February 23, 2021
Senate Committee on Finance
On Tuesday, February 23, the Senate Committee on Finance held a full committee hearing on Adewale Adeyemo, President Biden’s nominee for Deputy Treasury Secretary. Senators from both sides of the aisle praised Adeyemo’s public and private sector experience. Issues covered in the hearing included COVID-19 relief efforts, sanction policy, national security, Chinese investment issues, beneficial ownership rules, and taxes, among others.
- COVID-19 Relief – Senators from both parties expressed concerns about the economic and humanitarian impact of COVID-19 on American communities, particularly those which are underdeveloped. Adeyemo stated that COVID-19 relief policy should remain focused on those affected by inequity, which has only grown worse during the COVID-19 crisis. He stated that through CDFIs and NDFIs providing credit to low income and minority communities would be one of his top priorities. He stressed that Treasury using its powers to provide underdeveloped communities with equitable financial resources would be beneficial to the U.S. economy. Senator John Thune (R-SD) was concerned that the proposed COVID-19 package was too large, not targeted, and would cause inflation. Adeyemo stated that the greatest risk is not doing enough to face the current economic crisis. He stated that a large package that supports small businesses and workers is necessary to prevent economic scarring following the pandemic. Senator Elizabeth Warren (D-MA) asked Adeyemo why IMF special drawing rights (SDRs) are important to American national security and its COVID-19 response. Adeyemo stated that SDRs provide underdeveloped countries with resources to fight the pandemic. He continued that COVID-19 is a global issue and the economy will not recover until everyone has emerged from the crisis. Senator Maggie Hassan (D-NH) asked Adeyemo whether he would commit to providing improved guidance and educational outreach to small businesses eligible for PPP and the employee retention tax credit. Adeyemo said that he would because small businesses need to know the resources available to them.
- Sanctions – Multiple Senators asked Adeyemo how Treasury will approach sanctions. Senator Mike Crapo (R-ID) stated that Congress has recently been writing the sanctions, decreasing Treasury’s flexibility when implementing sanctions in a targeted manner. Additionally, Senator Ben Cardin (D-MD) asked Adeyemo whether he would look into the Trump administration’s easing sanctions on mining tycoon Dan Gertler. To both Senators, Adeyemo committed to a top to bottom review of current sanctions to identify improvements that are needed. He added that sanctions are most effective when approached in a multilateral way.
- National Security – Multiple Senators discussed the intersection of economic policy and national security. Their concerns included market distortions, subsidies, and anticompetitive behavior from China. Adeyemo cited his experience as Deputy National Security Advisor for International Economics in dealing with similar issues. Adeyemo stated that the U.S. should utilize a multilateral approach to hold China accountable to the standards that they agreed to. He stressed that the U.S. should approach its relationship with China holistically. Senator Hassan asked Adeyemo to keep the Committee informed on new anti-terrorist financing requirements concerning the antiquities and art markets.
- Chinese Investment – Multiple Senators expressed concerns about Chinese investments in American companies, particularly because the CCP is increasing controls on private Chinese firms. Specifically, the Senators raised issues surrounding Chinese companies extracting intellectual property, the vulnerability of allies without CFIUS-esque measures, and American investment in Chinese firms. Adeyemo expressed support for Congress’s measures to strengthen CFIUS to protect American companies. Adeyemo stressed that the U.S. should take a holistic approach to protecting American technology. He committed to assisting allies in adopting CFIUS-like measures because if China cannot infiltrate American markets, they will go elsewhere. Senator Todd Young (R-IN) asked Adeyemo whether he would support codifying President Trump’s Executive Order 13159 to prevent American investors from unintentionally supporting the CCP through outbound investments. Adeyemo stated that he would look into the executive order and assist Congress if they wished to codify it into law.
- Beneficial Ownership – Multiple Senators raised questions concerning beneficial ownership, particularly regarding the recent bipartisan ILLICIT CASH Act. The bill instructs Treasury to develop new rules to prevent anonymous shell corporations and money laundering. Multiple Senators asked Adeyemo how he would implement these new rules and what the timeline was for implementation. Adeyemo stressed that transparency is critical in combatting those who abuse Western markets for nefarious purposes. He committed to limiting burdens on small businesses as they seek to comply with the new beneficial ownership database. He stated that Treasury will implement the congressionally mandated rules as soon as possible.
- Manufacturing – Senators Debbie Stabenow (D-MI) and Maria Cantwell (D-WA) asked Adeyemo how Treasury would support manufacturing through clean energy manufacturing tax incentives and supply chain security, respectively. Adeyemo stated that the tax code should invest in innovation, especially in green energy. Adeyemo stated that incentives should encourage companies to be competitive at home and abroad. He stated that supply chain issues are changing because of the pandemic and that the U.S. should invest in securing them now to be competitive.
