Index companies, 90 percent of them already published, 
substantially, sustainability reports calling into climate.
    So it is putting a lot of burden on the food chain way down 
low, and people are just going to--you know, we are hearing an 
awful lot of comments on that; so if you want to just say 
something about that, or if you are aware of that, and 
considering that.
    Chairman Gensler. I thank you for the question. We just, I 
want to say this as I have said before, we are merit neutral at 
the SEC. Congress debated this 90 years ago; it is a really 
important feature, investors get to decide what investments 
they make, and we are a disclosure-based agency.
    And like the statistic, you said, investors are already 
relying on climate risk disclosures by companies. Well over 
half of the top-thousand companies already make disclosures, 
not because we mandated, Senator, but they are making it 
because their investors want that information to make 
investment decisions.
    So we took it up to make a proposal to bring some 
consistency and comparability to a lot that is already 
happening. To your question, if I might say, about so-called 
``Scope 3'', this is for the other senators and Members, this 
is like supply chain, greenhouse gas emissions, or customers, 
you know.
    Senator Manchin. Correct. We take it, and the chicken, and 
chicken houses occur from the chicken, and you know what, all 
the way up to the--where you eat the chicken.
    Chairman Gensler. I think that is a good way to say it, 
Senator.
    Senator Manchin. Thank you.
    Chairman Gensler. I have got, I think I have got it. And 
we, when we made a proposal, we even thought that it was this 
so-called ``Scope 3'', was at a different stage of development, 
different stage of disclosures, fewer companies making the 
disclosure. We took a tiered approach at that time.
    Senator Manchin. Okay.
    Chairman Gensler. But I would say this; we have heard the 
feedback, and it is from the agriculture community, it is from 
the small- and medium-sized enterprises, and around Scope 3 
discussions, and I ensure you that we only have, you know, a 
rule that we are trying to finalize to bring comparability and 
consistency about the public companies. And a lot of comments 
came in about alternatives to ensure that we don't 
inadvertently somehow, that the reach of the rule doesn't go to 
the nonpublic companies, which I think is, that is your 
consideration.
    Senator Manchin. Yes. The small, the small end farmers, the 
small end producers, those people who are beholden to the 
larger corporations, and they really dictate to them what they 
do and how they do it, anyway. And they are under the gun no 
matter what. But you put an extra burden on them, and they are 
marginal sometimes now.
    Chairman Gensler. But I assure you, we have heard loud and 
clear. I can't prejudge where we will end up. I mean, staff has 
to pull this together. We have got 15-16,000 comments on this 
one, so it is likely to take more than that, average 13 
months----
    Senator Manchin. We can get you a lot more if you need 
them.
    Chairman Gensler. What is that?
    Senator Manchin. We can get you a lot more if you need 
them.
    Chairman Gensler. All right.
    Senator Manchin. I will give you all the ones we are 
getting, and we will get--transfer them to you. I understand 
that under your tenure, the SEC has proposed twice as many 
rules as your predecessors. In the spring of this year you 
announced your intention to finalize more than two dozen of 
these rules.
    My colleagues on both sides of the aisle, as well as 
businesses of all sizes have expressed concern SEC has provided 
insufficient time for public comment. These are probably things 
you have heard anyway, particularly given the significance of 
many of the rules. Constituents and companies affected by these 
rules believe comment periods should fall in the projection of 
60- and 90-day range. However, under your tenure, 74 percent of 
the rulemaking has been a 30-day comment period.
    So given the importance of providing maximum certainty to 
the public in changes in the financial markets, will you commit 
to adhering closure to the traditional public comment periods 
for future rulemaking, which the people think they just need to 
get a proper cross-section?
    Chairman Gensler. So I am sure your staff did very good 
work, but if I can just----
    Senator Manchin. Well, you can correct it, sometimes, you 
know, we even make mistakes.
    Chairman Gensler. No, no, I am not suggesting that at all. 
But my predecessor, Chair Clayton, finalized 64 rules, our 
docket is looking to do 50 to 55. We have finalized about 19; 
we have about 35 proposals outstanding right now, and so we are 
in that same zone. Two, in terms--now, there might be different 
types of rules----
    Senator Manchin. And so I just think it is the same period, 
right?
    Chairman Gensler [continuing]. Yes, over a 4-year term. We 
may have gone a little bit sooner in the 4-year period, but the 
whole docket is about----
    Senator Manchin. But his was--if I am understanding, his 
was a 60- 90-day, you know, comment period.
    Chairman Gensler. So in terms of the comment periods, our 
average period from the time we voted and put it on our website 
to literally the close of the comment period has been, I think, 
74 days. Now, what we do is, because there is a period of time 
before it gets in the Federal Register, we generally put things 
out, we say it will be no less than 60 days from the time we 
vote, or later if it takes long to get in this Federal 
Register.
    Senator Manchin. Okay.
    Chairman Gensler. But for instance, in some really, you 
know, important rules around equity markets, we put that out 
for 105 days. The climate rules that you mentioned were out, 
though I don't have the notes here, well in the high double-
digits days. We have also reopened between a dozen and twenty 
rules where we get further comments.
    And as I say, because it tends to take between a year and 
20 months to finalize, we continue to take meetings, we 
continue to take input, because these are important matters, as 
you say.
    Senator Manchin. Thank you, sir.
    Senator Durbin. Senator Hagerty.
    Senator Hagerty. Thank you, Mr. Chair.
    Chairman Gensler, I would first like to just start out by 
commenting on the fact that yesterday, the SEC refrained from 
inserting itself into an ongoing court case regarding the 
determination of syndicated loans as securities. And as you 
know, this is a well-functioning market, it has got 
sophisticated market participants, and I was glad to see the 
Commission resists to adding any uncertainty into such an 
important part of our credit markets.
    I would like to turn now to the SEC and its agenda. As I 
mentioned in my opening statement, many of the rules 
promulgated under your tenure have crept well beyond the SEC 
statutory mandate. And we are not talking about just a few 
rules; it is an eye-watering number. You just talked with 
Senator Manchin about the number of rules that you have 
undertaken so far, and you have pointed back to the fact that 
this is in line with what your predecessors have done.
    But I would look back at the last 27 months of your two 
predecessors and the pace that you have undertaken here. And 
during the 27 months that you have been Chairman of the SEC you 
issued--you have issued 58 rule proposals. That is nearly equal 
to the proposals by both Chairs Clayton and White combined 
during their first 27 months.
    The sheer volume of this isn't the only problem, though. 
And again, you touched on this with Senator Manchin, the speed 
with which these new rules are developed and imposed on the 
market is just as important. And here again, it feels that you 
are moving at an extremely rapid pace.
    This raises an obvious question then, how does the volume 
and speed of rulemaking impact the quality of these rules? 
Well, here are just a few issues that were raised by SEC 
managerial employees that came directly from the Inspector 
General Report that was conducted last October--that was 
printed last October.
    And I will run through a few of them, and these are direct 
quotes. ``Shortened timelines during the drafting process; 
limited time available for staff research and analysis, limited 
feedback during the rulemaking process, shortened public 
comment periods, increased litigation risk, difficulties 
managing resources, and other mission-related work.'' These are 
direct quotes from that OIG Report.
    So my first question is, do you agree with the statements 
of the SEC Managerial Staff that were in this report that 
state, quote, ``The more aggressive agenda, particularly as it 
relates to high-profile rules that significantly impact 
external stakeholders, potentially; one, limits the time 
available for staff research and analysis; and two, increases 
litigation risk''?
    Chairman Gensler. Again, I am very proud to be part of such 
a dedicated staff. And I think they are doing excellent work. 
It is what we benefit from when we put these proposals out to 
public comment, and we hear back, whether they see something 
that we didn't get accurate in the economic analysis, the legal 
analysis, the policies.
    In terms of the staff, I am also pleased to say that we 
have, for a number of years been very--the survey is done by 
the Partnership for--the Partnership for Public Service that we 
tend to be very highly ranked by our own staff about the work 
at the staff. But in terms of the rules----
    Senator Hagerty. I am talking specifically about the OIG 
Report, and here, what they are citing is not a process 
substance that you are talking about. It is talking about 
concerns with the process itself. Again, the speed and the 
volume that you are moving forward on; and here, it seems to me 
that it is a recipe for disaster moving at this pace, at this 
volume, particularly when you hear these types of complaints 
coming back from the staff. And the real victims here are the 
Americans whose livelihoods depend on returns from the 
marketplace.
    Chairman Gensler. You know, I appreciate that, but it is 
also we put out to public comment. We have a rule docket that 
is these 50 to 55, or so, and that is, we have been candid with 
the public through the administrative process about that is our 
docket, these 50 to 55 proposals, and we get the comments back, 
and we adjust. I mean, the final proposals--I mean, the final 
adoptions reflect a lot of the comments that we have received.
    Senator Hagerty. If I could come back again where I started 
here, in terms of the tendency to exceed the mandate of the 
SEC. The regulatory agenda that you have laid out, the 
increased budget requests that you have laid out raises 
complicated but particularly germane questions. Like, how much 
funding would the SEC need if it weren't trying to do the job 
of the Congress, the EPA, the banking agencies, if it weren't 
bringing enforcement actions that are likely to be lost?
    Rather than struggle for the answer here, let us--we will 
get through that, so the question is for the record, but that 
is a very obvious question. I mean, if you look beyond the 
mandate activities, we are funding those.
    What I do want to ask you is this: Do you keep a tally of 
the cost of lost cases, when you bring enforcement action and 
lose? Have you kept track of the expenditures, the cost of 
that, both to the SEC and to those who have to defend against 
them?
    Chairman Gensler. We bring a--we either settle or bring 
between 7- and 800 actions a year, and that is being a cop on 
the beat, and we lose very few, Senator, but we are going to it 
from time to time. That is the nature of our processes. So too 
would any law enforcement, we are a civil law enforcement 
agency. But it is really to protect the investing public, and 
protect those firms that are trying to access the capital 
markets. And so we bring cases, whether it is Ponzi schemes, or 
pump and dump schemes, or accounting fraud, insider trading, 
and----
    Senator Hagerty. I am talking about the statement cases, 
the cases that are meant for messaging. That is my great 
concern. And I don't think it is right to put American 
taxpayers on the hook for defending themselves in these cases 
when you know that there is a high odd--high odds of losing. 
That is the point here.
    Chairman Gensler. To say----
    Senator Hagerty. And I will come back with questions for 
the record. We are out of time on this round. But I will come 
back with questions for the record to try to get at this cost.
    Chairman Gensler. If I might just say, we only bring a case 
if we think that it is--the facts and the law dictate it, and 
it is really within the facts. We take it, our five-member 
Commission votes on every one of these. We end up voting 
between 15 and 30 of these a week, and we take this very 
seriously. We don't, we don't bring cases if we don't think 
there has been real wrongdoing.
    Senator Hagerty. Thank you.
    Senator Van Hollen. Senator Durbin.
    Senator Durbin. Thank you, Mr. Gensler, Chair Gensler, for 
being here. What percentage of Americans--are in the stock 
market?
    Chairman Gensler. Well, it is--there is at least 52 million 
Americans that have investment advisors advising them. There is 
even more than that number, and I will have to get back to you, 
that actually invest in mutual funds or have brokerage 
accounts, but it is--it is well over half, but we will get you 
the exact statistic.
    Senator Durbin. I have heard it was around half, if you 
could give me some specifics, it is helpful. The thing that 
surprises me, when I read and learned that one out of five 
Americans invested or traded cryptocurrency; are you aware of 
that?
    Chairman Gensler. I have seen some of those statistics.
    Senator Durbin. One out of five.
    Chairman Gensler. Again, I can't vouch for the surveys. It 
is not done by the SEC, or this Committee.
    Senator Durbin. So this is an industry which you have said 
is, quote, ``Rife with fraud, scams, and abuse.'' Did you say 
that recently?
    Chairman Gensler. I would say it in this live hearing; it 
is a field that is rife with fraud, scams, and abuse, and there 
are a lot of actors in this field that are international, 
offshore, but they are still tapping on the American public's 
wish for a better future.
    Senator Durbin. According to one estimate in 2022 alone, 
fraud schemes involving cryptocurrency totaled more than $9 
billion. Does that surprise you?
    Senator Durbin. No. It could be larger, sir.
    Senator Durbin. I could go through the list of outrages 
involved in this industry. Celebrity endorsers, Matt Damon, 
noted financial advisor; Larry David, another financial advisor 
with trust implicitly; Tom Brady, who can't even get paid for 
doing the commercial; Kim Kardashian, and on and on. They spend 
billions on sports arena or stadium naming rights deals to gain 
misguided credibility with everyday Americans.
    They manipulated prices with phony tokens of no underlying 
value, fail to protect and segregate investor funds. This is 
happening over and over again. This doesn't sound like America. 
What is missing here?
    Chairman Gensler. Well, it is a real pattern. I mean, there 
is a technology underlying it, a ledger technology called 
blockchain technology. There may well be a particular value in 
some of these use cases, but the American public is not getting 
the proper disclosure to make their investment choices. And 
then the companies operating in this space, as you say, are 
bundling and co-mingling services that we would never allow.
    We would never allow the New York Stock Exchange to also 
trade against their customers. We just, we don't, we haven't 
for decades. And here, there is all this bundling and co-
mingling. And what is more, there is this tremendous amount of 
bad actors in the field as well, a lot of them offshore preying 
upon U.S. investors.
    Senator Durbin. And a lot of them are looking for a home in 
our political system, are they not?
    Chairman Gensler. That is not our jurisdiction, but I have 
read some of those articles.
    Senator Durbin. I went to a hearing like this, walked out 
in the hallway, the reporter said, ``How much money has your 
campaign fund taken from the cryptocurrency business sector? 
And I said, ``None. I have nothing to do with him.'' She said, 
``You are wrong. It is $20,000, and I can show you.'' I hadn't 
asked for it, didn't realize I had received it. But they are 
playing everywhere they can to buy influence in the process. 
What is the best way for us to protect American consumers from 
cryptocurrency in the future?
    Chairman Gensler. Well, I think that we have robust 
authorities at the SEC. I think our sibling agency still does--
I have said this often--the CFTC may need additional 
authorities, because some of these tokens are not under our 
jurisdiction. I think it is very few, but I am not trying to 
prejudge any one token. But our authorities at the SEC are 
quite robust. We could always use some more resources.
    Senator Durbin. That is a question I want to get to, 
because I am on the Agriculture Committee too, and there is an 
ongoing debate among some quarters as to whether the CFTC has 
any authority in this industry. Do you think they do?
    Chairman Gensler. Well, there are some tokens that--and 
Bitcoin, I will just stay with that, Bitcoin itself doesn't 
have the attributes of an investment contract under the 
Securities laws; but many tokens, without prejudging any one, 
have the attributes of an investment contract. Meaning there is 
a group of individuals that the public is investing based on 
anticipation of profits based on their efforts.
    But as it relates to this, the Bitcoin, as I understand it, 
under the Commodities and Exchange Act, there is anti-fraud and 
anti-manipulation, but they don't have what is called plenary 
rule-writing authority. But I am sure Chair Benham could better 
answer some of those questions.
    Senator Durbin. So when it comes to appropriated funds, do 
you have enough in the SEC, personnel, and resources to deal 
with the cryptocurrency business?
    Chairman Gensler. If this committee were to see fit, and 
want us to have more resources, we could use them. Part of this 
$73 million, I know, and I really do thank the committee to 
come, unanimously, to fund us. But that we were hoping to add 
another 170 people; some in disclosure review, some in 
examination, but certainly some of them in enforcement. And you 
know, that cuts back on our ability to do this.
    Senator Durbin. Thanks, Mr. Chairman.
    Senator Van Hollen. Thank you, Senator Durbin.
    Senator Kennedy.
    Senator Kennedy. Thank you, Mr. Chairman. And Mr. Chairman, 
welcome.
    Chairman Gensler. It is always good to see you, Senator. I 
have enjoyed our times in our private talks, and in these 
hearing rooms.
    Senator Kennedy. The feeling is mutual. Mr. Chairman, why 
did you and the SEC allow the FTX fraud to happen?
    Chairman Gensler. The crypto field is often one that is co-
mingling and bundling services, as I said earlier, and often, 
also offshore; and it is rife with abuses and fraud, it also 
takes time to thoughtfully, and by the book, and by the law 
build investigations and bring actions. There is a public 
figure, on average about 23 months from start to either 
settlement or bringing an action at the SEC.
    We did bring actions over the course of the last 5 years on 
150 companies, or a----
    Senator Kennedy. But the cow was out the barn? I mean, 
here--I follow your remarks, Mr. Chairman, because I have great 
respect for you, and you have said repeatedly before FTX blew 
up that the SEC has the authority to regulate cryptocurrency.
    Now, here you have this company, FTX, run by a young man 
who has more zeal than wisdom. He prides himself looking like 
the fourth runner-up in a John Belushi look-alike contest. He 
prides himself on being under-dressed and over-haired, reeks 
with arrogance. You could have sent down one investigator from 
the FTC with an ego like Mr. Bankman-Fried, and Sumler, send 
someone down from the SEC, and let them just watch you for a 
day. And he probably would have welcomed you in.
    I mean, his dad is a chaired professor at Stanford Law 
School. Where was Stanford? But where was the--where was the 
SEC? I mean, this was an accident waiting to happen, and I 
don't understand where the SEC was.
    Chairman Gensler. So sir, I would say that the whole field 
has hurt more Americans than it should.
    Senator Kennedy. Yes, but I am talking about FTX. I mean, 
we look back at FTX. I mean, Senator Durbin made this point, 
and we have this elaborate, complex regulatory machinery, the 
SEC, which I support, which is supposed to guarantee 
transparency and combat fraud. And any fair-minded person has 
to look at FTX and Mr. Bankman-Fried and these kids, and go: 
What in God's--where were--where was everybody? Where was the 
SEC?
    Chairman Gensler. And I would say where we were is, my 
predecessor, and also under my honor to be Chair, we have 
brought 140 or 150 actions. There are 15 to 20,000 tokens, and 
there are dozens of----
    Senator Kennedy. Yes, but that was after the fact, Gary. I 
mean, here is this young man; he did everything but bomb Mount 
Rushmore. Weren't you all curious? Where is this guy getting 
this money?
    Chairman Gensler. I would say that in the summer of 2021, 
when we Wells noticed a very large crypto exchange in the U.S., 
they went on Twitter and said that we were sketchy. When we 
subpoenaed Do Kwon, and this is all public, so I can say it; 
when we subpoenaed--we gave him a subpoena; he fought us in the 
District Court, he fought us in the Appellate Court.
    Senator Kennedy. I know that. I know that. But I am not 
talking about how many lawyers can dance on the head of a pin. 
I am talking about why didn't you send somebody down? I 
guarantee you, with his ego, Mr. Bankman-Fried would have 
welcomed you. Okay. He probably would have asked you to bring a 
film crew.
    You just send an investigator down, spend a half a day with 
these young people, come back, and go get an injunction. Shut 
them down, until they can answer some very basic fundamental 
questions. Like, for example, were they co-mingling funds? Why 
didn't we do that? Why didn't you do that? That is what we pay 
you folks to do.
    Chairman Gensler. Again, I can't----
    Senator Kennedy. I mean, I get all the Wells letter and all 
that. We have got--we have got tens of thousands of people that 
lost a lot of money, and they look, they look at this young 
man, and they will go: How did the--how did the regulatory 
authorities allow this guy to function? I mean, your Secret 
Service name is Butthead. That is how bad he is. Where was the 
SEC?
    Chairman Gensler. And again, sir, I can't speak to one 
enforcement matter like that, but let me just broadly say this 
whole----
    Senator Kennedy. Well, it is a big one.
    Chairman Gensler. This whole field, the whole crypto field, 
is built on models that we wouldn't allow in traditional 
securities markets of co-mingling. The co-mingling that you are 
mentioning----
    Senator Kennedy. And why did you allow FTX?
    Chairman Gensler. And we have----
    Senator Kennedy. Why did you allow FTX?
    Chairman Gensler. We have vigorously--we investigate by the 
book. You, I am sure, and the American public, want us to 
follow the facts, follow the law, properly give people 
subpoenas, they get lawyered up, they give us replies, they do 
effectively burn clock, and on average it takes time----
    Senator Kennedy. You could have gotten an injunction half-
a-day.
    Senator Van Hollen. Senator?
    Senator Kennedy. Thank you, Mr. Chairman.
    Senator Van Hollen. Thank you, Senator Kennedy.
    Senator Coons.
    Senator Coons. Thank you, Chairman Van Hollen; Ranking 
Member Hagerty, thank you.
    Chairman Gensler, as the questioning of my colleague 
indicates, there is widespread interest in and concern about 
not just the years of alleged fraud carried out by Mr. Bankman-
Fried at FTX, but concern about the whole sector, about the 
safety and security and transparency of crypto transactions. 
You have said the '33 Act and the work of the SEC is critical 
to providing protection for the half of all Americans who 
invest and who are at risk.
    I am glad, that on a bipartisan basis, this Committee is 
coming forward to support a level of staffing, and resources, 
and technology needed to deal with emerging challenges, like 
how to effectively regulate crypto. And your funding is deficit 
neutral. I mean, one of the great things about it is we are not 
expending more taxpayer dollars.
    Is there one critical area you would point to briefly where 
you think either staffing, technology, or resources are 
lacking, and you would urge us to prioritize investment beyond 
the agreement that is been reached by this subcommittee?
    Chairman Gensler. I thank you for that question. I think 
