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WASHINGTON – Secretary of the Treasury Janet L. Yellen today released the following statement at the conclusion of the Section 301 review:

“Since taking office, President Biden and I have made clear that we will take necessary actions to advance the interests of American workers and firms. The results of the Section 301 review announced today outline strategic and targeted steps that are needed to respond to specific long-standing unfair trade practices by the People’s Republic of China.

During my trip to Beijing last month, I raised our concerns on Chinese industrial overcapacity to economic policymakers at the highest levels of the PRC government. President Biden and I have seen firsthand the impacts of surges of certain artificially cheap Chinese imports on American communities in the past, and we will not tolerate that again. These overcapacity concerns are widely shared by our partners across advanced economies and emerging markets, motivated not by anti-China policy but by a desire to prevent damaging economic dislocation from unfair economic practices. These problems built up over time and will not be solved in a day. My team and I will continue to directly address with PRC counterparts our broad concerns with the PRC’s long-standing macroeconomic imbalances and industrial policy, along with the resulting spillovers on the U.S. and global economy.

I look forward to continuing to advance American interests and lead the Administration’s responsible management of the U.S.-China economic relationship.”

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WASHINGTON — Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated one Russian individual and three Russia-based companies involved in an attempted sanctions evasion scheme in which an opaque and complex supposed divestment could have unfrozen more than $1.5 billion worth of shares belonging to U.S.-designated Russian oligarch Oleg Vladimirovich Deripaska (Deripaska).

OFAC designated Deripaska on April 6, 2018 pursuant to Executive Order (E.O.) 13661 for having acted or purported to act for or on behalf of, directly or indirectly, a senior official of the Government of the Russian Federation as well as pursuant to E.O. 13662 for operating in the energy sector of the Russian Federation economy. Deripaska is also sanctioned by Australia, Canada, the European Union, New Zealand, and the United Kingdom. On September 29, 2022, the U.S. Department of Justice charged Deripaska with conspiring to violate and evade U.S. sanctions in violation of the International Emergency Economic Powers Act.

“Treasury will continue to take action to protect the integrity of our multilateral sanctions regime and stop evasion by the Kremlin and its oligarch enablers,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. “Anyone still doing business in or with Russia should be skeptical of supposed divestment schemes that involve shell companies or proxies linked to sanctioned oligarchs. Corporate sales and acquisitions can be abused for money laundering and sanctions evasion.”

In June 2023, Deripaska coordinated with Russian national Dmitrii Aleksandrovich Beloglazov (Beloglazov), the owner of Russia-based financial services firm Obshchestvo S Ogranichennoi Otvetstvennostiu Titul (Titul), on a planned transaction to sell Deripaska’s frozen shares in a European company. Within weeks of this coordination, Russia-based financial services firm Aktsionernoe Obshchestvo Iliadis (Iliadis) was established as a subsidiary of Titul. In early 2024, Iliadis acquired Russia-based investment holding company International Company Joint Stock Company Rasperia Trading Limited (Rasperia), which holds Deripaska’s frozen shares. 

Today, Beloglazov, Titul, and Iliadis were designated pursuant to E.O. 14024 for operating or having operated in the financial services sector of the Russian Federation economy. Rasperia was designated pursuant to E.O. 14024 for being owned or controlled by, or having acted or purported to act for or on behalf of, directly or indirectly, Iliadis. 

This scheme is consistent with typologies highlighted by the multilateral Russian Elites, Proxies, and Oligarchs (REPO) Task Force in a March 9, 2023 Global Advisory. As noted in the REPO Task Force Global Advisory, sanctioned Russian individuals leverage complex ownership structures to disguise their connections to particular assets or entities and use enablers to aid evasion efforts. A March 7, 2022 Financial Crimes Enforcement Network (FinCEN) Alert also identified certain red flags, including the use of corporate vehicles to obscure ownership and source of funds and the use of third parties to shield the identify of sanctioned persons, to assist financial institutions in identifying potential Russian sanctions evasion attempts.

SANCTIONS IMPLICATIONS

As a result of today’s action, all property and interests in property of the persons above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person. In addition, sufficient due diligence should be conducted to determine that any purported divestment in fact occurred and that the transfer of ownership interests was not merely a sham transaction.

The power and integrity of OFAC sanctions derive not only from OFAC’s ability to designate and add persons to the SDN List, but also from its willingness to remove persons from the SDN List consistent with the law. The ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior. For information concerning the process for seeking removal from an OFAC list, including the SDN List, please refer to OFAC’s FAQ 897 here. For detailed information on the process to submit a request for removal from an OFAC sanctions list, please click here.

For identifying information on the individual and entities sanctioned today, click here. 

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Washington– Today President Biden issued an order prohibiting the purchase and requiring the divestment of certain real estate operated as a cryptocurrency mining facility located within one mile of Francis E. Warren Air Force Base (F.E. Warren AFB), as well as requiring the removal of certain improvements and equipment at the property by MineOne Partners Limited, which is ultimately majority owned by nationals of the People’s Republic of China; MineOne Cloud Computing Investment I L.P.; MineOne Data Center LLC; and MineOne Wyoming Data Center LLC (collectively MineOne), as well as their affiliates.

MineOne acquired the property in June 2022 and then made improvements to allow for use of the property for specialized cryptocurrency mining operations within one mile of F.E. Warren AFB in Cheyenne, Wyoming, a strategic missile base and home to Minuteman III intercontinental ballistic missiles.  The Committee on Foreign Investment in the United States (CFIUS or the Committee) reviewed and investigated this transaction pursuant to authorities provided by Congress in the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) to cover real estate transactions in close proximity to certain sensitive U.S. facilities, including F.E. Warren AFB. 

