Scott Bessent defends Treasury intervention, Trump economy in contentious House hearing

With the midterm election just weeks away, Democrats laced into Treasury Secretary Scott Bessent in a combative House hearing Tuesday. They sought to paint him as covering for President Donald Trump in the face of high energy prices and rising interest costs on consumer debt. 

"You go on television and you say Trump's economic agenda is a great comeback," said Rep. Ayanna Pressley, D-Mass., at the hearing held by the House Financial Services Committee. "That makes me question not only your integrity, but if you're operating in the same reality as the people whom you are accountable to," she said.

Bessent presented a spirited defense of Trump's economic record in his testimony, which was formally scheduled as part of International Monetary Fund oversight but rapidly devolved into a free-for-all about partisan views of the economy. Bessent was frequently interrupted not by just Democrats, who insisted he answer yes or no questions on a range of issues, but also by a group of protestors who objected to U.S. sanctions on Iran and Cuba.

The 10-year Treasury note traded at 5% midday Tuesday. It briefly reached a level not seen since 2007. That has raised consumer borrowing costs. The 30-year fixed mortgage rate average topped 7% last week. 

"Despite your feeble efforts, there continues to be a sell-off of U.S. Treasuries," Rep. Maxine Waters, the ranking Democrat on the committee, told Bessent.

Bessent defended his management of the U.S. Treasury market during questioning by other lawmakers. The Treasury Department increased its purchases of certain long-dated Treasury bonds that it sees as mispriced. Democrats suggested those buybacks weren't successful because yields on long-dated bonds have continued to rise.

Bessent disagreed, saying bond yields would be yet higher had the department not intervened.

"There was the counterfactual of what it would have done," he said. "And then we proceeded to have two of most successful bond Treasury auctions that we've had in 20 years."

Bessent said he is working on deficit-reduction plans, which would ease Treasury yields.

"I believe that the 10-year yield reflects many things, but the need to address the deficit is one of those," Bessent said.

Yields have risen alongside the price of oil. A barrel of oil is trading above $100 a barrel as the Iran war has heated up again recently. That has pushed the price of gas in the U.S. to an average of $4.32 a gallon as of Monday, up $1.14 from a year ago, according to AAA. Diesel costs $6.23, up $2.54 over the past year.

Bessent has been a full-throated supporter of the war. His department has ratcheted up sanctions on Iran and banks that facilitate its business.

Another thread of testimony focused on artificial intelligence. Washington has been consumed by questions on AI policy after several leading AI executives said they are concerned about potential for AI to advance beyond their ability to control the technology.

Bessent on Tuesday suggested Chinese companies are a greater threat than U.S. firms. Anthropic, creator of Claude, said earlier this month that a Chinese AI model had routed some of its users' queries to Anthropic.

"Kimi had a breach and sent Chinese weapons plans back to Anthropic," Bessent said Tuesday, speaking about the first known example of a Chinese AI model being involved in a breach.

Anthropic didn't immediately respond to a request for comment about Bessent's remarks.

Bessent declined to specify any particular draft regulations or bills he believed would improve AI safety, but he indicated he supported arguments made by critics of large AI labs such as Anthropic.

Former Trump administration AI czar David Sacks and other detractors have attacked Anthropic in recent days. He has said the company is trying to push regulation would that slow down open-source AI models in favor of its own technology, while also easing potential liability issues that may arise if its AI tools are used to compromise other institutions' security.

"I can tell you what we shouldn't do on safety is give these labs a liability exemption, which is what they're asking for," Bessent said.

"We need to develop more open source models in the U.S. We can't let these large labs capture — have regulatory capture," Bessent added.

Bessent and House Republicans emphasized positive aspects of the Trump economy. Stocks have been volatile lately but remain near highs. The S&P 500 is up about 27% since Trump took office for his second term. 

The economy has also continued to produce jobs, while the administration slows immigration. Unemployment is low at 4.1%.

Bessent said wages for the bottom 25% of earners have risen faster than the top group of earners. More than 64 million tax returns have claimed one of the tax cuts passed last year, he said.

As the hearing came to a close, Bessent acknowledged the tough nature of the appearance. "It started off great," he said with a shrug.

— Karen James Sloan and Matt Peterson contributed to this report.