that our full funding request, which is about $70 million more 
than you were able to come together on, would provide about 170 
more people.
    Senator Coons. Yes.
    Chairman Gensler. And that is across our examination, our 
disclosure review, which is a really important piece where 
issuers need feedback and enforcement, but it is also 
technology. And a big piece of it is, at give or take $400 
million, we are really--most of that technology spend right now 
is about our Legacy systems and technologies changing so 
rapidly. And even just data storage costs a lot more, just 
sheer volume of data. I think that would help us be better----
    Senator Coons. That is my hope, it will be----
    Chairman Gensler [continuing]. Cops on the beat, and 
better--but just even be more responsive to market participants 
wanting to get their filings reviewed.
    Senator Coons. How many rule proposals do you currently 
have under development, and how many of them might be finalized 
later this year?
    Chairman Gensler. I believe sir that we have thirty-four--
or -five proposals that are already out public but not yet 
adopted, and we have maybe a handful, five, six that are still 
being considered to be proposed, but that is our whole docket. 
In terms of timing, it is really when the staff is ready; and 
the Commission is ready, but it will take more than through the 
end of this year.
    Senator Coons. I joined a dozen of my colleagues in sending 
a letter just encouraging you, given the suite of rules in 
proposal development, to just make sure you are providing 
sufficient time for notice and comment on the proposed rules. I 
don't believe we got an answer. What is your answer to concerns 
that the aggregate impacts on the market, of such a broad range 
of proposed rules, need to be taken into account?
    Chairman Gensler. Well, in each of these rules, we do take 
into consideration the economic analysis, and then sometimes 
there are some interactions, and we note those in those rules. 
But we benefit from the feedback, whether it is from large 
market participants, their trade associations, individual 
investors, and then we take that into consideration.
    And as I said earlier, on average, these rules from 
proposal to final, take a year to a-year-and-a-half, but the 
formal comment periods have been about two to two-and-a-half 
months from when we voted out, we put it on our website, we 
start getting feedback.
    We have also reopened our--more than a dozen, I think it is 
20 of them, to get additional comment, and sometimes we update 
economic analysis and put that further out, and where 
appropriate we make adjustments in the Final Rules.
    Senator Coons. I do think it is important to regulate in a 
wise, and transparent, measured way so that the regulations are 
both effective and sustain. A last question about a specific 
proposal, swing pricing as an option used by funds currently. 
How many funds have actually utilized swing pricing since it 
was authorized in 2016?
    Chairman Gensler. Sir, I would have to get back to you in 
detail, but I think very few. I mean it is--while it is 
voluntary, I am not sure, so this is on mutual funds for this, 
sir.
    Senator Coons. Yes. I would appreciate an answer back in 
terms of how you think the proposal for a hard close would 
impact the use of swing pricing, and whether or not this is 
going to have an undue market impact. It strikes me my--what I 
have heard is that it is a tool that is very rarely used. And 
so perhaps the analysis needs to----
    Chairman Gensler. No, no--that is correct. I don't know the 
exact number, but it has been very rarely used. It is open-end 
bond funds work for the American public, really in many ways it 
is a very good product, because you can get the benefit of low-
cost and diversification. In times of stress, there have been 
times, and we saw it in 2020, in times of stress where we rely, 
ultimately, on the Federal Reserve, the Fire Department, so to 
speak, to come in and support the markets. And so we are just--
we are trying to build a little greater resiliency into the 
markets in those times of stress.
    Senator Coons. Thank you. Thank you for your testimony. 
Thank you, Mr. Chairman.
    Senator Van Hollen. Thank you, Senator Coons.
    Senator Boozman.
    Senator Boozman. Thank you, Mr. Chairman, very much; and 
thank you all for holding this really important hearing.
    It wasn't too long ago that I was chairing this Committee, 
and you were chairing the CFTC, and the one thing that I want 
to compliment you on is that you have always been good to come 
and testify, and are very approachable, so we appreciate that.
    Chairman Gensler. I thank you. And I want to compliment 
you. It has always been good to get on the phone, or come to 
your office, even if we might have differences of policy, but 
we always--I learn from it, and we try to narrow the 
differences.
    Senator Boozman. No, I appreciate that very much. One of 
the things that I have a lot of concerns about is the SEC's 
custody proposal. You know, it undermines CFTC customer 
protection rules, conflicts with global margin treatment, what 
happens in the derivatives and treasury markets, and adds 
complexity to institutional, investment advisors, and qualified 
custodians. Even worse, in response to questions from my staff, 
both CFTC and Treasury staff said the SEC did not coordinate 
with either agency, which is unacceptable.
    The impacts on the derivatives, commodities, and treasury 
markets could cause systemic harm, and I strongly urge you to 
withdraw the proposal or completely rework it. Now, it is 
difficult. The SEC is such an important entity, and yet it is 
hard for us to, you know, give you the means that you need when 
you come out with this kind of stuff. I don't know how to say 
that in a nice way, but again, you know, this is--this rule is 
not a good rule. It has the potential of creating a lot of 
problems; and then, also, not working with CFTC and Treasury, 
which it affects in a great way, could it affect in a great 
way.
    Chairman Gensler. If I might, just put it in context; we 
have had a custody rule, and this is about investment advisors 
holding assets for their customers, since the 1960s, but then 
the Bernie Madoff events happened. They were terrible, really. 
And Congress came together and put a provision in, that Reform 
Bill, Dodd-Frank, that specifically addressed that we, the SEC, 
would have not just new authorities but should address the 
safeguarding of all client assets.
    It was no longer just the securities and funds held, or on 
behalf of customers, but all client assets. That was in 2010, 
and here we are in 2023, 13 years later, and we hadn't taken it 
up. So it is one of the remaining, I would say we had about 8 
of these when I came on board, 8 of 54 things we are working on 
were left--still left over from Dodd-Frank.
    And we have got a lot of public feedback. It is important 
to take that feedback. We have met with the Commodity Futures 
Trading Commission; we have met with the Futures Industry 
Association about some of their comments, and we are taking 
those into consideration.
    Senator Boozman. No, we appreciate it. But the reality is 
the markets have been very resilient, and again, we want to 
allow our farmers and others to manage risk, and our concern is 
this would blow up those markets, and the agency, again, you 
should consider, you know, making significant changes based on 
all the conversations that you have had.
    The Fed has recently warned of a potential credit crunch 
and further slowing of the economy, during the pandemic we saw 
lenders use a single-name CDS to hedge against credit 
drawdowns; however, many believe the SEC's Proposed Rule 10b-1 
would hurt liquidity, and cause lending pullbacks, which is 
exactly the Fed's concern. We are in a high rate environment, 
and the Fed is warning against credit pullbacks. Yet, the SEC 
proposals, such as Treasury market reform, applying Rule 15c2-
11 to fixed income, the dealer proposal in the Rule 10b-1 would 
all be major overhauls that could reduce access to credit.
    So I guess the question I would have, would you conduct a 
publicly available economic analysis of the cumulative effects 
of your SEC proposals on U.S. credit markets? And will you 
commit to coordinating with the Federal Reserve about the 
cumulative effects of SEC proposals on U.S. credit markets?
    Chairman Gensler. So thanks for the question. There are a 
number of proposals that you mentioned related to the U.S. 
Treasury market, so there were three or four of those that you 
mentioned, and we have been in consistent dialogue with the 
U.S. Treasury, the issuer of U.S. Treasuries, on behalf of us, 
the American public, and the Federal Reserve because they use 
Treasuries to conduct monetary policy, and the various rules. 
So we have been in very good, close discussions with them.
    Second, we do have economic analysis on--in each of those; 
one is a Treasury market clearing; one is about Treasury 
dealers, and each of those we have robust economic analysis but 
also have gotten feedback. What is the issue we are trying to 
deal with? We are trying to deal with resiliency in the 2020 
dash for cash, during the starting part of COVID, there were 
really significant issues in the U.S. Treasury market, than 
there were in the fall of 2019, and in part, what supported the 
Treasury market was the Federal Reserve buying a couple 
trillion dollars, give or take, of Treasuries.
    So it has really, it has been an effort to have a little 
greater resiliency and competitiveness in that market. We, the 
taxpayers, ultimately benefit from that.
    Senator Boozman. We appreciate it. Again, fragile economy; 
we just want to make sure that access to credit is not impaired 
even more. Very quickly, you know, you mentioned that you got 
feedback regarding Senator Coons' question about rushing rules, 
and so you know the feedback we are getting is from the IG, and 
they said, the IG report found that staff had limited time for, 
quote, ``Research and analysis'', end quote, meaning their 
economic analysis were rushed.
    So you know, we need to sort that out. And I know that you 
are working hard in that regard. You are trying to get a lot 
done, but that is the feedback that we are getting.
    Chairman Gensler. I thank you for that feedback, sir.
    Senator Boozman. Thank you.
    Senator Van Hollen. Thank you, Senator, Boozman. So here is 
how we are going to proceed. We are going to have one more 
round of questions for interested Members of the Committee. 
That is going to be 5-minute rounds.
    So Mr. Chairman, you have discussed in your appearances 
before the Banking and Housing Committee, my belief that 
investors and the public have a right to know when corporations 
are taking big risks through the use of offshore tax havens. 
Jurisdictions around the world, especially Australia and the 
European Union, are moving in this direction, giving their 
investors the information they need to assess the tasks risks 
of their portfolios, including offshore tax havens.
    I have introduced legislation, the Disclosure of Tax Havens 
and Offshoring Act. Right now, as you know, the Financial 
Accounting Standards Board is looking at this. I am going to 
submit some questions for the record on the subject for you to 
take a look at, so we can, hopefully, move forward.
    I do want to ask you a question about proxy advisors, and I 
clearly have a difference of opinion from my colleague, the 
Ranking Member, on this. But tell me where I am wrong in this 
logic.
    I am T. Rowe Price, or I am another company, I choose to 
hire, with my own money, proxy advisors to give me guidance and 
advice on how I should proceed on different proxy votes. I use 
the example of T. Rowe Price; they are a Maryland-based 
company, and they both provide advice and they also pay proxy 
advisors for advice in some cases.
    So it seems to me that for those of us who do believe in a 
market system, and for the ability of private parties to make 
choices of their own within the law, that trying, by Government 
Fiat to stop a private entity from hiring a proxy advisor to 
make recommendations on decisions, seems kind of a violation of 
market principles and freedom of choice. What do you think?
    Chairman Gensler. The investors in this case, in your 
hypothetical, T. Rowe Price, a Maryland firm, but it doesn't 
matter what State they are in, but that investor has, as an 
investment advisor, a fiduciary duty to their ultimate 
investors. And that fiduciary duty, they have to decide, as 
part of that fiduciary duty, how to vote on a board of 
directors, maybe on mergers, and maybe on other matters before 
them.
    It tends to come in a short season in the spring, and so 
there has developed, in the last 20 to 30 years, these outside 
advisory firms that--firms like you just mentioned, but other 
investment advisors turn to. But it is still, ultimately, in 
your hypothetical, T. Rowe Price's fiduciary obligation to 
decide whether they support or object to whatever the vote is.
    In terms of the rulemaking that we did, we had a number of 
people that came into us, it was early in my tenure, that said 
that they thought that we should take this up. And we took the 
time to put it out to notice and comment. We got comments back, 
and based upon the record and the Commission's consideration of 
it, we have finalized some changes as our predecessor had made 
other changes.
    Senator Van Hollen. Right. But don't you think that any 
company should be able to, with their own money, pay somebody 
for proxy advice which they can take or leave without anyone 
trying to pass a law or regulation to prevent them from using 
their own money in that way?
    Chairman Gensler. Yes, I would broaden it; investment 
advisors, small and large, use outsourcing. They hire others 
for their technology, they hire others for pricing services, 
they hire others for proxy advice. I mean, there is dozens and 
dozens of things that they use outside advisors and we, we are 
neutral to that. We allow that.
    They still retain their fiduciary obligations and all of 
their other obligations that an investment advisor is 
safeguarding the assets that we were talking about earlier.
    But the use of outsourcing is a robust part of our economy, 
not just for investment advisors, and at least at the SEC, 
there is no--and that has facilitated--it promotes efficiency.
    Senator Van Hollen. Thank you. Thank you, Mr. Chairman.
    Senator Haggerty.
    Senator Hagerty. If the Chairman might accommodate me to go 
outside of the 5-minute limit for a minute because I would love 
to--this is a very healthy conversation and to share my 
perspective on it.
    One, my conversation with Chairman Gensler, really has to 
do with transparency and disclosure regarding the advisory 
firms, not whether or not you can hire them, but transparency 
in terms of what these firms do; these firms not only work for 
the T. Rowe Prices, in your example, they also can work for 
activist investors, and they can be deployed to go out and put 
proposals in place that suit the desires of those activist 
investors.
    In fact, activists are in the ownership structure of these 
offshore firms. It is a duopoly. Two firms they say control 97 
percent of the proxy advisory services. I don't know who the 
other 3 percent are controlled by, but these two large firms.
    In my own private sector experience, I have dealt with 
these firms. As a member of the New York Stock Exchange traded 
company, experienced a proposal against, recommending against 
management, and what happens next is a phone call comes to 
management saying that our consulting arm--I am sure there is a 
Chinese wall there--but our consulting arm will help you get to 
a better answer.
    And after paying hundreds of thousands, sometimes millions 
of dollars in consulting fees, you can get the proposal 
recommendation for management as opposed to when it was against 
it. And as I mentioned, there are even circumstances where 
these firms are recommending four actions; that if management 
were to take them, would cause them to violate State or Federal 
laws.
    So there is a real problem. I think this goes back to our 
whole discussion about the volume of rules coming down the pike 
and trying to deal with the proposals that are now so easy to 
issue.
    As I mentioned earlier, the Harvard Law School Study 
indicated that there are five individuals that are launching 
over 40 percent of all these proposals. They are easy to do, 
and they are just inundating companies with this. And I think 
there needs to be--I think we should take a hard look at how 
these proxy proposals are put forward too. This is outside the 
realm of the advisors, but boy, they generate a lot of business 
for the advisors.
    Thanks for that diversion, but I think that is a healthy, a 
healthy conversation for all of us to have. And that is where 
my concern lies.
    To come back to some questions I wanted to discuss with 
you, Chairman Gensler, I would like to come back to crypto and 
the blockchain technology markets for a moment. In your 
conversations with Senator Durbin, you talked about a robust, a 
robust set of rules that you have--a robust set of tools, I 
should say, that you have to deal with this. What I have seen 
happen, just this year alone, is that U.S. share of stablecoin 
volume has gone down. U.S. blockchain developers' jobs have 
decreased here in America, and I think what is happening is 
that industry players are migrating overseas to other 
jurisdictions where the rules of the road are clearer for them.
    And when you think about the rules of the road here in 
America, the rule set is anything but clear. And what is 
occurring here, much more often than not, is regulation by 
enforcement, if you will. And I think that is creating a great 
deal of uncertainty in the market.
    What worries me is that we are losing out on technology 
development and innovation that I would like to see happening 
here, and I think it might make your job more challenging, as I 
think about your conversation with Senator Kennedy, because the 
company he is concerned about, FTX, is a Bahamian company. It 
is not an American company. And these companies like FTX are 
searching for jurisdictions that probably allow them to do what 
they want to do.
    The question I raise is if we had a robust rule set here, 
would we have the ability to attract the licit actors to 
operate here in the United States of America? And is there a 
way to put clarity? I mean, I would be interested in your 
concerns on that, yes.
    Chairman Gensler. So I actually think there are robust rule 
sets at the Securities and Exchange Commission, and it is 
outside of my--our jurisdiction, but over at the Treasury 
Department, and anti-money laundering, and financial crimes, 
enforcement network, and so forth.
    Senator Hagerty. Yet these firms are moving offshore.
    Chairman Gensler. Yes, because this is a field that, in 
part, is built on a business model of, catch us if you can. It 
is built in part, not everybody, but in part on a model of 
preying upon the investing public's desire for a better life 
and future, and the hype around these tokens, these 15- or 
20,000 tokens.
    And like most of venture capital, and I know, Senator, I 
respect you were in the venture capital field, most venture 
capital investments fail, just statistically, to many of these 
tokens, you know, if you think of them like startups, are 
likely to fail. And yet, they are not making full, fair, and 
truthful disclosures to the investing public. And you are 
absolutely right. There is a bit of regulatory arbitrage. I 
will set up in Malta. I will set up in the Bahamas. I will set 
up in, you know, some tax haven or offshore where they don't 
have the robust rules of the road that we have in our 
securities markets or the robust enforcement we might have 
around anti-money laundering.
    Senator Hagerty. To come back to, to the timing here, 
because I just a couple more questions to, to touch on, and we 
are running short. I would just strongly encourage, rather than 
regulating via enforcement, to think through the rule set that 
would create clarity in the marketplace. Because when I talk to 
market participants, they tell me that there is a lack of 
clarity here. And that is a, I think, a laudable goal to 
achieve.
    I have got a couple of other quick points. One of them goes 
back to what Senator Coons touched on in terms of not getting a 
response back, what I mentioned myself in terms of not getting 
responses back, fulsome responses back from the SEC when we 
send questions in. And this comes back to specifically two 
letters that you received from House Committee Chairman 
McHenry, Jordan, and Comer; Chairs McHenry, Jordan, Comer, 
asking about providing specific certifications regarding any 
use by you, or your direct reports, or personnel there at the 
SEC using their own personal, either off-channel or all-
platform methods, to communicate or conduct SEC business.
    I am talking about personal phones, using Signal, WhatsApp, 
those types of communications. In your written response to the 
first letter, you talk about the operation, you mentioned a 
number of areas, but you don't specifically respond directly to 
the five clear requests that were made in the SEC off-platform 
letter that came forward. And it includes providing specific 
certifications regarding the SEC's, and your personal 
compliance with Federal record-keeping requirements.
    So I think those requests are straightforward. I think it 
would be appropriate to address those, and I would just ask you 
now if you; have, you yourself, been involved in using your 
personal device, or off-platform devices for SEC business?
    Chairman Gensler. I have disclosed here; I think Senator 
Van Hollen still might call me on my cell phone. I have known 
him for 23 years, but when I get----
    Senator Hagerty. I am talking about the concern that was 
raised by----
    Chairman Gensler. No. I don't use. I occasionally--it is 
very rare these days, but I occasionally get an email from 
somebody, and then I just forward it over to the SEC.
    Senator Hagerty. I would just encourage you to please 
respond to these questions again. I have expressed the same 
frustration that my colleagues do in that regard. I think a 
response would be warranted there.
    One last area I will touch on, and I will deal with the 
rest of this to questions for the record; when you were 
speaking with Senator Collins about work from home, when you 
and I talked about this yesterday, it raises the question of 
what the impact might be on your office footprint.
    And there has been news, a lot of news related to the GSA 
announcement on your new headquarters' lease. I have seen 
different estimates for the cost of that lease to the taxpayer. 
But what would you expect over the next--do you have an 
estimate of what the next 25 years that building cost would be?
    Chairman Gensler. I think we need to get back to you, but I 
would say this, that our needed footprint has come down from 
when that was initially put out for a request for quote, now I 
think it was 4 years ago; it was pre-COVID, and so we----
    Senator Hagerty. At least we are trying to do it after 
COVID----
    Chairman Gensler [continuing]. We have actually worked with 
the General Service Administration and said, and we were--we 
had a right, under our agreement with GSA, we had a right to 
downsize with them, and we did about a year ago downsize with 
GSA. But we would have to get back to you on this specific 
question about----
    Senator Hagerty. Yes, and just, again, just thinking about 
the expense of these buildings, and as you described, a very 
different sort of work pattern. I would think that would have 
an implication on this.
    Chairman Gensler. We are actually looking at it across all 
12 of our offices, and where we can, to prudently and 
thoughtfully, shed space.
    Senator Hagerty. Well what; if I could work with you--if 
your staff could work with mine to just get us any sort of 
internal analysis that you have done, any fair pricing analysis 
that you have done, I would very much appreciate that.
    Chairman Gensler. I will ask staff to coordinate with 
yours, and some of this information is over at GSA, and not 
ours, but okay.
    Senator Hagerty. Okay. Thanks for coordinating with us on 
that. And I will submit the rest of my questions for the 
record. Thank you, Mr. Chairman.
    Senator Van Hollen. Thank you, Senator Hagerty. Thank you, 
Chairman Gensler, for being before the subcommittee. We look 
forward to continuing to be in touch on issues that were raised 
today.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Van Hollen. Our senators on this Committee will 
have one week to submit questions for the record. That means 
they are due July 26.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
    No questions were submitted for the record.