“Today’s divestment order underscores President Biden’s steadfast commitment to protecting the United States’ national security.  It also highlights the critical gatekeeper role that CFIUS serves to ensure that foreign investment does not undermine our national security, particularly as it relates to transactions that present risk to sensitive U.S. military installations as well as those involving specialized equipment and technologies,” said Secretary of the Treasury Janet L. Yellen. 

CFIUS identified national security risks arising from the transaction relating to the proximity of the property to F.E. Warren AFB. CFIUS also assessed the risk associated with the presence of specialized equipment on the property used to conduct cryptocurrency mining operations, some of which is foreign-sourced and presents significant national security concerns.  The proximity of the foreign-owned cryptocurrency mining facility to a strategic missile base and key element of America’s nuclear triad, and the presence of specialized and foreign-sourced equipment potentially capable of facilitating surveillance and espionage activities, presented a significant national security risk that led to CFIUS’s referral to the President.  To address this risk, the President’s order directs both the prompt divestment of foreign ownership of the property as well as the removal of the equipment and improvements that were added to the property. 

By law, CFIUS is authorized to negotiate and enter into an agreement or take other actions to mitigate the national security risk arising from a covered transaction.  In some cases, however, CFIUS determines that mitigation of the national security risk is not adequate or appropriate, and that the President should prohibit a transaction.  In such instances, most transaction parties voluntarily take steps to forgo or abandon a transaction.  In other cases, parties are unwilling or unable to take actions or to timely agree to terms and conditions the Committee deems necessary to adequately address the national security risks.  In all CFIUS reviews, the parties’ conduct can impact the Committee’s assessment of what steps or actions are needed to resolve national security risks.

“If CFIUS parties are unwilling or unable to fully address national security risks, CFIUS won’t hesitate to exercise the full scope of its authorities, including Presidential referrals, to address the risk,” said Assistant Secretary of the Treasury for Investment Security Paul Rosen. Rosen added that “CFIUS expects complete, accurate, and timely information, particularly when serious national security issues are on the line.” 

MineOne did not file the transaction with CFIUS until after CFIUS’s non-notified team investigated the transaction as a result of a public tip.  CFIUS’s non-notified function has been enhanced by authorities provided by Congress in FIRRMA and ongoing appropriations to support the Committee’s ability to identify and review non-notified transactions.  

By law, CFIUS may enter into a negotiated mitigation agreement only if it is effective, verifiable, and monitorable based on a careful evaluation.  In this case, the Committee determined that it would not be possible to enter into a negotiated agreement with MineOne that would sufficiently address the national security risks in an effective, verifiable, and monitorable manner, resulting in CFIUS’s referral to the President.

This decision is based on the facts and national security risks related to this transaction only.  The CFIUS process focuses exclusively on identifying and addressing national security concerns arising from a covered transaction on a case-by-case basis, which reinforces CFIUS’s commitment to encouraging foreign investment while protecting national security.  

View a copy of the President’s order.

ABOUT CFIUS

CFIUS is an interagency committee authorized to review certain transactions involving foreign investment in the United States and certain real estate transactions by foreign persons, in order to determine the effect of such transactions on the national security of the United States.  CFIUS is chaired by the Secretary of the Treasury and includes as members the Secretaries of State, Defense, Commerce, Energy, and Homeland Security, the Attorney General, the Director of the White House Office of Science and Technology Policy, and the U.S. Trade Representative.  The Director of National Intelligence and the Secretary of Labor participate as non-voting, ex-officio members, and the Secretary of the Department of Agriculture is a member when a case involves elements of the agricultural industrial base that have implications for food security.  

Treasury’s Office of Investment Security leads CFIUS’s efforts to identify transactions where no voluntary notice has been filed under section 721 of the Defense Production Act of 1950, as amended.  If CFIUS determines that a non-notified transaction may be a covered transaction or covered real estate transaction and may raise national security considerations, the Committee may contact the transaction parties and request a CFIUS filing.  Members of the public are encouraged to provide tips, referrals, or other relevant information to [email protected] regarding matters that may be within CFIUS’s purview, including foreign investment in, or an acquisition of, a U.S. business or real estate.

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As Prepared for Delivery

Thank you for joining me here today. 

President Biden’s American Rescue Plan was enacted in March 2021, in the depths of the COVID pandemic. It provided much-needed support to states, cities, and counties.  They used that support to address their citizens’ urgent needs: from expanding public health services to keeping people housed and businesses open. The American Rescue Plan’s support drove a historic recovery. But beyond that, along with the trifecta of legislation we’ve passed since—the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act—the ARP is fueling investments that will boost our economy’s prospects over the medium- and long-term.  

Today, Americans are seeing the economy expanding, a healthy labor market, and inflation that has come down significantly from its peak. That said, the President and I know that when you walk into a grocery store, or go to the doctor, or pay your rent, the costs are still too high. Addressing them is the President’s top economic priority, and we’ve taken action to lower key household expenses like energy and health care. As we look ahead, I believe that inflation will continue to come down while we maintain a strong economy. 

Put simply, despite the challenges we’ve faced, we’ve emerged stronger and poised for future growth. I’m glad to have the opportunity to visit a project that exemplifies this. Investing in high-speed internet is an Administration-wide priority, with a goal of connecting every American by 2030. It’s a key example of our agenda to expand our economy’s capacity to produce in order to drive growth while increasing opportunity for people and places that haven’t had enough of it. We’re also saving Americans money right away. 

I. Investments in Broadband

So, let me talk about what we’ve done. The American Rescue Plan’s Capital Projects Fund allocated $10 billion to states, territories, and Tribal governments for internet and other critical capital projects. Virginia has chosen to spend its entire allocation on expanding high-speed internet infrastructure to reach the nearly 20 percent of locations that currently lack such access across the state. 

