Fed Chairman Jerome Powell testifies on economy and monetary policy – 2/11/2020

the committee will come into order without objection the chairmen are authorized to declare a recess of the committee at any time this hearing is titled

monetary

policy

and the state of the

economy

I now acknowledge myself for four minutes to give opening statements. I would like to welcome you back, Chairman Powell, as I discussed previously and in our last hearing with you, I remain very concerned about the President's efforts to interfere with the Federal Reserve's independent

monetary

policy

. A recent news story noted that Trump has tweeted more than 100 times about the Federal Reserve since then for his nomination.

Many of those tweets appear to be trying to put pressure on Fed Chairman Powell, you and the Fed Board of Governors should not be carried away by these aggressive tactics to defend the independence of the Fed. You should also take public perception into account. Of course, Trump continues to try. to claim credit for the economic growth that was set in motion by the policies of President Obama, Congressional Democrats and the Federal Reserve, his irresponsible trade war and the GOP tax may have blown up the national debt, slowed our economic growth and harmed working American families. Trump continues to squander this legacy

economy

, let me note, however, I am disappointed with the administration's efforts to deregulate megabanks, most recently by proposing a further rollback of the Volcker rule.

The Dodd-Frank Act made our financial system safer, but it relies on agencies like the Federal Reserve. Prudential II use available tools to monitor and mitigate threats to our economy the committee is carefully monitoring developments in the repo market and the feds' response the Fed should not arbitrarily reduce liquidity requirements in response to the disruption of the repo market like some on Wall Street Instead, we have asked that the Federal Reserve make appropriate adjustments to eliminate and promote a well-functioning repo market, while ensuring that we have sound capital rules. reducing their capital levels, furthermore, the risk of various financial assets is increasing as climate change poses a more serious risk to our economy.

The Federal Reserve and other regulators should use financial stability tools under Dodd-Frank, such as incorporating Clement's climate-related losses into supervisory stress tests. of the big banks to address this growing risk. I would also like to discuss recent developments related to the Community Reinvestment Act, i.e. the CRA. We have had a series of hearings on this issue and I am very concerned about the OCC Comptroller's harmful awning proposal to convert the CRA. in the Community Divestment Act and allow banks to escape their obligation to make responsible investments in the communities where they are licensed. I urge Safed to take a careful and deliberate approach to any changes to the implementation of the CRA and not join the governor's misguided efforts.

Brainard's statement and I'll quote that it's more important to do reforms right than to do them quickly quote unquote is absolutely correct, the OCC and FDIC should also heed that advice and extend the public comment period like community banks, state regulators, community and civilians. Human rights groups and Democratic committees have called for all interested parties to be given the opportunity to voice their concerns. I also encourage the Federal Reserve to closely monitor Facebook's efforts to launch a cryptocurrency and digital wallet, which, as we discussed in our last hearing, could have profound implications for monetary policy and compete with our own US dollar in light of the many risks involved in Facebook's plans to create I and other Democrats have called on Facebook to pause its plans until Congress can examine the issues associated with a large technology company developing these digital technologies. products and take action.

I look forward to your testimony today, Chairman Hal, and discussing these matters and now recognizing the ranking member of the committee, the gentleman from North Carolina, Mr. McHenry for four minutes for his opening remarks thank Chairman Powell for appear before us once again under the Trump administration we have the best economy we have had in decades the numbers are irrefutable we added 225 thousand new jobs in January and the unemployment rate is essentially at its lowest level in half a century this prosperity is being Shared by all Americans, from African Americans to Hispanics, where their unemployment rate hit record lows last year, prime-age labor force participation has reached 2.2 million people who were previously outside the La workforce and, unsurprisingly, consumer confidence has increased dramatically since the month before the president was elected.