                           SUBCOMMITEE RECESS

    Senator Van Hollen. And with that, this subcommittee 
meeting is adjourned.
    [Whereupon, at 4:45 p.m., Wednesday, July 19, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]


  FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL 
                               YEAR 2024

                              ----------                              


                      TUESDAY, SEPTEMBER 19, 2023

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.

    The subcommittee met, pursuant to notice, at 2:35 p.m., in 
room SD-124, Dirksen Senate Office Building, Hon. Chris Van 
Hollen (Chairman) presiding.
    Present: Senators Van Hollen, Manchin, Hagerty, and 
Kennedy.

                 U.S. FEDERAL COMMUNICATIONS COMMISSION

             OPENING STATEMENT OF SENATOR CHRIS VAN HOLLEN

    Senator Van Hollen. This Committee, the Subcommittee on 
Financial Services and General Government Hearing will come to 
order.
    I would like to begin by thanking my Ranking Member, 
Senator Hagerty, and other Members of the Committee for our 
continued oversight efforts of agencies under our jurisdiction.
    We are very grateful to be joined today by the Chair of the 
U.S. Federal Communications Commission, Jessica Rosenworcel. 
Welcome to you.
    The FCC has a very important set of responsibilities, from 
working to provide access to affordable high-speed Internet to 
keeping spectrum licensing competitive, and much more. The 
mission of the FCC is essential to ensuring that the United 
States remains on the cutting edge of communications' 
technologies in the 21st century, and that, in turn, is 
essential to the success of our country, our economy, and 
important, of course, to national security.
    I am pleased the Senate confirmed President Biden's 
nominee, Anna Gomez, to the Commission earlier this month, 
bringing the FCC to its full contingent of five Commissioners.
    And I would like to applaud Chair Rosenworcel and the 
entire FCC team, including all the Commissioners, for their 
rapid response to the disasters in Hawaii and Florida. Their 
work in the early days of the disaster helped save lives by 
ensuring that survivors could stay connected to their loved 
ones and to emergency response teams. Tragedies like this show 
us just how essential access to broadband is in our modern 
life. It is not a luxury; it is a necessity.
    And if we did not know that before the pandemic, we 
certainly know it now. America scrambled to get online; Zoom 
became a verb, and Congress worked through a number of measures 
to try to address these issues and get more Americans 
connected. Before the pandemic struck, I had introduced 
legislation to close what we call the ``homework gap'', because 
students without access to broadband were put at a big 
disadvantage when doing their homework, compared to their peers 
who were connected. But with the pandemic, now the homework gap 
became a full-blown learning gap. As classes went online, 
students who were unconnected were bound to fall even further 
behind.
    Many States and local jurisdictions used the emergency 
school funding they had through the CARES Bills to help their 
students connect with remote learning. But there was not a 
dedicated program until, as part of the American Rescue Plan, 
we established the Emergency Connectivity Fund, a critical 
lifeline to students around the country.
    And that Emergency Connectivity Fund has helped more than 
18 million students connect to the Internet by providing them 
with Wi-Fi hotspots, modems, routers, and Internet-enabled 
devices, as well as Internet service to those devices.
    This was an emergency measure, and its dedicated funding 
will run out in December. But it has established a strong 
foundation that we can build on by modernizing and adapting the 
E-Rate Program. We need to ensure that the E-Rate Program can 
provide connectivity beyond the walls of our classrooms and our 
libraries. And I know Chair Rosenworcel is passionate about 
this issue, and I salute you for your efforts.
    We must, of course, not only connect students to broadband 
but every American household and small business, no matter 
where they live--in rural, suburban, and urban areas. 
Nationwide, tens of millions of Americans remain without access 
to broadband, but thanks to the passage of the Infrastructure 
Modernization Bill, we are well on our way to connecting them. 
That law launched and funded the Broadband Equity Access and 
Deployment Program, known as the BEAD Program, to connect 
America.
    But the BEAD Program and other Internet connectivity 
programs would be flying blind if it were not for the FCC's 
broadband mapping program. For years, the FCC had a broken 
mapping system. Many Americans were told they were connected to 
the Internet when, in fact, they were not. By creating an 
interactive system, the FCC has dramatically improved the 
mapping process so we can implement plans to connect all 
Americans. There are still issues, and we are working through 
them, but it is much better today than it was, much better.
    My home State of Maryland received nearly $268 million to 
expand access to affordable, reliable, high-speed broadband 
across our State, and the FCC's map is providing crucial data 
to aid in the implementation of that effort. But we all know 
that getting people physically connected to the Internet won't 
do them any good if they cannot afford to pay the bill for 
services. That is why the Infrastructure Modernization Bill 
also launched the FCC's Affordable Connectivity Program.
    This program provides eligible low-income households with 
high-speed Internet plans at little or no cost. In my home 
State of Maryland, over 255,000 households have already 
enrolled in ACP, and more than 20 million households in every 
part of the country have enrolled in the program, and 
enrollment is growing by the day. The Affordable Connectivity 
Program has been vital to ensuring equitable access to high-
quality, modern broadband infrastructure, especially in rural 
areas, and low- and moderate-income communities.
    And today, we will discuss the importance of providing 
ongoing support for that program.
    Turning to another area of FCC responsibility, it has been 
6 months since the FCC's Spectrum Auction Authority has lapsed, 
the first time the FCC has not had this authority in over 30 
years. This is on Members of Congress to address, but we look 
forward to Chair Rosenworcel's comments on that matter.
    Colleagues, we need to quickly come to agreement so the FCC 
can conduct auctions that are necessary to ensure the United 
States remains on the cutting edge of global communications, 
technology, it is important to our economy and our national 
security.
    Today's hearing will give us an opportunity to learn more 
about that and other issues, and inform the work we are doing 
together on behalf of the American people.
    So with that, I will now turn to Senator Hagerty for his 
opening statement; Senator.

               OPENING STATEMENT OF SENATOR BILL HAGERTY

    Senator Hagerty. Well, thank you, Chairman Van Hollen, for 
holding this hearing. As the Ranking Member, I look forward to 
working with you on this subcommittee and with all of our 
staffs to continue to make certain that our tax dollars are 
spent effectively and efficiently.
    Chairwoman Rosenworcel, welcome to you. It has been good to 
get to know you by phone. I am glad to see you here today and 
looking forward to your testimony.
    As with the airwaves that are broadcasting this hearing, 
the FCC's influence on the economy, our national security, and 
the daily routines of American life is paradoxically both 
ubiquitous and invisible. The FCC regulates the non-Federal use 
of the electromagnetic spectrum that we rely upon for mundane 
activities, like our garage door openers, all the way to the 
global delivery of events that shape the world and allow us to 
witness history as it unfolds, in real time. And not just on 
television, but over mobile devices now.
    The FCC also regulates speech, specifically children's 
programming, campaign advertising, and indecency. But today, 
that is only for broadcasters. Whether the FCC should, or 
should not, or to what degree, regulate the speech of social 
media platforms is currently under debate.
    Personally, I have introduced legislation, the 21st Century 
Free Speech Act that would ensure that all Americans have 
reasonable, nondiscriminatory access to Big Tech speech 
platforms. It would also limit the ability of Big Tech 
platforms to discriminate against free speech on ideological or 
political grounds.
    That is because I believe that Americans, rather than Big 
Tech companies, should determine what information to consume, 
what information to share, and what information to believe.
    The FCC also, in coordination with other Federal agencies, 
has a role in regulating communications equipment, equipment 
that may pose an unacceptable national security risk, which 
means the FCC can prohibit the sale or use of domestic or 
foreign-made equipment in the United States. We are in an 
information age that depends on reliable and secure data, 
video, and voice transmissions, as well as reliable and secure 
networks and devices. We all experience that first-hand during 
the pandemic, trying to work from home while sitting around the 
kitchen table with our children who are trying to attend 
classes remotely.
    The FCC's highest priority, according to a strategic plan, 
is to help bring affordable, reliable, high-speed broadband to 
100 percent of the population. Once upon a time, back in the 
1950s, the FCC's highest priority was to bring telephone 
service to 100 percent of the population. Telephones, then 
rotary ones, were considered a necessity that should be 
provided to all.
    The FCC has come close, but still hasn't achieved ubiquity. 
As technology change, the definition of universal service has 
changed as well, to encompass wireless service, and now it 
includes broadband. I will also add that the definition of 
broadband has changed. At one point, it was the 10:1 standard; 
now it is 25:3, and in the future, it could be 100:20.
    In other words, as long as the definition and measure of 
universal service in broadband keep changing, then the goal of 
100 percent connectivity is practically unattainable. One 
thing, however, that has not changed, nor will it ever, is that 
resources are limited. The FCC relies on fees to pay for its 
operations. In Federal budget parlance, these costs are offset, 
which was often mistaken for free.
    These costs are not free. They are ultimately paid by the 
consumer. And it is this subcommittee's prerogative and duty to 
limit these costs, which are growing. If the FCC's full budget 
requests were enacted, then the FCC's costs will have grown by 
26 percent or 8 percent annually on average since fiscal year 
2021, excluding mandatory funding.
    As a former businessman, I want to see evidence of a 
corresponding increase in output or productivity for that type 
of investment.
    Chairwoman Rosenworcel, I am certain that you will address 
these concerns today in your testimony. I look forward to 
hearing you.
    Thank you, Mr. Chairman.
    Senator Van Hollen. Thank you, Senator Hagerty. We have 
been joined by Senator Kennedy.
    And now I am going to turn it over to Chair Rosenworcel. 
And we will not go through your long and very impressive 
biography, but just to say that the Chair has over two decades 
of communications policy and public service experience, 
including as the Senior Communications Council for the United 
States Senate Committee on Commerce, Science, and 
Transportation.
    And with that, let me turn it over to you. If you could try 
to keep your opening statement to about 5 minutes; and then we 
will take questions. Chair Rosenworcel.
STATEMENT OF HON. JESSICA ROSENWORCEL, CHAIRWOMAN, U.S. 
            FEDERAL COMMUNICATIONS COMMISSION
    Chairwoman Rosenworcel. Thank you. Chairman Van Hollen, 
Ranking Member Hagerty, Senator Kennedy; thank you for the 
opportunity to appear before you today, and for providing full 
funding for the FCC in your fiscal year 2024 bill.
    As a fee-funded agency, the FCC has worked hard to develop 
a budget that maximizes benefits to consumers while remaining 
fair to those responsible for funding our requested 
appropriation. We do this because the work of the FCC matters. 
Communications technologies power one-sixth of the economy, and 
I believe everyone needs access to these technologies to have a 
fair shot at 21st-century success.
    Although this is not my first hearing before this 
subcommittee, it is a first in other ways. It is my first 
presentation of the agency budget under my leadership, and the 
first time in our Nation's history that a woman has permanently 
led the FCC.
    So let me draw attention to some of the recent efforts of 
the agency. First up, our Affordable Connectivity Program, it 
is the largest broadband affordability effort in the history of 
the United States. It now helps 21 million households get 
online and stay online. But for this program to continue to do 
this good work, we will need additional funds because support 
from the Bipartisan Infrastructure Law will run out as early as 
April of next year. We have come too far to turn back. Keeping 
this program funded needs to be a priority.
    Of course, this program is not the only one to help get 
broadband to those who need it. I want to acknowledge that the 
Emergency Connectivity Fund, championed by Chairman Van Hollen, 
has also been instrumental in closing the digital divide, 
especially for students.
    Second, the FCC launched its Space Bureau. The space 
economy is growing fast, and the agency's satellite licensing 
policies need to keep up. I want to thank the subcommittee for 
supporting this reorganization.
    Third, we have modernized our regulatory fee structure to 
be more transparent and fair.
    Fourth, we have developed the National Broadband Map. It is 
a detailed effort to identify where broadband is and is not all 
across the country. This effort is iterative; it is improving 
all the time.
    Fifth, we implemented the Pirate Act. The budget increase 
you provided has made it possible to enforce this law.
    Sixth, the FCC is working to connect the most vulnerable. 
We are implementing the Safe Connections Act to assist 
survivors of domestic violence. We are also implementing the 
Martha Wright-Reed Just and Reasonable Communications Act to 
ensure that the rates for prison pay phone calls are truly just 
and reasonable. On top of this, we took steps to ensure video 
conferencing services have those that have become ubiquitous, 
like Zoom, Teams, and WebEx, are accessible to people with 
disabilities.
    Seventh, we are doubling down on our efforts to stop scam 
robocalls and robotexts. We have new technologies to cut them 
off and new legal procedures to stop carriers from sending 
along these scams, and our efforts are beginning to bear fruit. 
For instance, we were able to shut down a major auto warranty 
robocall scam, but we are going to need new tools from Congress 
to continue to keep this junk off the line.
    Eighth, we are connecting people to emergency services. We 
set up 9-8-8, the new three-digit easy-to-remember number to 
call or text the Suicide and Crisis Hotline.
    Ninth, we are focused on network security. We have updated 
our rules to improve the reliability of wireless networks 
during disaster, and for the first time in history, we have 
revoked the authorization to provide telecommunications 
services for Chinese communications providers. We have also set 
up the Secure and Trusted Communications Networks Reimbursement 
Program to remove and replace insecure equipment in our 
Nation's networks. To fully fund this effort, we will need 
additional funds.
    And tenth, we are focused on spectrum policy. We are 
identifying airwaves in the 7 to 16 gigahertz span to ensure 
the United States leads in 5G, 6G, and beyond. We have also put 
a premium on ensuring Spectrum reaches Tribal communities. As a 
result of our work, today, more than 80 percent of federally 
recognized Tribes have access to licensed spectrum.
    But as we plan for the future, we need Congress to restore 
the FCC's Spectrum Auction Authority. For 3 decades the agency 
has had the power to auction airwaves for commercial use. 
During that time, we have held 100 auctions and raised $233 
billion for the United States Treasury. Letting this authority 
lapse jeopardizes our wireless leadership and ability to 
compete in a global economy. Simply put, we need this authority 
back.
    Thank you again, to the subcommittee for your support for 
the fiscal year 2024 bill. And I look forward to answering any 
questions you might have.