In addition to that, localities have committed $8 billion from the ARP’s State and Local Fiscal Recovery Funds program to expansion of internet access. Here in Virginia, nearly $600 million has been allocated for this purpose.

And the Bipartisan Infrastructure Law’s Broadband Equity, Access, and Deployment Program, BEAD, provides $42.5 billion. This is the largest investment for internet in our history. It will mean an additional nearly $1.5 billion for high-speed internet here in Virginia.

Alongside federal funds, states, cities, and counties are stepping up as well. And the private sector, including Comcast, as we see right here, is seizing the opportunity to expand services. That’s why I see our efforts to close the digital divide as a prime example of how all levels of government, along with private companies and non-profits, can effectively work together. Spurring such partnerships has been at the heart of President Biden’s economic agenda to Invest in America. 

II. Driving Growth

We’re seeing the impacts. Investing in internet access creates jobs. Making high-speed internet a reality requires manufacturing fiber-optic cable and installing it across the country. This means new employment opportunities for thousands of Americans, including many well-paying union jobs.

But like with roads, bridges, and rail, the jobs created from building infrastructure are just one reason infrastructure matters. It’s also crucial to boosting productivity and growth.

We saw this most starkly in the pandemic, which revealed that investing in broadband was an urgent need. The pandemic forced education online, meaning kids across the country needed internet access to learn. Workplaces shuttered their office doors, meaning countless employees needed internet access to do their jobs. Doctor’s offices closed too, leaving many seniors and veterans dependent on internet access to get health care through telemedicine. 

And while broadband may have been particularly critical during the pandemic when other options weren’t available, there’s very little you can do in a modern economy without a reliable, affordable internet connection. It’s not just key to completing homework and receiving health care. It’s key to individuals looking and applying for jobs. It’s key to businesses reaching new customers. 

In brief, high-speed internet isn’t a luxury. It stopped being that a long time ago. Now, high-speed internet is an economic necessity. It’s crucial to participating in and benefitting from the economy—whether you’re 10 years old, or 30, or 60; no matter where you work and live. 

III. Expanding Opportunity

And investing in broadband is at the heart of President Biden’s economic agenda because it matters not just for growth but also for expanding opportunity.

High-speed internet access in this country hasn’t been evenly distributed. In rural areas, around one third of households don’t have reliable high-speed access. That’s unacceptable. But it’s also an opportunity. It means that investing in high-speed internet can increase economic opportunity in places where potential exists but opportunity often hasn’t. These investments can be more impactful, yielding bigger economic gains.

Virginia is working to make good on the promise of expanding opportunity. This project has reached over 600 addresses: homes and businesses that had previously lacked high-speed internet. 

And it’s not only reach that matters. As President Biden said and I want to emphasize today, “It’s not enough to just have Internet access. It needs to be affordable.” This has long been a challenge, in rural and urban areas.

We’ve designed our investments to address this, pulling all the policy levers we have to reduce costs. Through the Bipartisan Infrastructure Law’s Affordable Connectivity Program, or ACP, we’ve secured commitments from leading internet service providers, including Comcast, to offer high-speed, high-quality plans for no more than $30 per month. 23 million American households have taken advantage of the Program, including over 470,000 families in Virginia. That means significant savings, freeing up funds for families to put toward other needs.

ACP is now at risk because funding is running out this month. We know families are struggling with the high costs of key household expenses. We know how crucial the internet is. So I urge Congress to act to continue support for the Program.

I also want to address another urgent issue. The Senate may vote this week on a resolution that would overturn Treasury’s guidance on obligating State and Local Fiscal Recovery Funds. The guidance gave state, local, territorial, and Tribal governments the clarity and flexibility they needed to work toward completing projects, from expanding internet access to building affordable housing. If the guidance is overturned, critical projects—such as nearly 8,000 infrastructure projects across the country, including over 100 here in Virginia—may not have the funding they need. It’s crucial that localities can move these projects forward to improve the lives of Americans across the country. 

IV. Conclusion

Let me end by reemphasizing that what we’re seeing here, with this project, and throughout Virginia, is happening across the country. It’s changing the lives of individuals and families. And it’s an example of the Biden Administration’s broader agenda: to build on our historic recovery and drive inclusive growth for every American. Thank you for being here today and for supporting this work.

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Program created by President Biden’s Inflation Reduction Act provides up to 20-percentage point credit boost for projects in low-income and Tribal communities 

WASHINGTON—Today, the U.S. Department of the Treasury and Internal Revenue Service (IRS) announced that applications will open at 9:00 a.m. ET on May 28, 2024 for the 2024 Program Year of the Low-Income Communities Bonus Credit Program under Section 48(e) of the Internal Revenue Code. All applications submitted within the first 30 days, by 11:59 pm ET on June 27, will be treated as submitted on the same date and at the same time. This ensures that all applicants, regardless of size or resources, have an equal opportunity to participate. Following the initial 30-day period, DOE will continue to accept applications on a rolling basis.

Treasury and the IRS also announced that approximately 325 megawatts of available capacity will rollover to the 2024 program year. This will add to the annual 1.8 gigawatts of capacity for a total of over 2.1 gigawatts of capacity available in 2024 to help spur additional investment and advance President Biden’s Investing in America Agenda by lowering energy costs for Americans, investing in good-paying clean energy jobs in low-income communities, and supporting small business growth.

To provide information about the application process ahead of the application opening, Treasury and the Department of Energy (DOE) will host a webinar open to the public about the 2024 program year application process on May 16, 2024 at 1:00 p.m. ET. Potential applicants can register for the webinar here. Additional guidance including the 2024 Revenue Procedure, final regulations, and program resources to help applicants prepare their submissions are available on the DOE program homepage.