Every member of Congress should celebrate these remarkable results that have resulted from Republican leadership on pro-growth policies such as tax reform and regulatory tightening, but also maintaining our economic prosperity. depends on the Federal Reserve having good policy, the central bank is conducting a review of its monetary policy framework to determine the tools it might need in the future Chairman Powell, I raised concerns that we have a regulatory policy that is affecting their ability to do appropriate monetary policy and that is why I think it is important that there be a regulatory review of the limitations that those regulations can impose on their broader monetary policy decisions, which includes the systemic risk concerns that I have raised , as well as open market operations, especially MOOC Open Market Operations in the repo market.

I appreciate your prompt response to my questions about repo market operations, but I'm not sure there has been a satisfactory answer to what caused the market to rise in the first place and that's concerning. I also expressed concern about the transition from the LIBOR reference rate that we have nine months later. I'm still concerned that consumers will be affected by the transition, we still have contracts written at the library reference rate and I think given the recent volatility and the repo. markets, I am concerned about subsequent volatility and products facing consumers, including mortgages, auto loans, business loans and other consumer loans, as this new benchmark emerged derived from guaranteed overnight financing.

In previous hearings, I have spoken about the cyber threats posed to our financial institutions and Your institution and China in particular, yesterday's news about the Equifax data breach is deeply concerning and is a wake-up call to each and every one of us. policy makers that we must take the threat from China and the Chinese communist regime very seriously if we do not take seriously, they are not afraid that they are taking us very seriously and now they have basically all of our data, so the indirect effects of this issue of Chinese policy are significant not only for cybersecurity but also for what we are seeing with the corona virus and the destabilizing effects that it has on global health.

I know you're not a global health expert, but can you give us some insight into your measurement techniques and response to these economic changes that are being pushed out of the coronavirus and China challenge. and the spillover effects it has to its supply chain neighbors that flow through China, the nature of the Chinese regime may not fit neatly into the feds' risk assessments. The Federal Reserve has acknowledged in its financial stability report that cyber risk is not a neat fit. Either way, but the risks are real even though our data from China is limited and the limited data we have raises questions for us, we still need to properly reflect on what we know and how we respond as the US government and to the Western world in response to these cyber threats as well as health risks and the spillover effect that it has on our economy, so again, Chairman Powell, thank you for being here, thank you for your openness, thank you for your approach as Chairman of the Reserve Federal to speak in the language of the people instead of simply that language of the doctors with that I yield now I recognize the

chairman

of the Subcommittee on National Security International Development and Monetary Policy mr. klieber for a minute thank you madam president mr.

President, first of all, I really appreciate your willingness to travel around the country to do 14 of those feeding and listening sessions, and one of them was in Kansas City, at our Federal Reserve building, and I think it's a great opportunity. so that most people have the opportunity to sit in a room and discuss economics with the president, so thank you very much when you came, the people of the city were sitting around the table with you and gave you a picture of their struggles and efforts. I'm trying to make it in the economy and people are also worried about inflation, they think it's like toothpaste, once you leave Harlech it's hard to get back in, so we're worried and we also appreciate your work and I'm looking forward to it. .

To advance this topic a little further as we move forward with canoeing. Thank you. Now I recognize the ranking member of the subcommittee, Mr. French Hill, for a minute, thank you Madam Chair, friend, thank you for being here today. We appreciate your willingness to come and answer our questions and give us your ideas. I want to take a moment to echo the comments of the ranking member on the Community Reinvestment Act. I know this received a lot of attention. I read Governor Brainard very comprehensive opinions on the subject and we had Mr. Odden here recently to discuss the OCC's point of view as a former community banker.

In my opinion, ultimately, we should have one approach for the CRA among the financial services regulatory agencies. I've had 40 years of dealing with inconsistency and delivery of regulatory proposals and so I think ultimately it would be productive for us to have a one-size-fits-all approach to that regulation and modernize it for the digital world we live in today. I look forward to your presentation today and, Madam President, I thank you. I want to welcome to the committee our distinguished witness Jerome Powell, Chairman of the Board of Governors of the Federal Reserve System, has been a member of the Board of Governors since 2012 and has been its Chairman since 2017, Mr.