    [The statement follows:]
               Prepared Statement of Jessica Rosenworcel
    Chairman Van Hollen, Ranking Member Hagerty and Members of the 
Financial Services and General Government Subcommittee, thank you for 
this opportunity to appear before you today.
    I want to start by thanking the Subcommittee for its decision to 
provide full funding for the Federal Communications Commission in your 
Fiscal Year 2024 FSGG bill.
    The work of the Commission matters. Communications technologies 
power one-sixth of the nation's economy--and everyone needs access to 
these technologies to have a fair shot at 21st Century success. As a 
fee-funded agency, the Commission has worked hard to develop a 
reasonable budget that maximizes benefits to consumers, while remaining 
fair to the industries responsible for funding our requested 
$410,743,000 appropriation. Your support will go a long way toward 
ensuring that the Commission meets its statutory mandates and upholds 
the core values of our laws--consumer protection, universal service, 
competition, national security, and public safety--all while keeping 
pace with ever-changing and advancing technologies.
    Although this is not my first hearing before the Financial Services 
and General Government Subcommittee, it is my first presentation of the 
budget as Chairwoman, and the first woman to permanently lead the 
agency in our Nation's history. I'd like to highlight some the 
Commission's recent work, made possible by your support of our budget, 
under my leadership.
    First, the Commission's Affordable Connectivity Program, the 
largest broadband affordability program in our Nation's history, now 
helps 21 million households pay for high-speed Internet service. Across 
the country, I have met with people who have been able to get online 
and stay online thanks to this program for work, school, healthcare, 
and more. Our current projections indicate that the appropriated funds 
provided through the Infrastructure Investment and Jobs Act to keep 
these households connected will run out as early as April of next year. 
I strongly support identifying a way to fund the Affordable 
Connectivity Program into the future to help more families get and stay 
connected to the high-speed Internet they need to participate in modern 
life.
    In addition to the Affordable Connectivity Program, I want to note 
the work the agency did with the Emergency Connectivity Fund, a program 
Senator Van Hollen championed. This one-time effort developed during 
the early days of the pandemic was designed to assist students and 
library patrons with access to connections and devices. To date, more 
than 18 million students have benefited from Emergency Connectivity 
Fund support. It has helped close the Homework Gap, ensuring that kids 
everywhere have the ability to get online for schoolwork both in the 
classroom and at home.
    Second, we are doing our part to keep pace with rapid development 
of the satellite sector and the growing importance of space-based 
communications. I want to thank the Subcommittee for supporting our 
ability to do this by approving the Commission's request earlier this 
year to establish the Space Bureau. The space industry has entered an 
era of unprecedented growth, which is fueling an increase in both the 
complexity and the number of applications for space services before the 
Commission. The Space Bureau is up and running and already hard at 
work. The Commission is preparing for the coming convergence of 
satellite and terrestrial convergence--we call it Single Network 
Future. And later this week, the Commission will vote on new rules to 
streamline our satellite policies and expedite the processing of space 
and earth station applications as well as a new licensing framework for 
commercial space launches.
    Third, the Commission made the regulatory fees that support our 
work more transparent and more fair. In August, we unanimously adopted 
a long-overdue, comprehensive review of our internal regulatory fee 
process that aligns the assessment of regulatory fees more closely with 
the burden of the work being performed by Commission employees in each 
category.
    Fourth, the agency's work to create the National Broadband Map--the 
most accurate broadband map ever created--will help close the digital 
divide. For decades, the Commission produced broadband maps based on 
Census blocks. In practice, this meant that if there was high-speed 
Internet service in a single location in a Census block, the agency 
assumed there was service throughout the area. Needless to say, this 
methodology overstated service nationwide. Following the Broadband DATA 
Act, in November 2022, thanks to the appropriated funds you provided--
$98 million total--the FCC developed its first location-based broadband 
map to paint a more accurate picture of where broadband is and is not 
available across the United States. This new map identifies every 
household and small business in the country that should have access to 
high-speed Internet service. For context, on how much more granular 
this is than what came before, in our current mapping effort the 
Commission identified over 114 million locations where fixed broadband 
could be installed compared to data from just 8.1 million Census blocks 
in our prior maps. We will keep iterating and improving this map and 
look forward to using this data to help efforts all over this country 
to bring broadband to everyone, everywhere. Given the time, effort and 
money that went into starting it up, we need to make certain that we 
have the resources to continue to update and maintain our maps well 
into the future.
    Fifth, we implemented the Pirate Act and enhanced our protections 
of licensed broadcasters from pirate radio. We did this with a $5 
million budget increase to our base appropriation to support this 
resource-intensive, on-the-ground work. In addition to tougher fines on 
those who violate the spectrum rights of broadcasters, the law requires 
the FCC to conduct periodic enforcement sweeps, and grants the 
Commission authority to take enforcement action against landlords and 
property owners that knowingly permit illegal pirate radio activity on 
their properties. In March, we proposed over $2 million in fines 
against violators. And in 2023 so far, we've issued 24 notices to 
property owners warning them of apparent pirate radio broadcasts from 
their property. At the current spending level approved by this 
Subcommittee, we will be able to continue this important work.
    Sixth, the Commission is working to connect the most vulnerable. 
This past February, the Commission took steps to implement the Safe 
Connections Act. Under this new law, the Commission now has authority 
to help survivors of domestic abuse to swiftly and securely separate 
from communications contracts like family plans and receive emergency 
communications support from Lifeline or the Affordable Connectivity 
Program for up to 6 months.
    We are also implementing the Martha Wright-Reed Just and Reasonable 
Communications Act. We are going to use this new law and the expanded 
authority it provides to ensure the rates for prison phone calls--both 
interstate and intrastate--are just and reasonable. We are going to use 
it to address advanced communications services like video. And we are 
going to use it to ensure access to these communications by those with 
disabilities.
    In addition, in June, we took steps to make the video conferencing 
services that have become ubiquitous more accessible to people with 
disabilities.
    Seventh, we are doubling down on our efforts to stop scam robocalls 
and robotexts. Robocalls and robotexts aren't just exasperating, they 
are a pathway for fraudsters to harm consumers. So, we have been 
attacking them from all angles--cutting off bad actors from our 
networks, requiring providers to block unwanted calls, and mandating 
technology to stop call spoofing. Some of our efforts are beginning to 
bear fruit. After we identified the companies behind the auto warranty 
robocall scam, we told the rest of the industry to cut them off and 
auto warranty calls fell by over 90 percent. We used the same method to 
reduce student loan scam calls by 88 percent. And because this is 
problem that requires coordination among law enforcement, we now have a 
memorandum of understanding with Attorneys General from 47 States.
    Eighth, the Commission is helping connect people to emergency 
services. This past July was the first anniversary of 988--the three-
digit, easy-to-remember number you can dial to reach the Suicide and 
Crisis Lifeline. Thanks in part to the Commission's work, if you text 
or dial 988, you will now be connected to professional, compassionate 
support for mental health emergencies.
    Ninth, the Commission is doing more than ever before to keep your 
communications more resilient and secure. For example, we have updated 
our rules to improve the reliability and resiliency of wireless 
networks during emergencies. We launched the Mandatory Disaster 
Response Initiative, which promotes service continuity through 
coordination, assistance, and information sharing during emergencies 
and disasters. And we opened up our Network Outage Reporting Systems 
and Disaster Information Reporting System for sharing with Federal, 
state, Tribal and territory access. Sharing this information will 
enhance the ability of these agencies to respond more rapidly to 
outages and help save lives.
    And under my strategy of ``deter, defend, develop'': deter bad 
actors, defend against untrusted vendors, and develop a market for 
trustworthy innovation, the Commission has taken a number of actions to 
protect our networks from national security threats. For the first time 
in history, we have revoked the authorization to provide 
telecommunications services for four Chinese communications providers. 
In addition, the Commission adopted my proposal to regularly review 
foreign companies' authorizations to provide telecommunications 
services in the United States. On top of this, we have launched the 
Secure and Trusted Communications Networks Reimbursement Program to 
remove Huawei and ZTE equipment in our communications networks. This is 
important for our domestic security and also sends a signal to the 
world that going forward we will not support insecure equipment in 
essential infrastructure. However, the $1.9 billion previously 
appropriated to operate the Secure and Trusted Communications Networks 
Reimbursement Program is not going to be enough to secure our networks. 
After receiving and reviewing applications, we currently face a more 
than $3.08 billion shortfall to fully reimburse participating carriers 
for removal, replacement and disposal of the problematic equipment. The 
Commission has received its first reimbursement requests from 
participants and, unless a further funding source is identified, will 
only be able provide forty cents on the dollar to those companies in 
reimbursement.
    And tenth, we are finding more ways to use spectrum to support 
wireless communications into the future. We are working to free up more 
spectrum to serve as a launching pad for new technologies. We have 
already identified the 7-16 GHz band as prime mid-band airwaves for 5G, 
6G and beyond. That is why I proposed making 550 megahertz of spectrum 
in the 12.7-13.25 GHz band available for new commercial mobile use. And 
we're not stopping there, the FCC is already looking to what a 6G 
future could look like including its impact on the digital divide, 
machine learning, how it could make life easier and more efficient for 
consumers, and new ways to connect industries, technology, and 
communities. Those communities include Tribal communities, and as a 
result of our work in the 2.5 GHz band, today more than 80 percent of 
federally-recognized Tribes have licensed spectrum. That is real 
change--and real opportunity.
    But as we plan for the future, we also need to be mindful of the 
spectrum demands in the present. And one thing that absolutely needs to 
happen is the restoration of the FCC's spectrum auction authority. For 
three decades the FCC has had the authority to auction off airwaves to 
commercial actors to use to deploy, create, and innovate. But on March 
9 of this year, that authority expired for the first time. As this 
Committee knows, if this is not corrected, it could have a tremendous 
impact. Over the past three decades, the FCC has held 100 spectrum 
auctions and, in the process, raised more than $233 billion for the 
United States Treasury.
    Restoring this authority will provide the United States with the 
strongest foundation to compete in a global economy, counter our 
adversaries' technology ambitions, and safeguard our national security. 
Most importantly, we cannot afford to wait. The global wireless 
community is convening for the World Radiocommunication Conference at 
the end of this year. It is where we set the future of spectrum policy. 
Restoring the FCC's auction authority is the first step in doing that, 
and it is my hope we can do it soon.
    So that's ten things the FCC is doing to bring high-speed 
connectivity to everyone, everywhere that is secure, resilient, and 
ready for the future. The budget that this Subcommittee has provided in 
its FY2024 FSGG bill will help to support these critical efforts into 
the future. Thank you for the opportunity to join you today to share 
these details about the Commission's ongoing work. I look forward to 
your questions.