- Digital Service Taxes – Senator Crapo stated his concern with other countries’ proposed discriminatory digital service taxes (DST). He continued that the Committee opposed unilateral measures but had expressed support for a multilateral agreement. Adeyemo stated that he was committed to finding a multilateral solution that does not unfairly target American companies. Senator Tom Carper (D-DE) asked Adeyemo what approach he would take with OECD DST negotiations. Adeyemo answered that he would seek to level the playing field while maintaining America’s competitiveness and tax base.
- Taxes – Senator Chuck Grassley (R-IA) expressed concerns about President Biden’s proposal to increase the corporate tax rate to 28%. Senator Grassley was concerned that it would negatively affect American competitiveness. Adeyemo stated that taxation does influence competitiveness but continued that investments can also improve competitiveness. He stated that President Biden will make strategic investments to support American competitiveness. He committed to working with OACD and international tax processes to end the race to the bottom with taxation. Senator Bob Menendez (D-NJ) was concerned about the Tax Cuts and Jobs Act (TCJA) cutting state and municipal tax deductions. He stated that this forces states like New Jersey to support low tax states. Adeyemo said that TCJA did have this effect and that he would work to reduce the problem.
- Private Equity – Senator Warren stated that private equity companies strip assets from companies which negatively affects workers. She continued that one of FSOC’s responsibilities is to address the risks financial activities impose on low income and underdeveloped communities. She asked Adeyemo whether he would use FSOC authority to address economic inequality by recommending more regulatory scrutiny of private equity funds. Adeyemo replied that Treasury also has nonregulatory tools to combat economic inequality, but he would discuss using FSOC with Secretary Yellen.
- Cannabis Banking – Senator Catherine Cortez Masto (D-NV) asked Adeyemo whether he believed Treasury should update FINCEN’s 2014 guidance on the Bank Secrecy Act’s expectations for institutions providing banking services for cannabis businesses. Adeyemo stated that he looked forward to President Biden’s guidance on the issue.
- Affordable Housing – Senators Cantwell and Michael Bennet (D-CO) asked whether he would focus on increasing affordable housing stock. Senator Cantwell specifically offered her and Senator Young’s Affordable Housing Credit Improvement Act to increase the affordable housing tax credit. Adeyemo remarked that America does not have enough affordable housing but that affordable housing tax credits are successful in achieving their goal. He noted that affordable housing in city centers and near jobs is a gateway to opportunity. He noted that Treasury has tools to address housing affordability both strategically and comprehensively.
- Climate Change – Senator Sheldon Whitehouse (D-RI) stated that climate change will cause an economic upheaval if left unaddressed. He stressed that climate change could severely damage U.S. markets. Senator Whitehouse asked Adeyemo whether continuing to subsidize the fossil fuel industry at a cost of $600 billion is consistent with heading off an environmental economic crash. Adeyemo agreed that the climate crisis is an economic crisis. He stated that the U.S. must mobilize a full array of tools to manage risk and invest in American innovation. He continued that President Biden has made clear where he stands on fossil fuel subsidies
- Pensions – Senator Stabenow stated that with the American Rescue Plan, Treasury will oversee issues concerning pensions. She continued that the Butch Lewis Pension Relief Act will stabilize pension plans facing elimination. Senator Stabenow asked Adeyemo to speak on the importance of pension protection during the COVID-19 crisis. Adeyemo stated that President Biden supported similar legislation during the campaign. He stressed that pension issues must be addressed sooner rather than later.
Wally Adeyemo is no stranger to working with members of the Senate Committees on Finance and Banking, as well as the Department of the Treasury, where he served as deputy chief of staff during the Obama administration. This was a common theme observed throughout the hearing, as multiple senators expressed their endorsement for Adeyemo. If confirmed by the full Senate, Adeyemo will join the Treasury with ambitious goals to rebuild the Department and tackle policies such as COVID-19, income inequality, and climate change. One of his first tasks will be to lead a review of sanctions policy, which in some ways is a continuation of his time in the Obama NEC focused on international economic issues. Adeyemo remained poised throughout the hearing and seemed well-prepared to step back into Treasury, but this time as the second in command. Behind the longstanding experience of Secretary Janet Yellen, Adeyemo will bring both a fresh and seasoned perspective to the Department.
Committee votes are the next step in the process. Adeyemo is poised to go through a swift confirmation. Ranking Member Crapo and Senator Grassley praised Adeyemo for his bipartisanship and his qualifications.