Powell has testified before the committee and I believe he does not need any additional presentation. Without objection, his written testimony will form part of the record, mr. Powell is now granted the opportunity to present his oral testimony. Thank you so much. Be quiet. maximum employment and price stability that Congress has established for monetary policy Congress has given us a significant degree of independence to pursue these goals based solely on objective data and analysis. This independence brings with it the obligation to clearly explain how we pursue our goals today. review the current economic situation before turning to monetary policy the economic expansion is now in its eleventh year and is the longest on record during the second half of last year economic activity increased at a moderate pace and the labor market is further strengthening As the economy appeared resilient to the global headwinds that had intensified last summer, inflation has been low and stable but has remained below the FOMC's symmetrical 2 percent target employment increase averaged 200,000 per month in the second half of last year and an additional two hundred thousand.

Twenty-five thousand jobs were added in January. The pace of job creation has remained above what is needed to provide employment for new workers entering the labor force, allowing the unemployment rate to continue falling over the past year. The unemployment rate was three. point six percent last month and has been near half-century lows for more than a year Job openings remain plentiful Employers are increasingly willing to hire lower-skilled workers and train them as a result the benefits of a market strong job opportunities have been shared more widely among people who live and work in low- and middle-income communities are finding new opportunities employment gains have been widespread across racial and ethnic groups and education levels wages have been rising , particularly for lower-paid jobs.

GDP increased at a moderate pace during the second. During the half of last year, consumer spending growth moderated towardend of the year after previous strong increases, but the fundamentals supporting household spending remain strong. Residential investment rose in the second half, but business investment and exports were weak, largely reflecting slow growth overseas and trade developments. Those same factors weighed on activity at the country's factories, whose output declined during the first half of 2019 and has changed little on a net basis since then. The February monetary policy report analyzes recent weakness in the manufacturing sector. Some of the uncertainties around trade have eased recently, but the risks.

Regarding the outlook, in particular we are closely monitoring the emergence of the coronavirus, which could cause disruptions in China that spread to the rest of the global economy. Inflation was below the FOMC's symmetrical 2 percent target throughout 2019 for the 12 months through December overall. Inflation based on the price index for personal consumption expenditures was 1.6 percent. Core inflation, which excludes volatile food and energy prices, was also 1.6 percent over the next few months. We expect inflation to approach 2 percent as the unusually low readings from early 2019 fade. From the trailing 12-month estimate, the nation faces significant long-term challenges. Labor force participation of people in their prime working years is at its highest rate in more than a decade;

However, it remains lower than in most other advanced economies and there are worrying disparities in the labor market. in all racial and ethnic groups and in all regions of the country, moreover, although it is encouraging that productivity growth is the main driver for increasing wages and living standards over the years. The long term has Recently advanced productivity gains have been poor throughout this long economic expansion. Finding ways to boost labor force participation and productivity growth would benefit Americans and should remain a national priority. I will now turn to monetary policy during the second half of the year.

In 2019, the FOMC adopted a more accommodative monetary policy stance to protect the economy from weaker global growth and trade developments and to promote a more rapid return of inflation to our symmetrical 2 percent target. We lowered the target range for federal funding at our July, September and October meetings. meetings that brought the current target range to between one and a half and one and three quarters percent and our subsequent meetings with some uncertainties around trade having eased and amid some signs that global growth may be stabilizing, the committee left policy rate unchanged, the FOMC believes the current monetary policy stance will support continued economic growth, a strong labor market, and inflation that returns the committee's symmetrical two percent target as long as incoming information on the economy remains broadly consistent with this outlook the current stance of monetary policy will likely remain appropriate, of course policies that are not on a pre-set course if events arise that cause a major reassessment of our outlook, we would respond accordingly by taking a broader view.