    Senator Van Hollen. Thank you. Thank you, Madam Chair.
    And I am going to start where you left off on the issue of 
spectrum authority and just get your sense of what the harmful 
impact is to our economy, to our national security, to a whole 
range of issues because that authority has now lapsed? And if 
you could just provide your impressions about how we can best 
navigate a solution, which of course does need to come from 
Congress.
    Chairwoman Rosenworcel. Thank you. The United States is a 
wireless leader. The smartphone started here, the application 
economy began on our shores, and we have powered this wireless 
revolution with spectrum. We have been able to take airwaves 
and repurpose them for new commercial use and hold commercial 
spectrum auctions. Those auctions have been a model for the 
world, and they have been lucrative for the United States 
Treasury. Like I just mentioned, we have raised $233 billion.
    But for the first time in 3 years, we don't have that 
authority. And this year is an especially important year 
because we are going to the World Radio Conference. That is a 
conference where global spectrum authorities gather every 4 
years to discuss their plans for the wireless future. And in 
the United States, we now do not have the authority to hold 
commercial spectrum auctions, and we lack a commercial spectrum 
pipeline.
    So what I am concerned about is that the future won't look 
like the past, and our leadership is less secured than it 
should be.
    Senator Van Hollen. Well, thank you. Thank you, Chair 
Rosenworcel. And just, to my colleagues here, we have really 
got to resolve this. I mean, as you know, it expired in March 
and, you know, we are just hurting our own country and our 
economy. So I hope we will all figure out a way forward on 
this.
    If I could turn now to trying to connect all of America to 
high-speed Internet, and really ask you to focus on two 
programs that both you and I mentioned in our opening 
statements. One is the Affordable Connectivity Program. How 
many people are on it? How many people do you expect to join in 
the coming weeks? And what would be the consequences of 
Congress failing to provide additional funding for that 
program? And actually, I will wait until you answer that one 
before I ask a second question.
    Chairwoman Rosenworcel. All right, it gets complicated 
fast. The Affordable Connectivity Program is the largest 
broadband affordability effort in our Nation's history. It is 
the byproduct of the Bipartisan Infrastructure Act. The FCC 
runs it; it means low-income households in every State can get 
access to support for basic broadband service. It is helping 21 
million households across the country get online and stay 
online.
    Right now, our best estimate is that the funding provided 
in that law will run out in April, and by April, we might have 
as many as 25 million households that are connected to this 
program. We have come so far; we can't stop now. We absolutely 
need another direct appropriation from Congress to continue the 
good work this program is doing. It has been of extraordinary 
benefit to people around the country who can now go to work, go 
to school, take health care appointments, and participate in 
their communities because they have reliable Internet access.
    Senator Van Hollen. Well, thank you. As you said, I think 
24 million people and in every State around the country, this 
would obviously be a huge blow to our effort to really connect 
people, because physical connection is important, but if you 
can't afford it, it doesn't do you much good.
    On the homework gap issue, but as you indicated during the 
pandemic, we put in place the Emergency Connectivity Fund. 
Those funds will--those dedicated funds will expire at the end 
of this year. There was an emergency program, but we are 
hopeful that you will be able to adapt the E-Rate Program to 
make sure that we don't lose the ground we have gained and 
instead build upon that foundation. Can you talk about some of 
your ideas for doing that?
    Chairwoman Rosenworcel. Sure. The E-Rate Program is a quiet 
powerhouse. Since 1996, we have been able to connect schools 
and libraries across the country to high-speed Internet. We 
lead the world in our efforts to do so. And what we need to do 
now is update that program for the moment we are in. So I have 
proposed what I call Learn Without Limits, where we use the E-
Rate Program and modernize it. For kids in rural America who 
spend lots of time on a school bus, we propose to use the E-
Rate program to develop Wi-Fi on Wheels, to hook those school 
buses up to the school network so kids who spend time on those 
school buses can get some school work done.
    I have been on buses in rural communities that have it; it 
is pretty dramatic, and those buses were funded by the 
Emergency Connectivity Fund, so we know it works.
    Now, the other part of Learn Without Limits is making sure 
every school library and library in this country has wireless 
hotspots to loan out. I think the E-Rate Program is well suited 
for doing both of those things, and in the process, it can help 
us solve that homework gap you and I have talked so much about.
    Senator Van Hollen. Thank you. And we look forward to 
working with you on those initiatives.
    Senator Hagerty.
    Senator Hagerty. Thank you, Chairman Van Hollen.
    And welcome again, Chair Rosenworcel. We have talked about 
National Security before. I would like to talk with you about 
it again today. We all know that Chinese technology is a threat 
not only to the Federal Government but to private industry here 
in America, and the FCC's covered list effectively bans the 
sale, bans the use, and the importation of certain 
communications equipment and services. I think it is a very 
potent tool.
    One of the things, and you and I have touched on this 
before, is it seems that the list is quite narrow, and so just 
as an opening question, I would like to ask you. Is the 
Commission being deliberately cautious here, or is there 
something that is holding you back?
    Chairwoman Rosenworcel. That is a really good question, 
Senator. The covered list is a list of equipment that our 
Nation's National Security authorities have found to be 
insecure, and as a result, it cannot be used for any FCC 
expenditure. So if you get money from us to help you build your 
network, you cannot use it to purchase any of that equipment.
    We update it from time to time, but we only are permitted 
under the law to update it if national security authorities 
identify additional companies. And so on a fairly regular 
basis, we reach out to those national security authorities 
enumerated in the law, like the FBI, like the Department of 
Justice, like the Office of the Director of National 
Intelligence, and ask for updates. And recently, we even wrote 
them with the names of two companies that had been brought to 
our attention by some Members of the House of Representatives 
and asked for their assessment on it.
    So if I could ask you to do one thing, it would be to make 
sure that those national security authorities get back to us 
and help us keep that list up to date.
    Senator Hagerty. That is a very helpful suggestion, and I 
think our work right here on the Appropriations Committee, we 
may be able to help in that regard.
    Staying on this, the covered list, what would be the 
implications of a more extensive list, even a retroactive list? 
How would that help you utilize the covered list to the fullest 
extent?
    Chairwoman Rosenworcel. Well, a covered list has other 
values too. I just want to acknowledge that when we publicly 
produce a list of equipment that we believe is insecure that 
the government won't support we are also telling the private 
sector this isn't stuff you should be buying or using.
    Senator Hagerty. It is an important message.
    Chairwoman Rosenworcel. And we are also telling the global 
economy that we don't trust this equipment. So I do want to 
acknowledge that that list has power beyond just the FCC and 
our immediate programs. I think it is narrow because our 
national security authorities are careful, which is 
appropriate, but I also think we can't let this list wither. We 
need to update it from time to time and reaching out to them 
regularly as we do has been useful, but of course, you also 
pointing out that this should be a priority would be helpful as 
well.
    Senator Hagerty. And amplify the point you just made; when 
I was serving in a previous role as United States Ambassador to 
Japan, the third largest economy in the world, we were able to 
get them to block untrusted carriers because of what had 
happened here. Our ability to point to that, and the example 
that we set, as you say, can have repercussions around the 
world. So thanks for that to continue.
    Chairwoman Rosenworcel. Absolutely. That is absolutely 
correct.
    Senator Hagerty. The strength of the covered list rests 
with the Commission's Equipment Authorization Program, and that 
predates the covered list. And my question is if -- you had the 
Equipment Authorization Program, are there other FCC programs 
that are already in place that might serve as a foundation for 
addressing national security concerns beyond the covered list?
    Chairwoman Rosenworcel. We have been exploring what kind of 
certifications might be necessary from applicants before the 
FCC.
    Senator Hagerty. Mm-hmm.
    Chairwoman Rosenworcel. For instance, if you are about to 
bid in a spectrum auction in the future, should you certify 
that none of your funding comes from countries whose revenues 
and governments we have concerns about? We have also been 
exploring whether or not when we give you an authorization to 
participate in our economy, what kind of national security 
questions we should ask at the outset, including what 
equipments might be used in your networks, and what kind of 
managed services you might get from some foreign-provided 
company.
    So we are looking across the board for other points to 
create opportunities for certification to make sure that 
networks in this country are secure.
    Senator Hagerty. As you think about the national security 
ramifications of what you do, and I am sure you do this every 
day, know that our staff stands ready to work with you, and 
that I would be very interested in any thoughts that you might 
have in terms of looking at existing authorities and new ways 
to utilize those. And frankly, if there is any way we can 
support you in that, or if you need our support, letting us 
know.
    Very quickly, I would like to turn to the satellite 
industry. It is growing; it has an incredibly important role in 
communications. The creation of the Space Bureau is intended to 
align the Commission's resources with its responsibilities. And 
I just want to get an update from you on what the current 
status of the space Bureau is, how you are going to know if the 
reorganization that you are undertaking is a success? How will 
you measure that?
    Chairwoman Rosenworcel. Sure. First of all, I want to thank 
the subcommittee for supporting this reorganization. When I got 
to the agency and I saw the backlog we had of satellite 
applications, I felt that we had to reorganize to address them 
more rapidly. Just this week, the agency will be voting on an 
effort to streamline the application process. We also have a 
transparency initiative.
    And then globally, we are leading with what I call the 
``single network future'' because we are trying to develop a 
framework for figuring out how terrestrial wireless services 
can combine with new satellite services in the phones in our 
pockets and the devices on the ground. So I think we are 
actually making great strides. The challenge now is to continue 
and to hire people who can help us with all the applications we 
have before us.
    Senator Hagerty. And I would think you will find great 
opportunities as well for cost savings when you think about 
your connectivity objectives as well, utilizing this, as you 
call it, the ``single network'' approach----
    Chairwoman Rosenworcel. The future.
    Senator Hagerty [continuing]. Future. Thank you.
    Thank you, Mr. Chairman.
    Senator Van Hollen. Thank you Senator Hagerty. We have been 
joined by Senator Manchin, who has agreed to defer his 
opportunity to question first to Senator Kennedy.
    Senator Kennedy.
    Senator Kennedy. Okay. Thank you, Senators.
    Madam Chair, welcome. You have been on the FCC for a while, 
haven't you?
    Chairwoman Rosenworcel. Mm-hmm.
    Senator Kennedy. You know what I am talking about then when 
I refer to the C-band.
    Chairwoman Rosenworcel. I do. I do.
    Senator Kennedy. Yes, I bet you do. That is sort of the 
part of the spectrum that the companies that want to roll out 
5G cell phone service really need; am I right?
    Chairwoman Rosenworcel. It is mid-band airwaves that are 
like Gold Coast territory for wireless.
    Senator Kennedy. All right. I am going to call them the C-
band. You will remember then in 2018, I certainly do.
    Chairwoman Rosenworcel. Mm-hmm.
    Senator Kennedy. Not you, but some of your colleagues on 
the FCC decided they were going to give the C-Band away, my 
words, not yours. At the time, that C-band, we didn't know how 
important it was. It was licensed to some foreign satellite 
companies.
    Chairwoman Rosenworcel. That is right.
    Senator Kennedy. And we discovered how valuable that C-band 
was. And the 5G telecommunication companies, mostly American 
companies, were really anxious to get it. And some members of 
the FCC, and frankly some senators, came up with a proposal to 
give that C-band to the foreign satellite companies and let 
them sell it to the 5G companies and keep the money.
    And I didn't like that, and neither did Senator Cantwell, 
and neither did Senator Schatz. And we called the President and 
insisted that--and the President called the FCC and said we 
need to bid this out. Do you remember all that?
    Chairwoman Rosenworcel. I do, Senator. Yes.
    Senator Kennedy. And we saved about $81 billion. Now, you 
have been auctioning the C-Band out. You held an auction in 
September, did you not?
    Chairwoman Rosenworcel. Yes.
    Senator Kennedy. Number 107, I think it is called.
    Chairwoman Rosenworcel. I believe that is right. Auction 
107 as referenced here involved the auction of the C Band (3.7 
GHz band), but that auction took place between December 8, 2020 
and February 17, 2021. Auction 107 garnered over $81 billion 
for the U.S. Treasury and no longer has outstanding 
applications on file. Auction 108 (2.5 GHz band) occurred from 
July 29, 2022 to August 29, 2022 with the winning bidders 
published on September 1, 2022. Auction 108's licensing process 
was incomplete when the FCC's auction authority expired under 
Section 309(j) of the Communications Act.
    Senator Kennedy. Okay. The problem, that we have got two 
problems here, your authority to hold auctions has run out.
    Chairwoman Rosenworcel. Yes.
    Senator Kennedy. And number two, more immediately, you 
conducted some auctions in September, awarded some licenses to 
the C-band based on auctions, highest bidder.
    Chairwoman Rosenworcel. That is right. The licenses in 
question are for the 2.5 GHz band. The licensing process for 
the winning bidders cannot be completed due to the expiration 
of auction authority under Section 309(j) of the Communications 
Act.
    Senator Kennedy. Took those companies' money, and then your 
authority ran out.
    Chairwoman Rosenworcel. That is right.
    Senator Kennedy. And the FCC hadn't given them the 
licenses.
    Chairwoman Rosenworcel. That is right.
    Senator Kennedy. Why can't you give them the licenses, they 
paid for it.
    Chairwoman Rosenworcel. I agree with you, the situation is 
unfair. They paid for it. They deserve to have that license.
    Senator Kennedy. So why can't you give it to them?
    Chairwoman Rosenworcel. So the Communications Act is very 
straightforward. It says: Our authority to grant licenses 
expired on March 9, 2023. We got a lot of laws before us that 
are tortured and confusing, but this is a straightforward 
provision; it expired.
    Senator Kennedy. Okay.
    Chairwoman Rosenworcel. And so we are going to need your 
help getting rid of that expiration.
    Senator Kennedy. What if we did two things? What if, number 
one, to solve the immediate problem, we passed a bill that 
said, only one time, short-term basis, we are giving you, Madam 
Chair, and the FCC, the authority to go ahead and award those 
licenses that people have already paid for? That is the first 
bill. The second bill would be to renew your authority to hold 
auctions. Would you have any objection to us doing those two 
things?
    Chairwoman Rosenworcel. Sure. I don't object to you trying 
to be specific about the licenses in your bill. But I want to 
emphasize how much we do need that authority back.
    Senator Kennedy. All right. Tell me. I mean, this sounds 
very, very simple when we talk about it here, tell me, tell me 
who is pushing back on reauthorizing your authority to hold 
auctions?
    Senator Kennedy. Well, that is happening in Congress. I 
certainly have uniform support among my colleagues at the FCC 
for getting auctions reauthorized.
    Senator Kennedy. But who is--who is against it? And I am 
not asking personalities, I am asking what interest groups are 
against it?
    Chairwoman Rosenworcel. Well, you know, the way that we 
auction spectrum, and have in the last several years, the C-
band being an exception, is we frequently identify airwaves 
with Federal users, from the Department of Defense, or the 
Department of Transportation, and we say, perhaps they could do 
the same function with a little less spectrum.
    And then we identify a way to take some of that spectrum, 
repurpose it for new commercial use. And then with the revenues 
from our auctions, we make the Defense Department or the 
Department of Transportation whole by giving them funds from 
the auction----
    Senator Kennedy. So you are getting pushed back from the 
Defense Department and the Department of Transportation?
    Chairwoman Rosenworcel. Well, those are the two largest 
Federal authorities with airwaves below 6 gigahertz, so I 
focused on them here. But the reality is we are putting more 
stuff in our skies for communication than ever before, they all 
have to----
    Senator Kennedy. I know. But you can't say this, but I can. 
You are getting pushed back from Defense and Transportation. We 
have got a turf battle here. What can we do to sit down with 
DOD, and Transportation, and the FCC and work this out? We are 
all for national defense.
    Chairwoman Rosenworcel. Absolutely.
    Senator Kennedy. We are also for 5G. So what can we do to 
get this worked out?
    Chairwoman Rosenworcel. Well, I could offer the services of 
my office and my whole agency to assist you because I want to 
make clear that when our commercial wireless economy grows, 
technology expands, and the U.S. does better. That is true 
across the board.
    Senator Kennedy. If our Chairman called a meeting and tried 
to get everybody together, would you come to it?
    Chairwoman Rosenworcel. I would.
    Senator Kennedy. And would you bring your colleagues on the 
FCC?
    Chairwoman Rosenworcel. I would. Absolutely.
    Senator Kennedy. Okay. We need to get this battle worked 
out.
    Chairwoman Rosenworcel. I agree with you.
    Senator Kennedy. Thank you, Mr. Chair.
    Senator Van Hollen. Senator Kennedy, before I turn it over 
to Senator Manchin, I say, amen, to everything you said, both 
in terms of making sure that those companies that have already 
paid for their spectrum should get it. But they could also get 
that if we just reauthorize the--write the authority to enter 
into these contracts.
    I talked to Senator Cantwell about this issue today, who 
chairs the Senate Commerce Committee with authorizing 
jurisdiction. Not a long conversation. But I agree with you. We 
need to get this done in the coming weeks because it is hurting 
all of us. Thank you.
    Senator Manchin.
    Senator Manchin. I also agree. Let me just say this, the 
fiscal year 2021 Omnibus Bill appropriated $1.9 billion to 
carry out the Secured and Trusted Communications Networks 
Reimbursement Program, which is also known as a Rip and Replace 
Program.
    Chairwoman Rosenworcel. Yes.
    Senator Manchin. For all the people that we say are out 
there that we got to get off these services. Where do you stand 
on that? What are the security implications that we are not 
fully aware of, and we are not----
    Chairwoman Rosenworcel. Well, there is insecure Chinese 
equipment----
    Senator Manchin. Right.
    Chairwoman Rosenworcel [continuing]. And many of our 
Nation's smallest wireless carriers, and Congress provided us 
with $1.9 billion to take it out so they could replace it.
    Senator Manchin. Right.
    Chairwoman Rosenworcel. But as I have told the authorizing 
committees, we need an additional $3.08 billion to fully take 
that equipment out securely and place----
    Senator Manchin. We are paying for all, the Federal 
Government is paying to reimburse those who were led to believe 
this is safe and secure and it is cheaper.
    Chairwoman Rosenworcel. That is exactly right. I think we 
have decided that this equipment is insecure----
    Senator Manchin. And so would you----
    Chairwoman Rosenworcel [continuing]. And we need to take it 
out at all costs. And the smallest carriers have it in their 
networks with the least resources and the fewest companies--and 
the fewest customers.
    Senator Manchin. Okay.
    Chairwoman Rosenworcel. So Congress set aside funding for 
it but those funds are not sufficient to fully fund 
reimbursement.
    Senator Manchin. Madam Chairwoman, then talk to me about 
your FCC's budget for 2024.
    Chairwoman Rosenworcel. Yes. Our budget maintains----
    Senator Manchin. Is it in there? Is your request in there?
    Chairwoman Rosenworcel. Our request is not part of our 
budget. That funding was set aside in the Infrastructure 
Investment and Jobs Act, Division J, Title IV.
    Senator Manchin. The reason I am saying that this is -- 
everything we are talking about is extremely important. That 
was one of the most offensive things that we had found out 
about all the different users that we had using something that 
could be detrimental to all of us and our security.
    Chairwoman Rosenworcel. Yes.
    Senator Manchin. So to me, that would be a high priority. 
That I think if you don't identify it, I can guarantee you, 
they won't come forward and just say: Oh, yes, we still think 
that is needed. But it must not be your highest priority 
because it is not in your budget request.
    Chairwoman Rosenworcel. Well, we have--I have written to 
Members of Congress on this on five or six different separate 
occasions asking to be able to have this funding made 
available. So we have made it a priority, and we are working 
with the carriers that have it in their networks right now to 
try to identify what our funding stream options are.
    Senator Manchin. What are your highest priorities right now 
within your budget request; as far as the mission of the FCC?
    Chairwoman Rosenworcel. I think we have got to make sure 
that we figure out a way to get broadband to everyone in this 
country. We have got to make sure that our maps can actually be 
accurate and help with that process. We got to make sure that 
wireless services reach everyone and that we get our spectrum 
authorities back.
    Senator Manchin. How do you, how do you in rural areas such 
as mine, in Louisiana, and Tennessee, and on, and on, and 
Maryland even has some rural areas that I am very familiar 
with, how do we make sure that the carriers who have exclusive 
rights in those areas, who have had rights, and have told us 
everything in the maps would have been totally erroneous, or 
maps when they protect their territory? How can we make sure 
that they are doing what is needed?
    I had a person call me today, one-half mile from where 
Frontier was going eight homes down over, and they won't come. 
How can it be----
    Chairwoman Rosenworcel. Yes. No, we hear stories like that 
all the time.
    Senator Manchin. Yes.
    Chairwoman Rosenworcel. What we are trying to do with our 
maps, and this is a process, it is not something that happens 
overnight, as we build the kind of database where consumers, 
States, and municipalities can come to us and say: This 
information's not right. I live here, and in my own backyard, 
let me tell you, you have got it wrong. And what the carriers 
are telling you isn't right.
    And I think you know we have been working with the West 
Virginia Broadband Office to do a lot of that work, and a lot 
of State broadband offices have really stepped up to help us 
understand where our data is right and where it is wrong. And I 
just got to tell you, we are going to have to commit to that 
process for the long haul to make sure that things like those 
BEAD monies that are being spent right now get spent in the 
right places.
    Senator Manchin. Do you have enough resources to do the 
mapping and making sure the maps are accurate and followed as 
we designed?
    Chairwoman Rosenworcel. We do right now, but in the next 
fiscal year we will have to ask for an additional appropriation 
to keep those maps up and running, and continue to improve 
them.
    Senator Manchin. My recommendation would be, based on what 
we talked, with the Huaweis, and all the concerns we had, that 
we just mentioned, that that be a high priority of yours to ask 
in your budget?
    Chairwoman Rosenworcel. Yes.
    Senator Manchin. And so for the additional background on 
this because just in common sense, I tell people back home, and 
they remember their grandparents, or great-grandparents talking 
about when they had no electricity, in 1936 we had the rural 
broadband electrification. I could never figure how we got into 
so many hollers and up so many creeks and everything else. I 
never could figure it out. And then I heard about co-ops.
    Chairwoman Rosenworcel. Yes.
    Senator Manchin. And it was people who didn't basically 
look at anything except the service they needed, and they 
gathered as a co-op and was able to take it the lowest cost. Is 
that type of a model still available for broadband when we 
can't get the big guys to go because they say, well it is not--
there is no return on investment, so why are you forcing me to 
go up this hollers, or down this road here, and there is only 
five people?
    Chairwoman Rosenworcel. I think we have a perfect analog 
with the Rural Electrification Act. I mean, there was a time 
where we thought we could only bring electricity to the cities; 
you weren't going to turn the lights on in parts of rural West 
Virginia.
    Senator Manchin. There is not that many rural co-ops still 
left.
    Chairwoman Rosenworcel. And what we did was we mapped where 
electricity was and was not, and then we identified where 
commercial actors could take it, and where commercial actors 
wouldn't take it, we developed public-private partnerships to 
deploy in those communities.
    Senator Manchin. So we can go--we can identify some areas 
ourselves where they are just, they just cannot get service. I 
mean, I am sure that John, I am sure that all of us here have 
that same problem, and if we can identify that to where you 
will assist and help them put a collective together?
    Chairwoman Rosenworcel. Absolutely. What you have to be 
mindful of, is some State laws prevent some of those municipal 
deployments, and you need to make sure that the State 
legislature does not stop those activities from happening. But 
you know history shows that when we didn't have barns, or 
roads, or bridges, we came together as communities to build 
them.
    Senator Manchin. Sure.
    Chairwoman Rosenworcel. This, to me, feels exactly the 
same.
    Senator Manchin. Well, we have got one shot, because you 
have put a lot of money on it right, and if we don't follow 
through we will not have it.
    Chairwoman Rosenworcel. You are right. The BEAD Program is 
a-once-in-a-lifetime kind of effort.
    Senator Manchin. Thank you.
    Senator Van Hollen. Well, thank you, Senator Manchin.
    And as the Chair Rosenworcel said, in some of these areas 
and, you know, because we have had conversations in Western 
Maryland; in some of the areas there has been local resistance 
to allowing a municipality, for example, to simply, you know, 
start their own broadband service, if there is no other 
provider, and some State laws preempt it, but I look forward to 
working with you on that.
    Let me just say with respect to Rip and Replace, right, 
this was our effort to improve the security of our own 
networks, there were a number of networks around the country 
that had ZTE and Huawei, part of it. As part of the 2021 
Omnibus, we collectively, Congress provided $1.9 billion in 
mandatory funding to rip and replace those funds. So it has 
never been part of the baseline, it was considered a one-time 
expenditure. It was not enough. So my understanding, and 
correct me if I am wrong Madam--Chair Rosenworcel, is that it 
requires another approximately $3 billion to finish the job; is 
that right?
    Chairwoman Rosenworcel. That is correct.
    Senator Van Hollen. And we are hoping that that might be 
included as part of an effort to extend the--your authority 
when it comes to--you know, when it comes to the sales, leasing 
of the spectrum.
    Chairwoman Rosenworcel. That is right.
    Senator Manchin. Mr. Chairman, can I just follow up on?
    Senator Van Hollen. Yes.
    Senator Manchin. Is that only for domestic?
    Chairwoman Rosenworcel. Yes.
    Senator Manchin. Rip and Replace is just for a domestic?
    Chairwoman Rosenworcel. Just for carriers in the United 
States.
    Senator Manchin. The United States, because we have an 
awful lot of our allies who really follow----
    Chairwoman Rosenworcel. Absolutely; but only carriers in 
the United States, yes.
    Senator Manchin. Got you.
    Senator Van Hollen. Let me turn quickly to the question of 
robocalls. And we are obviously going to do another round of 
questions for any members who are interested.
    Robocalls are obviously a constant challenge for consumers, 
and it is always a bit of a cat and mouse game, trying to keep 
one step ahead of the robocallers who are violating the law. So 
if you could speak to two things, one the challenge of 
collecting fines that have been leveled against violators and 
whether we can be helpful in any way, or whether they are sort 
of fly-by-night operations.
    The second as you mentioned in your testimony the need for 
Congress to help you fill a loophole in the law, my 
understanding is there has been a recent lawsuit, and maybe 
current law does not cover texting. So if you could cover those 
two issues.
    Chairwoman Rosenworcel. Sure. Robocalls are annoying, 
robotexts are irritating. We need to do everything we can to 
stop them. We have deployed new technology like STIR/SHAKEN. We 
have got a Trace Back Consortium working on it. I have now got 
partnerships with 47 of our State Attorneys General to work 
with them on this issue. We have issued cease-and-desist 
letters; we are doing new things, new tools. But there are two 
gaping loopholes that I see.
    The first is a Supreme Court decision in 2021 decided to 
freeze the definition of auto-dialer in the early 1990s, and as 
a result, there are a whole lot of scam artists out there who 
can evade our authority in the Telephone Consumer Protection 
Act. We would like to update that definition so that we can 
enforce the law against them.
    And second, we have issued more than $700 million in fines 
against robocallers and robotexters since I have been at the 
helm of the agency, but I can't take them to court and go 
collect that money. I have to hand that off to the Department 
of Justice, and I am sure they have got lots of other 
priorities. And I am sure many of those companies are fly-by-
night, and collecting those fines may not be easy. But I still 
would like the authority to do it, because I have to do 
everything we can to hold those folks to account if we want 
this effort of enforcement to be successful.
    Senator Van Hollen. Well, speaking for myself, I would like 
to help you on both counts there, and maybe we can work with 
your team. The second part, which is giving the FCC the 
authority to directly go to court to collect the fees, do you 
have any estimate of what that would require in terms of 
additional resources?
    Chairwoman Rosenworcel. I suspect the consent of the 
Department of Justice, and that might prove more challenging in 
identifying the resources, but I just feel like we have got to 
hold some of these folks accountable, and issuing fines, and 
letting them disappear is not the way to do it.
    Senator Van Hollen. Absolutely. But as you know, there are 
other Federal agencies that do have the authority to bring 
lawsuits, and they develop sort of shared authorities----
    Chairwoman Rosenworcel. Right.
    Senator Van Hollen [continuing]. With the Department of 
Justice, so if you don't have----
    Chairwoman Rosenworcel. Yes. And we are working----
    Senator Van Hollen [continuing]. The time or capacity to do 
this; maybe we should talk to them.
    Chairwoman Rosenworcel. And we have been working with State 
Attorneys General. We have had a lot of success working with 
the Ohio Attorney General on auto warranty scams; we have done 
some mortgage scams with the Florida Attorney General. Really, 
no matter where you are in this country, people are irritated 
by this. So we are trying to develop as many partnerships as we 
can to make sure these folks are held to account.
    Senator Van Hollen. Got it. And my last question really 
picks up on something that Senator Manchin raised and which I 
raised; all of us have raised; which is the mapping question.
    Chairwoman Rosenworcel. Mm-hmm.
    Senator Van Hollen. And as I said in my opening remarks, I 
think the FCC has made dramatic strides in improving the system 
by creating that feedback loop. But I am sure you are aware of 
the 2022 GAO Report that talked about the 15 Federal agencies 
administering broadband programs.
    Now, the BEAD Program is obviously a big one in the 
Department of Commerce, but there are many others. Can you talk 
to--discuss the effort and coordination? Because I can tell 
you, you know, in preparing for this hearing, in fact, one of 
the reasons we want to have the hearing was just as we sort of 
look through the chart of, you know, Department of Agriculture, 
FCC, Commerce, all of these agencies that are involved.
    Chairwoman Rosenworcel. Yes.
    Senator Van Hollen. If you were going to recreate this, do 
you have any thoughts on how we design it, or how we can better 
coordinate with the existing programs?
    Chairwoman Rosenworcel. You know, Senator, if I had a magic 
wand, I would make it simpler. I understand what you are 
describing. So what I have been trying to do at the agency is 
figure out how we can coordinate with as many of these actors 
as possible. I signed a memorandum of understanding with the 
Department of Commerce because they have a lot of programs like 
BEAD, and I signed a memorandum of understanding with the 
Department of Agriculture because the Rural Utility Service has 
a lot of programs.
    I also went to the Department of the Treasury because their 
Capital Projects Fund is loaning out a lot of money. So I went 
to the biggest actors and said: We are all going to share 
information and data.
    On top of that, I have developed something called the 
Broadband Funding Map using $10 million in direct 
appropriations set aside in the IIJA. It is not the map that 
gets all the attention, but I think going forward it should get 
more attention, because I am asking everyone who has a 
broadband program to file data with us about where they have 
given out grants, so that we have a map of the enforceable 
commitments around the country.
    To be clear, I have had a lot of positive feedback from the 
Department of Commerce; we coordinate well. I have got to work 
with some of the other agencies to get more information and 
more data from them, but it is starting to come in. And keeping 
these other agencies reporting to us about where their grants 
are going, where their dollars are headed, and what they are 
doing is a really important part of making sure that we don't 
overfund some areas and ignore others.
    And so that Broadband Funding Map, I think, is a very 
important tool for Congress and its oversight. But I am going 
to need all those other agencies to give me their data in a 
very specific format in order to ensure that tool is really 
valuable.
    Senator Van Hollen. Well, if you can keep us posted, I am 
sure we have a shared interest in making sure you get full 
cooperation from the other agencies. Because as you said, one 
thing that--it is important is to have a map to know who has 
broadband connections, and who doesn't. It is also important to 
have a map of who is funding what and where, so we don't 
duplicate effort.
    Chairwoman Rosenworcel. Right. Exactly.
    Senator Hagerty.
    Senator Hagerty. Yes. I think that is a great suggestion, 
Mr. Chair. And I certainly applaud your asking the question. 
And Chair Rosenworcel, I hope you will share even the interim 
data on this Broadband Funding Map with our teams. I would very 
much like to see just the data to date and what it is showing 
you, what it is telling you, where it might lead us as 
policymakers and appropriators.
    Chairwoman Rosenworcel. Yes.
    Senator Hagerty. I would like to just come back to the 
topic of our allies for a moment. And I think you are working 
hard, you are working apace, you have even identified the cost 
of $3.08 billion, what it will take to rip and replace here, 
and try to get our networks secure. I think it is terribly 
important that we do it. I think it is also important that our 
allies do the same. And one of the most important aspects of 
our alliances around the world is our interoperability with our 
allies.
    That is constrained dramatically when we have systems that 
we can't trust on the other side. And I have seen a real gap, 
if you will, in terms of understanding amongst our allies, of 
what the threats are, what the concerns might be.
    And I am not certain what the vehicle would be, and it 
might take you a little longer than just this moment to think 
it through, but if there is a role that you could play in terms 
of putting together the information that would help persuade 
our allies of the urgency of doing exactly what you are trying 
to accomplish here, in terms of getting their networks secure 
so that we can share more information with them, and so that we 
will be more interoperable with them, I think would do us a 
great service. I would love to get your thoughts on that.
    Chairwoman Rosenworcel. Yes. I think, and I have talked to 
national security authorities about this. I think that if we 
choose to take this equipment out of our networks and fully 
fund its replacement costs, we have to go tell everyone around 
the world that we chose to do that. The United States decided 
that this equipment was so insecure we needed to take it out, 
remove it, and we paid for it. I think that is a really 
powerful example. And when we do it, we need to share that with 
our allies around the world.
    And there are other countries that are working with us on 
this issue, not all of them. But I think it is also 
simultaneously important that we help build up a better market 
for network equipment in the United States, and in our allies, 
because we have gotten to a place where there is only a handful 
of network equipment providers in the world right now; some of 
the biggest come from China.
    We need to make sure that the equipment market is more 
diverse, and more competitive, and less costly. I think that 
will also benefit us and our, you know, political interest in 
making sure that secure equipment is here at home and also 
abroad.
    Senator Hagerty. Back in 2017, I asked for a chart that 
showed what an end-to-end non-China solution for 5G would look 
like. And we actually put flags on the chart; multiple nations 
are involved for us to get this done, and multiple 
opportunities, therefore, to cooperate, and the need to 
cooperate with those nations, in terms of their standards, the 
specs for those devices. It is a big opportunity and a big 
challenge at the same time.
    Chairwoman Rosenworcel. Yes, we can't do this on our own. 
We have got to find like-minded nations and then work with 
others to make sure that this equipment, which isn't just about 
Communications networks, it is about the infrastructure that 
supports modern economies, is actually secure and not 
vulnerable to foreign actors who might eventually wish to do 
them harm.
    Senator Hagerty. Yes. I think the vulnerability is clear, 
and I very much appreciate your continued thinking on this. And 
if you see an opportunity for us to help support you in this 
effort, please know that we are all supportive of doing that. 
Thank you.
    Thanks, Mr. Chair.
    Senator Van Hollen. Thank you. Well, Chair Rosenworcel, so 
we have covered a lot of territory today.
    Thank you, Senator Hagerty, other members who were here.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Van Hollen. The hearing record will remain open for 
7 days, allowing Members to submit statements and/or questions 
for the record, which should be sent to the subcommittee by 
close of business Tuesday, September 25, 2023.