This groundbreaking provision of President Biden’s Inflation Reduction Act provides a 10 or 20-percentage point boost to the investment tax credit for qualified solar or wind facilities in low-income communities, and is already turbocharging the construction of clean energy facilities in communities across the country, encouraging new market participants, benefiting Americans that have experienced adverse health or environmental effects and lacked economic opportunities, and lowering energy costs and related housing costs for families.

“This groundbreaking incentive to invest in low-income communities created by President Biden’s Inflation Reduction Act is creating jobs and opportunity while lowering energy costs for communities that were long underinvested in,” said U.S. Deputy Secretary of the Treasury Wally Adeyemo. “In the program’s first year, we saw sky-high demand for solar and wind investments, and we expect that momentum to continue as President Biden’s economic agenda ensures all Americans benefit from the growth of the clean energy economy.” 

“The Low-Income Communities Bonus Credit Program is already boosting access to clean, reliable power in underserved communities, helping lower energy costs for low-income families, and creating good-paying jobs,” said John Podesta, Senior Advisor to the President for International Climate Policy. “The program’s impact will grow even more in its second year thanks to the increased available capacity.”

The Low-Income Communities Bonus Credit Program annually allocates 1.8 gigawatts of capacity available through competitive application across four categories of qualified solar or wind facilities with maximum output of less than five megawatts. According to the final regulations, at least 50% of the capacity limitation in each category or sub-reservation will be made available to facilities that meet additional selection criteria. Including the 324.8 megawatts of available capacity announced today that will rollover, the IRS will allocate the total capacity for the 2024 program year in the following manner:

Low-Income Communities Bonus Credit Program 2024 Capacity Limitation

Eligibility Description	Category or Sub-reservation	Total 2024 Capacity Available including 2023 Rollover (in megawatts)
Category 1: Located in a Low-Income Community 800 megawatts to facilities located in low-income communities	1a: Eligible Residential Behind-the-Meter (BTM)	250
	1b: Eligible Residential Behind-the-Meter (BTM) – Additional Selection Criteria	250
	1c: Other Facilities	100
	1d: Other Facilities – Additional Selection Criteria	200
Category 2: Located on Indian land 200 megawatts to facilities located on Indian lands	2a: Located on Indian land	100
	2b:Located on Indian land – Additional Selection Criteria	100
Category 3: Qualified Low-Income Residential Building Project 224.8 megawatts to facilities that are part of federally-subsidized residential buildings	3a: Qualified Low-Income Residential Building Project	100
	3b: Qualified Low-Income Residential Building Project  – Additional Selection Criteria	124.8
Category 4: Low-Income Economic Benefit Project 900 megawatts to facilities where at least 50 percent of the financial benefits of the electricity produced go to households with incomes below 200 percent of the poverty line or below 80 percent of area median gross income	4a: Low-Income Economic Benefit Project	400
	4b: Low-Income Economic Benefit Project – Additional Selection Criteria	500
TOTAL		2124.8

WASHINGTON — The Financial Stability Oversight Council (Council) today released its Report on Nonbank Mortgage Servicing.  The report documents the growth of the nonbank mortgage servicing sector and the critical roles that nonbank mortgage servicers play in the mortgage market.  It identifies certain key vulnerabilities that can impair servicers’ ability to carry out these critical functions and describes how these vulnerabilities could amplify shocks to the mortgage market and pose risks to financial stability.  The report includes the Council’s recommendations to enhance the resilience of the nonbank mortgage servicing sector, drawing on existing authorities of state and federal regulators and also encouraging Congress to act to address the identified risks.  The report was drafted by Council member agencies in coordination with the Government National Mortgage Association (Ginnie Mae). 

“The nonbank mortgage servicing sector plays an important role in our economy, and the Council has produced a comprehensive analysis of risks in the sector and is making concrete recommendations to protect U.S. financial stability,” Secretary of the Treasury Janet L. Yellen said.  “We need further action to promote safe and sound operations, address liquidity risks, and enable continuity of servicing operations when a servicer fails.  Moving the Council’s recommendations forward is crucial to protecting borrowers and preventing disruptions to economic activity.”

In 2022, nonbank mortgage companies (NMCs) originated approximately two-thirds of mortgages in the United States and owned the servicing rights on 54 percent of mortgage balances.  NMC market share has risen significantly since its low in 2008, when NMCs originated 39 percent of mortgages and owned the servicing rights on only 4 percent of mortgage balances.  Nonbank mortgage servicers are 7 of the 10 largest servicers for Fannie Mae, Freddie Mac, and Ginnie Mae.   

NMCs bring certain strengths to the mortgage market.  However, NMCs also have vulnerabilities, and in a stress scenario, NMCs’ vulnerabilities could cause NMCs to amplify and transmit the effect of a shock to the mortgage market and broader financial system.  

• NMC strengths: NMCs are significant mortgage originators and servicers for groups that have historically been underserved by the mortgage market. Some NMCs have also developed technology platforms that enable them to originate mortgages more quickly than their competitors, and others have expanded into specialty default servicing for nonperforming loans and loss mitigation.
• NMC vulnerabilities: NMCs’ concentrated exposure to mortgage-related assets means that stress in the mortgage market can lead to adverse effects on their income, balance sheets, and access to credit simultaneously.  NMCs’ obligations to make certain contractually required advances, as well as their reliance on debt that can be repriced, reduced, or canceled in times of stress, can lead to significant liquidity risk, which is exacerbated by high leverage carried by some NMCs.  Finally, vulnerabilities are similar across NMCs, so certain macroeconomic scenarios may lead to stress across the entire sector.
• Transmission channels: When these vulnerabilities compromise NMCs’ ability to carry out their critical functions, borrowers may suffer from disruptions in the servicing of their mortgages, and Fannie Mae, Freddie Mac, and Ginnie Mae may experience sizeable losses. Since NMCs have similar business models and share financing sources and subservicing providers, distress in the NMC sector may be widespread during times of strain.  Financial distress at NMCs that is sufficiently severe and widespread could lead to a reduction in servicing capacity and in the availability of mortgage credit.  Large servicing portfolios cannot be transferred quickly because the transfer process is inherently resource-intensive and complicated.  In addition, it might be difficult to identify another servicer to take over the portfolio, in part because the similarity of NMC business models means that other NMCs may be facing the same stresses at the same time.

