style="text-align: left;">WASHINGTON – At today’s U.S. Senate Finance Committee hearing on the nomination of Steven Mnuchin to serve as President-elect Donald Trump’s Secretary of the Treasury, U.S. Sen. Mark R. Warner (D-VA) elicited information about the incoming Administration’s approach to fiscal issues, including raising the debt ceiling. Sen. Warner also asked Sec.-designate Mnuchin for his views on housing finance reforms to Fannie Mae and Freddie Mac.

Transcripts of the relevant exchanges appear below.

On Debt Ceiling (Timestamp 00:12 – 00:53)

Warner: The United States obviously enjoys enormous advantages, particularly around the status of being the reserve currency. That allows smaller interest rates in everything from student loans to mortgages….The President-elect’s comments about potentially renegotiating the debt during the campaign were unprecedented. I want you to again affirm to this body that on a going forward basis it will be your policy as much as you can influence the President-elect, that we will never again question America’s willingness to stand by its debt obligations.

Mnuchin: Senator I agree with that 100 percent.

 

On Debt Prioritization (Timestamp 01:06 – 02:10)

Warner: I have been very troubled, by even some folks in elected office who have somehow said we can ignore the debt ceiling without consequences. There are even some that are going out and saying somehow we can prioritize those debt obligations and potentially pay bond holders—many of them foreign, many of them Chinese—and ignore our obligations to pay states, which would then affect their bond rating to pay Social Security trust funds that honor the commitments the U.S. government has made to pay salaries of FBI employees, etc. Is it your policy that the United States, in terms of its debt obligation, needs to honor all its debt obligations and should have no ability to prioritize those obligations?

Mnuchin: Absolutely, I hope you all work with me so that we get that done. We already spent that money, we have the obligations, there should be no uncertainty that we are paying the bills.

Warner: I think that is extraordinarily important, and those who somehow argue for prioritization would wreak havoc in the financial system.

 

On Fannie & Freddie (Timestamp 03:40 – 05:33)

Warner: I know there were some people that potentially interpreted some of your comments about “recap and release” which would in a sense say, even though that the American taxpayer was paid back the 188 billion dollars that we invested in those failing institutions at a moment of crisis—I think both of us perhaps from our business standpoint would say that was high risk capital and we got a better return—but somehow those who say let’s refloat those two entities and basically ignore some of the underlying challenges. Do you support that position of “recap and release” that some have advocated?

Mnuchin: Let me first be clear, I did make some comments about this. My comments were never that there should be “recap and release.” What my comments were, and first of all I’ve been around the mortgage industry for 30 years, I’ve seen this for a long period of time. This is an area I believe have expertise in. For a long period of time I think Fannie & Freddie have been well run, without creating risk to the government. As well as create an important role… I believe that these are very important entities to provide the necessary liquidity for housing finance. And what I’ve committed to is that I will work with Democrats and Republicans. What I’ve said is we need housing reform, so we shouldn’t just leave Fannie & Freddie as is for the next four or eight years under government control without a fix. I believe we can find a bipartisan fix. So on the one hand, we don’t end up with a giant bailout, on the other hand, we don’t run the risk of complete limiting housing finance.

 

On Fannie & Freddie (Timestamp 05:47 – 07:00)

Warner: In light of those comments about “recap and release” you commit not to support any kind of administrative effort that would bypass the Congress in efforts to “recap and release”?

Mnuchin: Again, I don’t to make any commitments legislative or not. What I will commit, because it is my responsibility in Treasury as it relates to certain issues with Fannie & Freddie. What I will commit to is that it is my objective to find a bipartisan solution to it and I would welcome the opportunity to sit down with you on that.

Warner: It is the bipartisan consensus, that the Banking Committee particularly arrived at, that that solution should end up with a housing finance system that preserves things like the 30-year mortgage but also makes sure that there is not the current status which has when things are going well, private sector gains but when stuff hits the fan the taxpayer is holding the bag.

Mnuchin: I can 100 percent assure you that I have no interest in that and I think I understand this well enough that you will find that I won’t support any policy that has that case.

Video of Sen. Warner’s questioning can be found here and above.
 

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