    [The following questions were not asked at the hearing, but 
were submitted to the Internal Revenue Service for response 
subsequent to the hearing:]
         Questions Submitted to Chairwoman Jessica Rosenworcel
               Questions Submitted by Senator Joe Manchin
    Question. The IIJA established the BEAD program to expand high-
speed Internet access across the country, including my home state of 
West Virginia. The BEAD program requires that funding be allocated 
based on each state's proportion of unserved locations according to the 
National Broadband Map. For decades, the FCC was allowing Internet 
providers to draw the broadband maps and they were wildly inaccurate 
with grossly overstated coverage. I led the fight to fix the map, 
because without correcting these maps, West Virginia would never have 
received the resources necessary to address the lack of coverage.
    It is imperative that the map be accurate and accessible to the 
general public.
    In that vein, I secured report language accompanying the FY24 
Financial Service and General Government appropriations bill that would 
direct the FCC to work with other agencies, including NTIA and USDA, to 
develop broadband maps that display eligibility for broadband 
deployment programs designed to expand broadband access and close the 
digital divide, particularly in rural areas.
    I also secured report language that would ask the FCC to address 
any ongoing accuracy issues with the National Broadband Map. What is 
your plan to continue the important work of improving the National 
Broadband Map?

    Answer. I understand how vital it is for the Commission to work to 
continually improve the accuracy of the National Broadband Map. This 
map is an important tool to help close the digital divide because it 
identifies, like no other data collection before it, where broadband is 
and is not all across the country. Moreover, this map is being used to 
inform broadband funding decisions at both the Federal and state level, 
including for the Broadband Equity Access and Deployment program at the 
Department of Commerce.
    The Broadband DATA Act is the law that governs the agency's data 
collections that are used to assemble the National Broadband Map on a 
biannual basis. This process is designed to be iterative, with each new 
version of the map providing a more accurate and up-to-date picture of 
where broadband services are nationwide.
    Twice a year the agency releases an updated broadband Fabric, which 
is a database of all broadband serviceable locations in the United 
States. The Fabric is developed using hundreds of data sources, 
including tax records, property records, parcel boundary records, and 
satellite building imagery.
    Following the release of each updated Fabric, providers are 
required to supply information about the service they provide at each 
broadband serviceable location. The combination of this information and 
the Fabric database leads to the production of each map.
    Our next map issued using this process will be released in November 
and will reflect provider-reported availability data as of June 30, 
2023. It will be our third map issued pursuant to the Broadband DATA 
Act.
    We will continue using all the tools available to the Commission to 
update and improve the map, including: improvements to the underlying 
data used to identify broadband serviceable locations on the Fabric, 
collecting updated broadband availability data every 6 months, 
processing challenges to the Fabric and broadband availability data 
shown on the map, and validating the data providers are filing.
    Our current version of the Fabric includes over 115 million 
locations where fixed broadband could be installed. This reflects 
steady improvement in the Fabric since it was initially released in 
June of 2022. Working with our vendor CostQuest, over one million 
additional broadband serviceable locations have been added to the map 
since the November 2022 pre-production map, and the November 2023 map 
will add over 800,000 additional locations nationwide.
    These additional locations are primarily the result of our work 
with our vendor to update and improve the Fabric by refining the models 
and processes for creating the Fabric and using updated and improved 
input data sources such as new parcel data. The current version of the 
Fabric also incorporates millions of adjustments to the data associated 
with locations that were already included in earlier versions of the 
Fabric, including, for example, changes to address fields, unit counts, 
secondary addresses, broadband serviceable location status, and 
building and land use codes. Stakeholders--including municipalities, 
states, Tribes and individual consumers--are also helping to improve 
the Fabric through the challenge process. Over 1.5 million Fabric 
challenges have been accepted and incorporated into the Fabric itself. 
These challenges have helped identify missing locations and correct 
addresses and other information associated with the broadband 
serviceable locations included in the Fabric. Going forward, these 
efforts to improve the Fabric will continue to be a critical tool for 
improvement of the National Broadband Map.
    In addition to our continuing efforts to improve the Fabric, we are 
also focused on making use of the tools provided in the Broadband DATA 
Act to ensure that the availability data shown on the map are as 
accurate as possible.
    When providers submit data there are several steps the Commission 
takes to ensure as accurate-as-possible reporting, including automated 
system validations, informal and formal data verification efforts, 
audits, and when warranted enforcement referrals. The FCC has built 
automated error and anomaly detection and data cross-checks into the 
Broadband Data Collection system to validate submissions from Internet 
providers. Some require the provider to make a correction before the 
submission is accepted and others are reviewed by FCC staff.
    To date, FCC staff have initiated over 900 verification inquiries. 
This has resulted in updates to over 600 submissions from providers and 
a clearer picture of broadband availability in every state and 
territory. The agency is also conducting audits of reported mobile 
coverage in a number of states.
    In addition to audits and verifications, the Commission has also 
engaged directly with providers to offer technical assistance and 
support ensuring that the availability data that is reported is of 
sufficient quality. This outreach includes webinars, tutorials, 
standing up a technical assistance help desk, and one-on-one meetings 
with staff.
    Another important tool is the availability challenge process. It 
has resulted in our mapping team processing over 4.8 million challenges 
to provider reported availability data since the release of our first 
pre-production map in November 2022. These challenges have already 
yielded important changes in the map data and I anticipate that, over 
time, the challenge process will continue to serve as an important tool 
for correcting inaccuracies in provide reported data on the map.
    Finally, the Broadband Data Act also gives the FCC authority to 
take enforcement actions to address situations where a provider 
``willfully, and knowingly, or recklessly'' submits ``materially 
inaccurate or incomplete'' availability information. While I cannot 
provide information about specific enforcement referrals as these are 
ongoing law enforcement investigations, I can confirm that we have 
ongoing enforcement investigations. Moreover, I want to be clear that 
we will not hesitate to use this process when warranted, including 
against providers that have failed to report data or falsified data.

    Question. How do you ensure the National Broadband Map is accurate?