State regulators and federal agencies have taken steps in recent years to mitigate the risks posed by the rising share of mortgages serviced by NMCs, but the combination of various state requirements and limited federal authorities to impose additional requirements do not adequately and holistically address the risks described in the Council’s report.  Stress in the sector could harm mortgage borrowers and, more broadly, disrupt the provision of financial services and impair the ability of the financial system to support economic activity.  The Council is making several recommendations to address the risks posed by nonbank mortgage servicers identified in the report.  

• Promoting safe and sound operations: The Council encourages state regulators, as the primary prudential regulators of nonbank mortgage servicers, to enhance prudential requirements as appropriate, adopt enhanced standards in those states that have not yet done so, and further coordinate supervision of nonbank mortgage servicers. State regulators should require recovery and resolution planning by large nonbank mortgage servicers to enhance the financial and operational resilience of the nonbank mortgage sector.  The Council also encourages Congress to provide the Federal Housing Finance Agency (FHFA) and Ginnie Mae with additional authorities to better manage the risks of NMC counterparties to Fannie Mae and Freddie Mac and to Ginnie Mae, respectively.  Congress should consider providing FHFA and Ginnie Mae with additional authority to establish appropriate safety and soundness standards and to directly examine nonbank mortgage servicer counterparties for, and enforce compliance with, such standards.  To facilitate coordination, the Council recommends Congress consider authorizing Ginnie Mae and encouraging state regulators to share information with each other and with Council member agencies, as appropriate.
• Addressing liquidity pressures in the event of stress: The Council recommends that Congress consider legislation to provide Ginnie Mae with authority to expand the Pass-Through Assistance Program into a more effective liquidity backstop to mortgage servicers participating in the program during periods of severe market stress. In addition, the Council supports the Department of Housing and Urban Development’s ongoing administrative work to relieve liquidity pressures for Ginnie Mae issuers as well as Ginnie Mae’s ongoing efforts to explore ways to facilitate financing for relieving liquidity pressures for solvent issuers.  Federal agencies should further explore and evaluate how existing policy tools and authorities could be further leveraged to reduce liquidity pressures from servicing advance obligations in times of stress.
• Ensuring continuity of servicing operations: The Council encourages Congress to consider establishing a fund financed by the nonbank mortgage servicing sector to provide liquidity to nonbank mortgage servicers that are in bankruptcy or have reached the point of failure. The fund should be designed to facilitate operational continuity of servicing, including loss-mitigation activities for borrowers and advancement of monthly payments to investors, until servicing obligations can be transferred in an orderly fashion or the company has been recapitalized by investors or sold.  The legislation should outline the scope and objectives of the fund, which include avoiding taxpayer-funded bailouts.  The legislation should also provide sufficient authorities to an existing federal agency to implement and maintain the fund, assess appropriate fees, set criteria for making disbursements, and mitigate risks associated with the implementation of the fund.  The establishment of such a fund should be accompanied by the additional regulatory authorities and consumer protections recommended in the Council’s report.

The Council will continue to monitor the evolution of the risks identified in the report and may take or recommend additional actions to mitigate such risks in accordance with the Analytic Framework for Financial Stability Risk Identification, Assessment, and Response that the Council adopted in November 2023, if needed.

The full report can be viewed here. 

Secretary Yellen’s remarks on the report during the open session of the Council meeting can be viewed here.

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WASHINGTON – Today, U.S. Secretary of the Treasury Janet L. Yellen convened a meeting of the Financial Stability Oversight Council (Council) in executive and public sessions at the U.S. Department of the Treasury (Treasury). 

During the executive session, the Council received an update from member agency staff on recent and planned work of the Council’s Financial Market Utilities (FMU) Committee, including the committee’s review of the eight FMUs that the Council designated in 2012. 

The Council also received an update from staff of Treasury and the Federal Reserve Bank of New York on market developments related to corporate credit, including private credit.  While risks remain balanced in credit markets overall, the private credit market has grown substantially and is a relatively opaque segment of the broader financial market that warrants continued monitoring. 

During the public session, the Council received a presentation on the Council’s Report on Nonbank Mortgage Servicing.  The Council voted unanimously to approve the issuance of the report.

The Council also voted to approve the minutes of its previous meeting on February 23, 2024. 

In attendance at the Council meeting at Treasury or virtually were the following members: 

• Janet L. Yellen, Secretary of the Treasury (Chairperson of the Council)
• Jerome H. Powell, Chair, Board of Governors of the Federal Reserve System
• Jay Gallagher, Senior Deputy Comptroller for Supervision Risk and Analysis, Office of the Comptroller of the Currency (acting pursuant to delegated authority)
• Rohit Chopra, Director, Consumer Financial Protection Bureau
• Gary Gensler, Chair, Securities and Exchange Commission
• Martin Gruenberg, Chairman, Federal Deposit Insurance Corporation
• Rostin Behnam, Chairman, Commodity Futures Trading Commission
• Sandra L. Thompson, Director, Federal Housing Finance Agency
• Andrew Leventis, Chief Economist, National Credit Union Administration (acting pursuant to delegated authority)
• Thomas Workman, Independent Member with Insurance Expertise
• James Martin, Acting Director, Office of Financial Research (non-voting member)
• Steven Seitz, Director, Federal Insurance Office (non-voting member)
• Elizabeth K. Dwyer, Superintendent of Financial Services, Rhode Island Department of Business Regulation (non-voting member)
• Adrienne A. Harris, Superintendent, New York State Department of Financial Services (non-voting member)
• Melanie Lubin, Securities Commissioner, Office of the Attorney General of Maryland, Securities Division (non-voting member)

Additional information regarding the Council, its work, and the recently approved Report on Nonbank Mortgage Servicing and meeting minutes is available at http://www.fsoc.gov.  