    Answer. The National Broadband Map is designed to be iterative--and 
consistently improving. To ensure these improvements are featured on 
the map, the Commission uses a number of tools to prevent, identify, 
and address inaccuracies and anomalies in both the fabric database and 
broadband availability data submitted by providers.
    The Fabric is an evolving dataset of all broadband serviceable 
locations in the United States that will need to change as new 
locations come online. Substantial improvements have been made to the 
Fabric since its first pre-production release in November 2022, and it 
continues to improve with each release.
    With respect to the Fabric, the Commission uses a number of 
practices to ensure it is as accurate as possible. Following each new 
Fabric release, the FCC's contractor, CostQuest, continues to refine 
and update its models, gain access to new and improved data sources 
used to identify broadband serviceable locations, such as new 
construction data, and makes other updates to the locations on the 
Fabric based on stakeholder feedback both through the challenge process 
and direct engagement.
    We have acknowledged that there were a few discrete instances where 
the data in the initial release of the Fabric did not meet our 
expectations. The known instances correspond to areas in the United 
States where the underlying datasets used to create the Fabric (parcel 
data, tax assessor data, high-resolution imagery data) were either 
outdated or simply not available. To improve the Fabric data in these 
areas, the FCC and our contractor, CostQuest, have invested significant 
resources since the release of the first version of the Fabric to 
undertake manual review above and beyond the baseline methodology to 
identify additional broadband serviceable locations in these areas.
    In addition, the FCC has developed a robust Fabric location 
challenge process through which stakeholders can raise location 
specific issues, such as missing locations, misidentified locations 
(i.e., a house incorrectly labeled as a large business), incorrect 
location information including address or unit count, and incorrect 
location placement on the map. Once submitted, the FCC and its vendor 
review the submissions using a series of geospatial checks and 
ultimately visual verification of satellite and fly over imagery for 
certain challenge types. Location changes resulting from a challenge 
are reflected in the next Fabric release.
    Stakeholders including states, local and tribal governments and 
consumers have submitted over 1.5 million challenges which been 
accepted and incorporated into the Fabric to date. We continue to 
accept both bulk and individual location challenges on a rolling basis. 
The FCC has taken a number of steps to inform and engage stakeholders 
in the Fabric challenge process, including holding webinars and 
workshops, and releasing outreach and technical assistance materials.
    With respect to availability data, the Commission is also using 
every tool available to ensure the information is as accurate as 
possible. For starters, Commission staff provide technical assistance 
and support to providers to assist with the correct filing of data 
through webinars, tutorials, articles, a technical assistance help 
desk, and one-on-one meetings. The Commission also uses system 
validations, data verifications and audits, enforcement actions and a 
challenge process to ensure the availability data on the map is as 
accurate as possible.
    The system providers use to submit availability data features a 
validation process, is designed to recognize patterns that suggest a 
problem with the underlying information provided to the agency. This 
has resulted in over 900 verification inquiries from Commission staff, 
followed by updates to more than 600 submissions from providers. These 
informal and formal verifications play an important role in ensuring 
the map is accurate. The FCC has also been using the audit tools 
provided in the DATA Act to verify the accuracy of mobile coverage data 
in a number of states. Providers are also required to certify the 
accuracy of their submissions to the agency. This facilitates our 
ability to refer matters for investigation and enforcement where 
appropriate, something we have not hesitated to do.
    One of the most important tools we have for ensuring the accuracy 
of broadband availability data is the challenge process laid out in the 
Broadband DATA Act. We accept challenges to availability data shown on 
the map on a rolling basis and update the map to reflect the results of 
these challenges. These challenges can be filed individually through 
the user-friendly map interface, or as bulk submissions into the BDC 
filing system. These processes allow those in the best position to know 
the accuracy of the data, consumers and other local stakeholders to 
help verify the accuracy of availability data on the map.
    To date, our mapping team has processed over 4.8 million challenges 
to provider reported availability data. These challenge can be 
submitted by individuals, state, local and Tribal governments and other 
entities. When a challenge is filed, FCC staff reviews the challenge to 
ensure it aligns with reason code selected for the challenge and then 
forwards accepted challenges to the provider for its response. 
Providers have 60 days to either concede or dispute the challenge. If 
the challenger and provider don't agree on the actual availability of 
the service reported at the location in questions it goes to the FCC 
for adjudication. Conceded challenges and those adjudicated in the 
challenger's favor result in corrections to the data shown on the map.
    West Virginia is a good example of how participation in the 
challenge processes and working in partnership with the FCC can yield 
important improvements to the accuracy of the data reflected in the 
National Broadband Map. The West Virginia State Broadband office filed 
both location and availability challenges and worked closely with FCC 
staff to identify discrete concerns that may warrant FCC verification. 
This back-and-forth helped contribute to an increase of 86,860 unserved 
locations in West Virginia between the release of our pre-production 
draft in November 2022 and the data used by the Department of Commerce 
for its allocation in the Broadband Equity Access and Deployment 
program.
    Given the importance of stakeholder participation in the challenge 
processes in refining the data depicted on the map and ensuring that 
the map is as accurate as possible, we have conducted extensive 
outreach to state, local, and Tribal governmental entities, service 
providers, and others to inform stakeholders about how they can 
participate in the process. Commission staff have held hundreds of 
meetings with congressional offices, service providers, public interest 
groups, and governmental entities across the nation to be sure we are 
offering support and technical assistance throughout this process. The 
Commission continues to conduct outreach meetings in person and 
virtually as well as produce guidance and educational materials on an 
ongoing basis as we work with stakeholders to improve the accuracy of 
the data on the National Broadband Map.

    Question. As a follow up, NTIA relies heavily on the FCC National 
Broadband Map to implement the BEAD program. As Federal investments in 
broadband move into full swing in states like West Virginia--which is 
the second least-served state in the country--we need to ensure we have 
the most up-to-date FCC map. Needless to say, the National Broadband 
Map has a significant impact on the BEAD program.
    Do we have adequate resources to support the National Broadband 
Map, and if not, do you have plans to ask the Office of Management and 
Budget (OMB) for additional funding next fiscal year?

    Answer. The Commission currently has funding sufficient to support 
the National Broadband Map through Fiscal Year 2024. However, it does 
not have funding adequate to support the map beyond Fiscal Year 2024. 
That is why we are requesting funding resources in our regular budget 
for Fiscal Year 2025.
    By way of background, it is important to know that in the Fiscal 
Year 2021 Consolidated Appropriations Act (Public Law 116-260), the 
Commission received $98 million in funding for the start-up and 
implementation of the Broadband DATA Act (Public Law 116-130). Congress 
provided funding in two distinct sections of the Fiscal Year 2021 
Consolidated Appropriations Act. The first $33 million Congress 
provided was in the Commission's regular appropriation and derived from 
regulatory fees (Division E, Title V, 134 STAT 1408). Congress later 
provided an additional $65 million in direct appropriations under 
Division N, Section 906 to ensure ongoing implementation of the newly 
established mapping effort (134 STAT. 2144).
    In light of this, on February 17, 2021, I established a Broadband 
Data Task Force to use this funding and lead a cross-agency effort to 
implement the Broadband DATA Act.
    The resulting maps are, consistent with the law, designed to be 
refined through an iterative process. That is why the agency developed 
systems that allow for the steady collection and integration of new 
data and the release of new maps. Providers are required to submit 
updated availability data twice a year, and the fabric underlying the 
maps is also refreshed twice a year to reflect broadband serviceable 
location updates. Ongoing map updates remain essential at this juncture 
and this data is being used to inform the agency's universal service 
funding decisions.
    To date, the Commission has carefully managed the mapping program 
to ensure that it provides data that is as accurate as possible under 
the law in light of the limited appropriated funds. However, the agency 
is now facing ``out years'' beyond the initial program start and 
implementation period. That is why the initial Fiscal Year 2021 
investment will need to be replenished in Fiscal Year 2025 and on an 
ongoing basis until such time when Congress determines that mapping is 
no longer needed. I want to be clear, however, that I think that having 
this tool is essential, especially right now, as we work to address the 
gaps in deployment that contribute to the digital divide. That is why I 
have directed our management team to ask the Office of Management and 
Budget for additional funds for Fiscal Year 2025 that are within the 
range of the original funds provided as part of our fee-derived funding 
in Fiscal Year 2021.

    Question. The FCC established the 5G Fund for Rural America, which 
uses reverse auctions to distribute $9 billion to bring 5G broadband 
service to rural communities unlikely to otherwise see the deployment 
of 5G-capable networks.
    I understand that you've Noticed a Proposed Rulemaking that seeks 
to improve the implementation of the 5G Fund.
    The Notice says, ``In the 5G Fund Report and Order, the Commission 
decided that it would accept bids and identify winning bids in the 5G 
Fund auctions using a support price per adjusted square kilometer.'' 
And would factor in such things as terrain and elevation.
    Considering that lower bids win in reverse auctions, this may be a 
reason why West Virginia is not getting its fair share of funding 
compared to a flatter state, since it is more expensive to build a 
tower that will be blocked on one side by a mountain.
    What is your approach to accounting for terrain and elevation when 
accepting and identifying winning bids?

    Answer. The 5G Fund was first proposed in 2020 as a way to 
modernize the Commission's universal service support system for 
wireless carriers serving rural and high-cost areas of the country. At 
that time the agency decided that it would assess bids in an auction on 
the basis of support price per adjusted square kilometer. This 
methodology featured the use of an adjustment factor designed to take 
characteristics like terrain, elevation, and population density into 
account.
    I believe we should update this approach. For the first time in our 
history, thanks to our new mapping initiatives, we have comprehensive 
data regarding the state of wireless service all across the country. We 
now know, for instance, that over 14 million homes and businesses 
nationwide--including over 360,000 in West Virginia--do not have mobile 
5G wireless coverage today. On top of this, the pandemic has changed 
our thinking about where we live, work, and travel, expanding our 
expectations for wireless service nationwide.
    It is imperative that as we move forward with the 5G Fund, we take 
these facts into account. That is why I believe we need to expand our 
thinking beyond what was first proposed for the 5G Fund in 2020. To 
this end, on September 21, 2023, the Commission began a rulemaking to 
consider new ways to administer this program. Specifically, the agency 
sought comment on how to best incorporate the use of mapping data in 
the 5G Fund, in light of the clear gaps it demonstrates in coverage. We 
seek comment on how to do so in light of the methodology that was 
adopted when the 5G Fund was first introduced, including through 
changes to the adjustment factor. I am looking forward to the record 
that we receive in response to this rulemaking. I am hopeful that we 
can modernize our approach so that we both appropriately account for 
areas that are costly to serve, including for topological reasons, and 
ensure we reach those locations that our mapping data indicate are 
without service today.

                                 ______
                                 
            Questions Submitted by Senator Chris Van Hollen
    Question. I want to bolster the Commission's efforts to stop scam 
robocalls and robotexts. In 1991, Congress passed the Telephone 
Consumer Protection Act (TCPA) to tackle the rising issue of 
unsolicited telemarketing calls or robocalls. The TCPA generally 
restricts the use of certain automated telephone equipment for making 
calls to consumers without prior consent. In the preceding years, the 
Commission has established regulations under the TCPA to ensure that 
emerging technologies fall under its protective umbrella, such as 
extending the consent requirement to text messages made using an 
autodialer. In a 2021 case interpreting the TCPA, Facebook, Inc. v. 
Duguid, the Supreme Court adopted a narrow interpretation of the class 
of equipment typically considered autodialers, potentially reducing the 
number of text messages for which prior consumer consent is required.
    Commission data show that consumers receive increasing numbers of 
illegal and unwanted text messages, and the problem worsens yearly. Are 
there limitations on your authority to address robotexts, to implement 
anti-robotexting rules, or to collect enforcement remedies that 
Congress can address? If so, please indicate what additional 
authorities you need to address this issue.

    Answer. There are at least three additional ways that Congress 
could grant the FCC authority to better address the increasing number 
of illegal and unwanted text messages.
    First, Congress could update the Telephone Consumer Protection Act. 
The TCPA's definition of ``automatic telephone dialing system'' has 
been unaltered since 1991, despite many changes in technology during 
the intervening years. Moreover, the Supreme Court's 2021 decision in 
Facebook v. Duguid narrowed the definition of automatic telephone 
dialing system, as a practical matter limiting it only to those systems 
with a random or sequential number generator. This decision makes it 
harder for the agency to ensure the protections in this law cover how 
many scam artists now use technology to reach us with junk calls and 
texts. To address this loophole, Congress could expand the TCPA's 
definition of ``automatic telephone dialing system'' to specify that it 
includes calls made from a stored list of numbers. Congress could also 
amend the TCPA, and specifically Section 227(b)(1)(A) of the 
Communications Act, to specify that it is unlawful to send robotexts 
under this section. The Commission has, since 2003, taken the position 
that the term ``call'' in Section 227(b)(1)(A) includes both voice 
calls and text messages and courts have supported this determination. 
See, e.g., Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 954 
(9th Cir. 2009). Nonetheless, I believe that legislation to make that 
explicit would bolster the Commission's ability to protect consumers 
from unwanted robotexts.
    Second, I believe it would be beneficial for Congress to provide 
the Commission with the authority to collect the fines we impose 
against the bad actors responsible for illegal robocalls and robotexts. 
Right now, our enforcement work ends when we issue a forfeiture order 
because we lack the authority to pursue collection in court without the 
Department of Justice. To put this in context, note that in the last 
year alone, the agency has finalized more than $500 million in fines 
for illegal robocalls but lacks the ability to even try to collect 
these funds in court.
    Third, the Commission could benefit from authority to access Bank 
Secrecy Act information in order to help identify more quickly the 
financial records of our calling targets without giving those targets 
suspected of scams a heads up that we are coming for them. We are 
currently engaged in discussions with the Department of Treasury to 
acquire the access to this information. If we are able to access this 
information, it would allow the Commission to obtain evidence that can 
help identify who is actually responsible for illegal robocall 
campaigns, and to prevent scam artists from registering new entities 
under new names after enforcement actions shut them down.

    Question. Our commitment to the universal service principle, 
ensuring that all Americans have access to essential communication 
services, is currently facing a serious test. The Communications Act, 
which established the FCC, firmly laid down this principle. However, 
the funding for two highly successful programs that play a crucial role 
in bridging the digital divide and ensuring affordable broadband access 
for all Americans will be depleted within months. The first of these 
programs, the Affordable Connectivity Program (ACP), offers financial 
assistance for broadband access to over 20 million working families. 
The second program, the Emergency Connectivity Fund (ECF), has provided 
invaluable support to more than 18 million students and library 
patrons, enabling them to access Internet connections and devices vital 
for their education and information needs.
    Numerous constituencies have sounded the alarm about this impending 
funding crisis. The Universal Service Fund (USF) has historically 
played a pivotal role in extending telecommunication services to 
underserved areas, paid for by fees collected from telecommunications 
carriers rather than direct appropriations. Could the Commission 
leverage the USF model, which underpins several vital initiatives, 
including Lifeline, the E-rate program, rural health delivery, and the 
expansion of rural broadband infrastructure, to fund the ACP and ECF, 
as some have suggested, without significantly increasing fees on 
consumers?

    Answer. The Affordable Connectivity Program is the Nation's 
largest-ever broadband affordability effort. Today, it is responsible 
for helping more than 21 million households get online and stay online. 
Based on our current projections, we expect that existing funding for 
the ACP from Congress will run out in April of 2024. Without additional 
funding, these ACP households are at risk of losing access to high-
speed Internet service. Cutting them off will also cut off access to 
work, education, and healthcare opportunities that are now online.
    For this reason, I have consistently stressed that the agency will 
need additional ACP funding. To address the emergency need for funds in 
the immediate future, the Administration recently proposed $6 billion 
in direct, supplemental funding for ACP. This request would provide the 
agency with funding to continue to program through the end of 2024, 
with some potential program changes.
    To be clear, additional congressional funding is the only path 
forward for the ACP in the immediate term. If Congress does not provide 
this additional funding, the FCC would be able to simply leverage the 
Universal Service Fund to support ACP. To do this successfully would 
require legislative action and significant time to resolve complex 
legal and administrative issues, including the fact that many ACP 
providers are not eligible to participate in traditional universal 
service programs and many ACP households are not eligible to 
participate in the FCC's traditional universal service low-income 
program--leading to substantial fall out of providers and customers. 
Even if these issues could be resolved through legislation, relying on 
the Universal Service Fund for ACP would more than double the size of 
this fund. Our current estimates suggest that this would triple the 
contribution factor--which in turn impacts the assessment that 
consumers pay into this fund on their bill. In practice, this would 
mean an additional increase of at least $6 to $10 on the monthly 
communications service bill of consumers in this country.

                                 ______
                                 
              Questions Submitted by Senator John Boozman
    Question. What is the FCC's plan to continue the Affordable 
Connectivity Program (ACP), absent Congressional action, in light of 
funding running out?

    Answer. When Congress tasked the Commission with developing the 
Affordable Connectivity Program it also provided an appropriation of 
$14.2 billion. Today, these funds support more than 21 million 
households that count on ACP to get online, including over 200,000 
households in Arkansas. To ensure that these households can continue to 
count on ACP for high-speed Internet access, the Administration 
recently requested that Congress provide an additional $6 billion in 
funding for ACP. In fact, our current estimate is that the initial 
appropriation of $14.2 billion will expire in April of 2024, which may 
result in millions of these households losing access to the Internet. 
So without further funding from Congress, this program is in jeopardy.

    Question. What is the FCC doing to communicate the possible 
upcoming changes to the ACP, including a lapse in funding, with 
consumers so that they aren't surprised by a sudden price increase or 
loss of service?

    Answer. The Commission fully recognizes the importance of 
communicating with participating households and providers about any 
changes to the Affordable Connectivity Program. However, it would be 
premature to communicate about potential program changes while 
discussions concerning additional funding for the ACP are ongoing. As 
noted above, the Administration has requested that Congress provide an 
additional $6 billion in funding for the ACP and the FCC remains 
hopeful that Congress will provide this additional funding. However, if 
Congress does not provide further funding for the ACP, staring early 
next year the Commission will provide guidance to both consumers and 
providers about the end of the program in order to prevent unexpected 
price increases or loss of service.