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WASHINGTON – The U.S. Department of the Treasury announced today its intention to conduct a series of auctions to sell its warrants to purchase the common stock of certain publicly traded airlines to qualified institutional buyers, institutional accredited investors, or the issuing airlines.  The proceeds of these sales will provide additional returns to the American taxpayer from the financial assistance and liquidity that Treasury provided to these airlines during the pandemic. 

Treasury provided financial assistance and loans to U.S. airlines and certain other types of businesses in 2020 and 2021 under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act); the Consolidated Appropriations Act, 2021; and the American Rescue Plan Act of 2021. Information about these programs, the warrants being sold, and the auction procedures is available here.

Treasury will be supported by its financial agents, Houlihan Lokey Capital, Inc. and Loop Financial Consulting Services, LLC, to help coordinate and conduct the auctions. Prospective bidders interested in participating in an auction must deliver a complete Bid Package (as defined in the auction procedures) by 5:00 p.m. Eastern Time on May 24, 2024. The auctions are expected to commence the week of June 3, 2024.  

The auction transactions will be exempt from the Securities Act of 1933, as amended (the Act). The warrants that will be sold in the auctions have not been, and will not be, sold pursuant a registration statement under the Act, and may not be offered or sold in the United States or to, or for the benefit of, U.S. persons absent registration under, or an applicable exemption from, the registration requirements of the Act and applicable state securities law. 

The warrants will be offered only to (1) “qualified institutional buyers” as defined in Rule 144A under the Act, (2) certain institutional “accredited investors” as defined in Rule 501(a) under the Act, and (3) the issuers of the relevant warrants. Neither this press release nor the information regarding the auction on Treasury’s website constitute an offer to sell or the solicitation of an offer to buy the warrants or any other securities (including the underlying shares of common stock), and shall not constitute an offer, solicitation or sale in any jurisdiction in which, or to any persons to whom, such offering, solicitation, or sale would be unlawful.

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As Prepared for Delivery

Introduction

Good afternoon and thank you for having me here at the New York Fed’s annual primary dealer meeting. The U.S. Treasury market is the deepest and most liquid market in the world. I’m glad to be here to speak with you, the primary dealers, because of the critical role you play in making this market that underpins the global financial system so deep and so liquid, both through your role as pro rata bidders in Treasury auctions and your market making capabilities. 

The Treasury market serves as the benchmark risk-free yield curve and as a source of safe and liquid assets for a broad range of investors. But its primary role is its reason for existing in the first place: financing the U.S. government. Because of the criticality of the Treasury market, and in light of disruptions that have occurred in recent years, the official sector has been working together to enhance the resilience of the market. Much of this work has been coordinated through the Inter-Agency Working Group on Treasury Market Surveillance or IAWG, which is made up of staff from Treasury, the New York Fed, the SEC, the CFTC, and the Fed Board of Governors.

The IAWG’s work over the past three years has been structured as five workstreams: improving the resilience of market intermediation, improving data quality and availability, evaluating expanded central clearing, enhancing trading venue transparency and oversight, and examining effects of leverage and fund liquidity risk management. First, I’ll briefly mention a few initiatives led by other agencies where there has been recent important progress, and then, I’ll go a bit deeper into Treasury-led initiatives with a particular focus on the buyback program that we announced just last week. 

SEC Central Clearing and Dealer Rule

One set of initiatives to enhance the resilience of the Treasury market has been the SEC’s recently adopted rules on central clearing and dealer definition. First, on central clearing, the SEC adopted a rule last year to improve central counterparty risk management and expand central clearing. The rule requires Treasury securities transactions between clearinghouse members and broker-dealers, as well as those executed on Alternative Trading Systems (ATSs) and Inter-dealer Broker (IDB) platforms operated by clearinghouse members, to be cleared by the end of 2025. Most repo transactions will need to be cleared by June 2026. There is work underway to consider a range of models for non-member clearing and develop the necessary documentation to make these changes. Expansion of central clearing could have a range of benefits for the Treasury securities market, including standardized risk management requirements, which can enhance the market’s resilience to shocks. Central clearing also helps to net down gross exposures across participants, reducing firms’ exposures while positions are open as well as reducing the flows required at settlement.

On the dealer rule, the SEC adopted rules to further define the phrase “as a part of a regular business” in order to identify certain activities that would require firms to register as dealers. The rule identifies two qualitative factors related to liquidity provision through market-making as criteria for dealer registration, with the primary effect expected to be registration of additional Principal Trading Firms (PTFs). As the SEC has stated, advancements in electronic trading across securities markets have led to the emergence of certain market participants that play an increasingly significant role in liquidity provision. However, some of these market participants, despite engaging in liquidity-providing activities, and despite their significant share of market volume, are not registered as dealers. As a result, investors lack important protections, and the obligations and regulatory oversight that promote market resiliency and stability are not being consistently applied to firms engaged in similar activities. Consistent regulatory oversight in this area will support market resiliency and stability and enhance investor protection across the U.S. Treasury market and other securities markets.