    Question. On March 29 of this year, I joined a bipartisan letter 
with 27 of my Senate colleagues asking the FCC to engage proactively in 
the ongoing ATSC 3.0 broadcast television transition. I have been 
pleased to see that the Commission announced the formulation of a task 
force and have been informed that the Commission has started to work on 
various rulemakings that would help lay the groundwork for a successful 
transition. Could you provide an update on where those rulemakings 
stand as well as how the task force meetings are progressing?

    Answer. The Commission is committed to helping with the rollout of 
next generation television based on the ATSC 3.0 standard and ensuring 
when this occurs consumers are protected from service disruption, 
service loss, and being saddled with the cost of expensive new 
equipment to maintain television service. To this end, the agency has 
worked with the National Association of Broadcasters in a public-
private effort known as the Future of Television Initiative. This 
initiative features a broad group of stakeholders working through 
challenging matters associated with the transition--both from an 
industry and consumer perspective--with an eye to creating a roadmap 
for a transition that serves the public interest. While this work is 
still in its early stages, we have appreciated the way this forum is 
facilitating discussion on major issues, including the conditions 
needed to complete the transition, what the post-transition landscape 
should look like, and challenges presented by the lack of backwards 
compatibility of equipment for consumers.
    This last point is an especially important one, because while ATSC 
3.0 has the potential to create new business opportunities for 
broadcasters, it is vital that we think upfront about what the 
transition means for consumers. To be clear, there are potential 
benefits for consumers in this transition, including new services and a 
higher quality viewing experience. Nonetheless, the next generation 
television standard is not backward compatible, meaning it does not 
work with existing television sets or set-top boxes. While progress has 
been made with the expansion of ATSC 3.0 signal availability, with over 
60 percent of households nationwide having access to next generation 
television signals, most households lack equipment necessary to receive 
this service. Some manufacturers, however, have started to include ATSC 
3.0 tuners in their new mid-range and high-end sets, but options are 
limited and remain costly, especially for households that do not want 
to purchase a new set right now nor have the means to do so. This means 
we do not yet have a solution that works for all consumers and moving 
to the next standard right now would mean many of the most vulnerable 
consumers would lose access to service.
    In order to prevent consumers from losing access to their free, 
local broadcast television service and still allow broadcasters to take 
steps forward and innovate, many stations are broadcasting in a manner 
that reaches viewers with a signal using the existing standard (ATSC 
1.0) while on a strictly voluntary basis transitioning to ATSC 3.0. 
This approach minimizes viewer disruption, allowing those who have not 
replaced their television or purchased a special reception device for 
ATSC 3.0 service to continue to receive broadcast television service.
    In order to further minimize viewer disruption, the Commission has 
had a ``substantially similar'' requirement that ensures that any 
broadcaster providing a signal in ATSC 3.0 provide programming content 
stream that is substantially similar on their ATSC 1.0 signal. This 
requirement was slated to expire on July 17, 2023. However, on June 23, 
2023, the Commission acted to extend this deadline to July 17, 2027 and 
committed to review it 1 year in advance in order to reassess market 
conditions.
    On June 23, 2023, the Commission also initiated a rulemaking to 
further our understanding of the current marketplace for ATSC 3.0 
Standard Essential Patents and the ability of third parties to develop 
products that rely upon them as well as the impact on consumers if the 
Commission were to require these patent holders to commit to licensing 
them on reasonable and non-discriminatory terms. Comments received in 
response to this proceeding are currently under review.

    Question. What is the FCC doing to coordinate with state broadband 
offices to provide status updates (such as timelines, construction 
progress, which providers are behind in their plans or likely to 
default, etc.) on the Rural Digital Opportunity Fund (RDOF) program?

    Answer. The Commission recognizes the importance of keeping states 
informed about the Rural Digital Opportunities Fund. That is why the 
agency uses a variety of different measures to ensure that states 
receive updated information about carriers awarded funding under this 
program in their respective states. First, the FCC produces a Broadband 
Funding Map. This tool provides states with the ability to view areas 
where carriers have RDOF commitments and already provide service due to 
RDOF obligations. Second, the FCC is closely monitoring carrier 
progress and compliance with RDOF obligations and will notify state 
broadband offices when the agency learns that a carrier subject to an 
obligation does not intend to meet it in the state or otherwise falls 
short. Third, the FCC plans to ask carriers to directly engage with 
state broadband offices when they develop their state-specific 
challenge processes under the Broadband Equity Access and Deployment 
program in order to keep state authorities fully apprised of existing 
deployment plans and the technologies they intend to use to meet their 
RDOF obligations. Fourth, in the event a carrier withdraws from RDOF, 
the FCC announces this in a public notice which it shares with both the 
Department of Commerce and relevant state broadband offices. On top of 
this, the Broadband Funding Map is updated to reflect any such 
withdrawal. Finally, the Commission staff is always open to inquiries 
from our state colleagues about any carrier and its participation in 
RDOF at any time.

                                 ______
                                 
              Questions Submitted by Senator Bill Hagerty
    Question. I have heard from constituents that the FCC is 
considering updating the rules surrounding spectrum to potentially 
facilitate new two-way wireless broadband services in the lower 12 GHz 
band. They tell me that updating these rules could help serve consumers 
in rural Tennessee by closing the digital divide.
    The FCC unanimously approved a Notice of Proposed Rulemaking to 
consider how to best modernize the rules for 12 GHz band and 
potentially facilitate new two-way wireless broadband services, and I 
understand no final decision has been made.
    Chairwoman Rosenworcel, as the Commission explores options for 
transitioning to 5G, could you discuss your thoughts on new rules for 
fixed broadband in the lower 12 GHz band and a timeline on a looming 
decision?

    Answer. The Commission has identified more than 1000 megahertz of 
prime mid-band spectrum in the 12 GHz Band (12.2-13.25 GHz) for new and 
innovative uses. These are airwaves are right in the middle of the 7-16 
GHz band that we have identified as the sweet spot for the next 
generation of wireless technology--or 6G. We are the first country in 
the world to identify these bands for new wireless use and take action.
    I believe these airwaves can be optimized with a mix of licensed, 
unlicensed, and space-based services. The 12.7-13.25 GHz band is a 
prime candidate for new mobile use, so we are exploring how to put it 
in the pipeline for new wireless broadband, which is critical for 
United States wireless leadership.
    Meanwhile, the 12.2-12.7 GHz band presents an opportunity to allow 
new services to use the band efficiently while protecting incumbent 
satellite functions that millions of people in this country rely on 
every day. As a result, we are exploring how these airwaves can be used 
for fixed licensed and unlicensed terrestrial services, including two-
way point-to-multipoint links and other use cases that could, among 
other things, expand backhaul to support advanced broadband capacity.
    The deadline for comments on these proposals was in September. 
Commission staff is reviewing the record carefully with an eye to 
moving forward and opening up this band for new services.

    Question. Chairwoman Rosenworcel, as the debate around cable 
regulations and new streaming platforms continues to play out in the 
public arena, could you provide the Subcommittee an update on where the 
FCC stands?

    Answer. The video marketplace has changed significantly with the 
introduction of streaming services. There are so many new screens and 
new ways to watch programming. This is exciting for viewers who can 
consume content from near and far at virtually anytime and anyplace. At 
the same time, it is important to recognize that television 
broadcasting, which is uniquely local, should have the opportunity to 
thrive in this new landscape.
    The primary laws governing the distribution and carriage of 
broadcast television stations on multichannel video programming 
distributors (MVPDs) include the Cable Communications Policy Act of 
1984 and the Cable Television Consumer Protection and Competition Act 
of 1992. Both of these laws amend the Communications Act. Therefore, 
this remains the legal framework under which the Commission must assess 
all issues associated with MVPDs.
    When the Commission last attempted to address this matter, in a 
Notice of Proposed Rulemaking adopted in 2014, the record revealed 
significant concerns with the agency asserting jurisdiction over MVPDs 
in a way that the statutory framework was not designed to support in 
1984 or 1992. To understand why, consider that Section 602(13) of the 
Communications Act defines an MVPD as an entity that ``makes available 
for purchase, by subscribers or customers, multiple channels of video 
programming.'' At the same time, Section 602(4) of the Communications 
Act defines a channel as ``a portion of the electromagnetic frequency 
spectrum which is used in a cable system and which is capable of 
delivering a television channel.'' It is imperative that the Commission 
give these words full meaning. As reflected in the record, online video 
programming distributors do not neatly fit in these statutory 
definitions because they lack a physical connection to subscribers and 
do not use any electromagnetic frequencies when delivering programming 
to their viewers. As you know, the Commission lacks the power to change 
these unambiguous provisions on its own but can do so if Congress 
changes the underlying law.
    In addition, the record demonstrated that even if the Commission 
were to proceed, it would require changes to underlying copyright 
policies. It is not clear if the Copyright Office would, with an 
altered Commission interpretation of the definition of MVPD, allow the 
current statutory copyright license to be used by online video 
programming distributors. As you know, the existing statutory copyright 
license works hand-in-hand with the retransmission consent policies in 
the Communications Act. What this means in practice is that the 
carriage of broadcast television station signals on traditional MVPDs 
can take place without negotiations with every single copyright holder 
associated with the station programming. Without a statutory copyright 
license applying to new online video programming distributors, those 
distributors would be obligated to black out programming for which they 
are not able to negotiate copyright licenses.
    Because we recognize that it is important that local broadcast 
stations have the ability to reach viewers where they are in this new 
media environment, the Commission is meeting with stakeholders to learn 
more. To this end, we understand that carriage via online video 
programming distributors is now the subject of private negotiations 
between local broadcast stations and their affiliated networks. We are 
monitoring these efforts, to better understand the consequences for 
carriage and consumers. We are also continuing to review the record 
from 2014 to identify outstanding issues.

                         CONCLUSION OF HEARINGS

    Senator Van Hollen. The subcommittee stands in recess until 
the call of the Chair.

    [Whereupon, at 3:27 p.m., Tuesday, September 19, the 
hearings were concluded, and the subcommittee was recessed, to 
reconvene subject to the call of the Chair.]


  FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL 
                               YEAR 2024

                              ----------                              

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.

                       NONDEPARTMENTAL WITNESSES

    [Clerk's note.--The subcommittee was unable to hold 
hearings on nondepartmental witnesses. The statements and 
letters of those submitting written testimony are as follows:]
        Prepared Statement of Professional Managers Association
Dear Chair Van Hollen, Ranking Member Hagerty, and Members of the 
Subcommittee:

    On behalf of the Professional Managers Association--the non-profit 
professional association that has, since 1981, represented professional 
managers, management officials, and non-bargaining unit employees at 
the Internal Revenue Service (IRS)--I write regarding funding for the 
IRS in FY 2024.
    The IRS is the primary revenue source for the entire Federal 
Government. Without revenue from the IRS, it is impossible to fund any 
other Federal program or agency initiative; NASA cannot send astronauts 
to Mars or the Moon, the Department of Veterans Affairs (VA) cannot 
serve our Nations veterans, and the Social Security Administration 
(SSA) cannot process retirement or disability payments. Put simply, the 
IRS funds freedom.

    I.  Improving Customer Service and the Taxpayer Experience Requires 
Ongoing Investment by Congress.

    There is no denying the frustrations millions of Americans and 
businesses feel when interacting with the IRS. IRS employees alike are 
frustrated with the quality of agency operations and the inability to 
properly service taxpayers. However, thanks to funds provided by 
Congress in recent years, the IRS is already beginning to make critical 
improvements to taxpayer services and business operations. To continue 
this progress, it is essential that the IRS receive stable and 
appropriately increased funding in FY 2024 and well into the future.
    PMA supports the Biden Administration's IRS request of $14.1 
billion for funding in FY 2024. This proposal includes dedicated funds 
to improve the taxpayer experience and customer service ($642 million) 
and for IT upgrades via Business Systems Modernization (BSM; $290 
million). The dedicated funding for BSM is especially critical to 
ongoing modernization efforts because this priority was unfunded in 
FY23 annual appropriations.
    The President's budget also includes other critical requests to 
strengthen the capacity of the Treasury Department. PMA supports the 
administrations requests for additional cybersecurity funds and to 
enhance the capacity of Departmental offices, such as the Office of the 
Chief Human Capital Officer. All IRS human capital policies must be 
approved by the Treasury human capital leadership, reinforcing the 
importance of enhanced capacity of Treasury Departmental mission 
enablement offices.

    II.  Implementing the Inflation Reduction Act (IRA)

    Passage of the IRA by Congress provided the IRS with a desperately 
needed infusion of stable, long-term investment that will enable agency 
and taxpayer service transformations. The IRS must be able to implement 
the law. PMA believes transparency and accountability with Congress is 
essential both to build trust with the IRS and to identify additional 
improvements that may become necessary.
    The Taxpayer Advocate recently noted her view that the IRA does not 
properly prioritize funding for Taxpayer Services and BSM accounts.\1\ 
We at PMA agree with the perspective that dedicated funding is required 
to improve taxpayer services. We urge Congress to provide specific 
funding for these accounts as requested by the President, instead of 
reprogramming IRA funds. The Taxpayer Advocate's idea that Congress 
could allow the IRS to reallocate funding across its four core 
accounts, within certain parameters, may provide the ideal balance of 
agility and oversight.
---------------------------------------------------------------------------
    \1\ NTA Blog: National Taxpayer Advocate Urges Congress to Maintain 
IRS Appropriations But Re-Direct Some Funds Toward Taxpayer Service and 
Information Technology Modernization--TAS.

    III.  Funding & Provisions To Ensure The Equitable Delivery of 
---------------------------------------------------------------------------
Taxpayer Services

    A combination of internal equity issues and funding constraints 
drive the inequitable delivery of taxpayer services. As the IRS grows 
its workforce and replenishes its ranks from exiting retirees, ensuring 
the next generation of IRS employees has the resources and awareness to 
promote equitably engagements with the public will be critical.
    Oversight is necessary to ensure IRS leadership is taking an active 
role in addressing barriers to the advancement for women and people of 
color within the Service. The IRS workforce has steadily increased in 
diversity over time. Unfortunately, IRS leadership does not reflect the 
diversity of its workforce. A March 2021 report reflects a significant 
drop-off of women and people of color in IRS leadership positions.
    The failure to ensure that a diverse cadre of employees can rise to 
leadership levels has a direct impact on taxpayer services.
    Issues regarding the equitable enforcement of our tax laws are 
well-documented and have been repeatedly reported to Congress. In the 
absence of robust enforcement funding, the IRS disproportionately 
audits low-income Americans, often people of color, with the simplest 
tax returns to review. Meanwhile, high-income earners with complex tax 
returns are infrequently audited due to a lack of time and resources.
    The IRS also fails to provide low-income taxpayers with adequate 
taxpayer assistance services. While the IRS does sponsor a program to 
provide free legal assistance to low-income taxpayers, in Mississippi, 
the state with the highest audit rate in the country, ProPublica 
discovered in 2019 that there was only one attorney for the program in 
the entire state.
    This legal assistance program is just one example of a well-
intentioned program meant to assist those in need that has failed its 
taxpayers due to a lack of funding and oversight by Congress.
    A gutted IRS creates a two-tiered tax system where low-income 
Americans are over audited and under services while wealthy Americans 
can avoid or evade paying an estimated $160 billion in taxes. Adequate 
funding and oversight are necessary to rectify these inequities and 
achieve the diversity, equity, and inclusion goals set out by this 
administration.
    PMA also supports funding to provide implicit bias assessments to 
all current leaders and future candidates recruited for leadership 
positions. These assessments are intended to help IRS leadership 
candidates develop a personal awareness of any potential biases so they 
can account for them in their leadership, however, the results should 
not be shared with the agency or used in personnel decisions. Further, 
to increase employee retention, PMA supports funding for professional 
development resources to support leaders in managing their implicit 
biases and learn skills to lead inclusively. PMA implementing 
leadership training centered on cultural competence and training to 
help all IRS workers, managers, supervisors, and executives manage 
their implicit biases.
    Finally, to truly understand the current equity landscape at the 
IRS and ensure modernization initiatives do not inadvertently 
perpetuate inequities, PMA encourages Congressional funding for a 
review of IRS workplace policies to identify areas where systemic 
discrimination and other biases have seeped into our processes (e.g., 
standards of dress, religious comp time, performance standards for 
written/verbal communication, etc.).

    IV.  Funding Government Agencies On Time

    Congress has struggled to pass appropriations bills on time for the 
majority of the past 45 years. Few would say the Federal Government's 
budgeting and appropriations process is not entirely broken. PMA wishes 
to stress the significant costs to the effective and efficient 
operation of agencies under these circumstances. Taxpayer money is 
wasted when Congress is unable to timely pass appropriations laws on 
time in advance of a new fiscal year.
    The IRS cannot conduct hiring and onboarding when it is in a 
continuing resolution state. The IRS cannot engage in new contracts 
when the government is under a CR. The IRS cannot enact a long-term 
plan to modernize its systems when it does not know what funding it 
will have in 6 months. Put simply, the IRS cannot do its job 
effectively when Congress consistently fails to do its job. And 
taxpayers ultimately pay the price through diminished service.
    PMA is hopeful that a divided Congress can still find a way to 
fulfil its basic constitutional obligations.
    Thank you for your consideration of PMA's perspective. Please 
contact PMA Washington Representative Natalia Castro 
(ncastro@shawbransford.com) if we can be of further assistance.

    [This statement was submitted by Chad Hooper, Executive Director]

                             SUBJECT INDEX

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                                                                   Page

                U.S. SECURITIES AND EXCHANGE COMMISSION

Additional Matters...............................................    46
Budget Request...................................................    43
Economic Risk and Analysis.......................................    45
Enforcement and Examinations.....................................    44
Programmatic Divisions...........................................    45
Protecting the Public for 90 Years...............................    42

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