Treasury-Led Initiatives

OFR Non-Centrally Cleared Bilateral Repo

Next, I wanted to highlight recent progress led by Treasury’s Office of Financial Research (OFR). Earlier this week, OFR finalized a rule to establish ongoing collection of data on transactions in the non-centrally cleared bilateral repo market. This market represents one of the largest remaining data gaps for the official sector on Treasury market activity. Filling this gap will provide data on dealers’ counterparties and the terms of the trades, which should help the official sector to better assess the vulnerabilities in this market. The collection will be complementary to the SEC’s rule on expanding central clearing as it will give the official sector a good sense of how repo activity is shifting over time between bilateral and centrally cleared, and what repo trades may remain outside of central clearing.

I will focus the remainder of my remarks today on a few efforts a bit closer to my office at Treasury: (1) expanding transparency of Treasury market transactions and (2) buybacks. 

On-The-Run Transparency

First, I’ll provide a brief recap of our efforts to-date to improve data and transparency in the secondary market. Almost 10 years ago now, on October 15, 2014, the Treasury market experienced an unusually high level of volatility and a very rapid round-trip in prices. With no apparent catalyst, in the span of 15 minutes, the 10-year yield dropped 16 basis points and then rebounded.^[1] This event, and the associated challenges in analyzing its causes and the important market trends it underscored, catalyzed a series of efforts in the official sector. Perhaps the most significant of those efforts was to establish, initially for the official sector, a centralized record of transactions in the Treasury secondary market. Accordingly, in 2017, the Financial Industry Regulatory Authority (FINRA) began collecting transaction data from its members through the Trade Reporting and Compliance Engine (TRACE) and providing that data to the official sector. 

After analyzing and improving the data, we decided it was appropriate to begin providing public transparency based on this new data source. Our approach here has been careful and measured, taking incremental steps to maximize the benefits of transparency while avoiding any potential harm to the market. And so, in March 2020, FINRA began to release weekly aggregate volume data to the public. Subsequently, in 2022, the SEC approved a FINRA proposal to increase the frequency of aggregate data releases from weekly to daily and to include additional statistics such as daily trade counts and average prices. FINRA began publishing this data in February 2023. 

In 2022, Treasury published a request for information on the potential benefits of additional transparency in the Treasury market along with scenarios for what additional transparency might look like. We also sought input from both the primary dealers and the Treasury Borrowing Advisory Committee (TBAC). Informed by these discussions and our own analysis of the data, Treasury proposed to release transaction-level data for on-the-run nominal coupons, with end-of-day dissemination, subject to appropriate caps on large trades. These transactions represent more than half of all trading volume across Treasury securities, and approximately 75% of trading volume in fixed rate nominal coupon securities. This February, the SEC approved a rule change that would allow FINRA to release this data each day subject to trade size caps of $250 million for two-, three-, and five-year Treasuries, $150 million for seven- and ten-year Treasuries, and $50 million for twenty- and thirty-year Treasuries.^[2] About 6 weeks ago, FINRA began publishing this transaction level data set at the end of each day. Treasury is still evaluating the impact of this important development.

Overall, Treasury has sought to expand transparency in a gradual and calibrated way – to quote Under Secretary for Domestic Finance Nellie Liang, we will “walk, not run” and in recent years we’ve been walking steadily down this path and have made important progress. In line with this approach, once we have had time to evaluate the effects of disseminating on-the-run transactions, we’ll consider possible next steps for additional transparency. 

Treasury Buybacks 

I will turn now to a bit more detail on Treasury’s recent announcement on buybacks. The formal launch of Treasury’s buyback program coincided with the May quarterly refunding just last week. In the refunding policy statement, we announced that Treasury would conduct its first regular buyback operation in the four-week to two-year nominal coupon sector on May 29^th. In this liquidity support buyback, we are willing to purchase up to $2 billion across 20 CUSIPs that will be announced closer to the operation. Before I discuss further details of our recent announcement, I’d like to share some of the history behind Treasury buybacks.

The idea of a sovereign debt buyback is not new. In the Treasury market alone, there have been two major debt redemptions in the past century. First, throughout the 1920s, during a time of consistent budget surpluses, Treasury redeemed its debt through a variety of different means including open market purchases on the New York Stock Exchange, reverse auctions, and tender offers.^[3] Approximately eighty years later, between March 2000 and April 2002, also during a period of budget surpluses, Treasury undertook buybacks to avoid cuts to auction sizes that might have adversely affected market liquidity. In these buybacks, Treasury redeemed about $68 billion of securities through 45 operations. 

At a high level, the “liquidity support” buybacks announced earlier this month share the same ultimate goal as the early 2000s buyback program: supporting Treasury market liquidity and market-functioning. However, the mechanism for liquidity support is quite different. While the early 2000s program focused on maintaining adequate benchmark auction sizes so that on-the-runs would stay liquid, the current liquidity support buybacks aim to support liquidity in off-the-runs by providing a regular, predictable opportunity to sell them back to Treasury. Our hope is that the existence of such an opportunity will encourage active liquidity provision in these securities. 

While Treasury’s “liquidity support” buybacks are similar the buybacks of the early 2000s, our planned “cash management” buybacks likely have more in common with the buybacks of the 1920s, which applied excess revenues to the purchase of Treasury securities trading in the secondary market.^[4] Dealers here today will be well-aware that the sizes of Treasury bill auctions ebb and flow throughout the year due to the “lumpiness” of fiscal flows that are concentrated around quarterly tax payment dates. Cash management buybacks will provide us with the ability to use these “lumpy” cash balances around tax season to make targeted purchases at the front-end of the curve to reduce future concentrated maturities and avoid potentially disruptive cuts to bill supply. Though Treasury does not plan any cash management buybacks between now and the next quarterly refunding at the end of July, we may conduct them later in 2024, depending on market conditions. 

As announced at the May quarterly refunding, Treasury will initially seek offers to purchase up to $2 billion of nominals or $500 million of TIPS for “liquidity support” purposes, cycling through nine “buyback buckets” – seven for nominals and two for TIPS. These buyback operations will start on May 29^th and are planned to occur with a cadence of one operation per week through July 24^th and will generally take place on Wednesdays between 1:40 and 2:00 p.m. These operations will initially be limited to 20 CUSIPs due to settlement process limitations. However, we expect that these limitations will be short-lived and in the coming months plan to remove all restrictions on CUSIP count and increase our liquidity support purchase maximums to the $30 billion per quarter level that we previously communicated. We aim to regularly update the market on our progress and will provide tentative operation calendars at each quarterly refunding. 

Treasury expects liquidity improvements resulting from buybacks to flow through three channels. First, dealers should feel more confident making markets in off-the-run securities, as they will have Treasury as a regular and predictable buyer. Second, Treasury buybacks are expected to be “liquidity events” around which additional trading activity is likely to take place. And third, dealers may use buyback operations to free up balance sheet allocated to less-liquid positions at a fair price. 

Treasury has no intention of buying back securities that are already in high demand, as these securities do not require liquidity support. Specifically, we will not seek offers for a security that meets one or more of the following criteria:

1. Any security that has not passed its first payment date. This rule serves to exclude all on-the-runs and some near on-the-runs,
2. Securities that are reasonably likely to be the cheapest-to-deliver for a futures contract, or
3. Securities that are trading significantly special in repurchase agreement markets or are otherwise in exceptional demand compared with similar issues.

Relatedly, on the topic of price, let me be clear: Treasury aims to be a price sensitive buyer. We may buy back less than the stated maximum, or nothing at all, in any operation depending upon the quality of offers that we receive. We will evaluate the offers we receive based on their proximity to prevailing market prices at the close of the operation, as well as measures of relative value.

Regarding the operational mechanics, Treasury buybacks will use the same FedTrade system that the New York Fed uses for its purchases of Treasury securities, which should reduce operational frictions for dealers. However, there are a few important differences between Treasury’s buybacks and the New York Fed’s operations that I would like to highlight. One key difference is that the results of Treasury’s operations are published on TreasuryDirect.gov rather than the New York Fed’s website. Another difference is the cadence of operations. Treasury publishes its tentative schedule far in advance at each quarterly refunding. Also, we will publish two lists of eligible CUSIPs for each buyback: one “preliminary list” on the day before an operation followed by a “final list” on the morning of the operation itself.

Another difference between the Fed’s purchases and Treasury’s buybacks worth highlighting is purchase limits. The Fed’s purchase limits are based on a sliding scale that caps CUSIP-level SOMA portfolio ownership at 70 percent. Treasury’s intention with buybacks is to align with the Fed’s existing policy around 70 percent ownership, so the first step in constructing Treasury’s purchase limit is to determine how much of an issue Treasury can purchase without pushing the SOMA ownership share over 70 percent. 

Treasury also recognizes that the total dollar amount trading in the market is important for liquidity. For this reason, we have applied an additional rule to our purchase limit calculation to ensure that the tradable float, in dollars, remains above $10 billion for nominal coupon securities and $5 billion for TIPS after any Treasury buyback operation is completed. Additional details of both our purchase limit calculation and security exclusion approach can be found in a recent presentation that Treasury made to TBAC that has been posted on the quarterly refunding webpage.^[5]

Although Treasury’s buybacks are quite similar to auctions with the direction of the trade reversed, there are a few important differences between auctions and buybacks that I would like to underscore for this group. First, buybacks use a multiple-price reverse-auction format, while auctions are awarded at a single-price. Additionally, in contrast to bidding in Treasury auctions, pro-rata participation in Treasury buybacks is not part of the expectations for primary dealers. While Treasury would prefer primary dealers “acknowledge” the operation in FedTrade, dealers are not obligated to submit offers in every operation.

Finally, on the topic of buyback financing, I would like to reiterate that amounts spent to purchase securities will be treated like any other source of borrowing needs for debt management purposes. Although Treasury will not attempt to directly align additional issuance with securities bought back at a specific tenor, we expect that net impact of buybacks on the maturity profile of the debt will be limited.

Conclusion

Over the past several months, Treasury and other IAWG member agencies have made great strides toward our shared goal of fostering a safe, transparent, and liquid Treasury market. On the data front, disclosure of on-the-run transaction data through TRACE will increase the public’s visibility into the cash market, while the OFR’s data collection rule will allow the official sector to monitor risks in the repo market. On the regulatory side, the SEC’s dealer-definition and clearing rules will reduce risk across the financial system. Finally, on the markets side, Treasury buybacks will both support off-the-run liquidity and provide Treasury with an essential tool to manage its cash position. While in their early days, these efforts leave us headed in the direction of a safer and more liquid Treasury market. Thank you for joining us here today and for your continued support of the Treasury market as primary dealers. 

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_{[1] U.S. Department of the Treasury, Board of Governors of the Federal Reserve System, Federal Reserve Bank of New York, U.S. Securities and Exchange Commission, and U.S. Commodity Futures Trading Commission, Joint Staff Report: The U.S. Treasury Market on October 15, 2014 (July 13, 2015), available at: https://home.treasury.gov/system/files/276/joint-staff-report-the-us-treasury-market-on-10-15-2014.pdf.}

_{[2] https://www.finra.org/rules-guidance/notices/24-06} 

_{[3] Buybacks in Treasury Cash and Debt Management (newyorkfed.org)}

_{[4] Buybacks in Treasury Cash and Debt Management (newyorkfed.org)}

_{[5] TreasurySupplementalQ22024.pdf}