There has been a decline over the last quarter century in the level of interest rates consistent with stable prices and the economy operating at its full potential. This low interest rate environment may limit the ability of central banks to reduce interest rates. enough policy interest to support the economy during a recession. With this concern in mind, we have been conducting a review of our strategic monetary policy tools and communication practices. Public participation. is at the center of this effort through our events The Fed hears that we have been hearing from representatives of the business, labor and consumer communities and other groups.

The February monetary policy report shares some of what we have learned, the insights we have gained from these events. informed our framework discussions as reported in the minutes of our meetings we will share our conclusions when we complete the review probably in the middle of this year the current low interest rate environment also means that it would be important for fiscal policy to help the health of the economy if Putting the federal budget on a sustainable trajectory when the economy is strong would help ensure that policymakers have the space to use fiscal policy to help stabilize the economy during a recession.

A more sustainable federal budget could also be weakened. support the long-term growth of the economy, finally, I will briefly review our planned technical operations to implement monetary policy. The February monetary policy report provides details of our operations to date. Last October, the FOMC announced a plan to purchase Treasury bills and conduct repurchase operations. These actions have been successful. providing an ample supply of reserves to the banking system and effective control of the federal funds rate as our bill purchases continue to build reserves toward levels that maintain ample conditions, we intend to gradually abandon the active use of repo operations as well as reserves reach a lasting level. broad levels we intend to reduce our purchases at a pace that allows our balance sheet to grow in line with the trend demand for our liabilities all of these technical measures support the efficient and effective implementation of monetary policy are not intended to represent an opportunity sorry a change In the monetary policy stance, as always, we are ready to adjust the details of our technical operations as conditions warrant. thank you.

I hope to thank you. I now recognize myself for five minutes for questions in December 2019, when the OCC and FDIC issued a notice of proposed rulemaking on the proposed Comptroller departures the Federal Reserve did not join this proposal Mark Gruenberg, member of the board of directors of the FDIC, voted against the Comptroller's departures proposal, describing it as a deeply ill-conceived proposal that would fundamentally undermine and weaken the quote-unquote Community Reinvestment Act. In remarks last month, Reserve Board Governor Federal, Brainard, said that quote: Since reforms to CRA regulations likely set expectations for a few decades, it is more important to do the reforms correctly than to do them quickly, which requires sufficient time for external stakeholders. and analysis to provide meaningful feedback on a range of options for modernizing regulations, quote Chairman Powell Governor Brainard also suggested in a speech last month that the Federal Reserve created a database of 6,000 public assessments of the CRA, analyzing how various CRA investments support low and moderate incomes. communities, has the Fed used this database to evaluate how the Bank's activities would be evaluated under the OCC S and the FDIC proposal?

The CRA. If I understood your question, it was whether we have used our database to evaluate your proposal, that's right. I'm not entirely sure that we've done that, maybe I can provide a little bit of context, if that's appropriate, if I may, which is that we agree that this is a good time to update the CRA in light of the technological and demographic changes, and we agree on the final objectives, we worked hard on this, we tried hard to be on the same page and we couldn't do it, we have some different ideas, since the Federal Reserve intends to make this evaluation, Excuse me, will you be attending to do the evaluation?

I am referring to the database for evaluating banking activities. You know how assets would be evaluated under the OCC and FDIC proposal for the CRA, so the real goal of that term in that database was for us to create our own set of metrics. We want to be very, very confident that whatever comes out of this is a proposal from us that will leave all the major CRA participants better off, so we think it's important that every metric and every change we make is data-driven. . and that was the purpose of helping us develop our thinking and our proposals and that's essentially what we've been using it for, so given the magnitude of the reform and the CRA regulations, do you think the comment period should be extended to allow the public to weigh? participate in such an important task, that's really an OCC decision and the other one, I know it's Lowe's decision, but what do you think?

I think it's not our role to comment on their proposal, where we have our own work and our own ideas that we'd be happy to share, but it's really up to them to make that decision. Are you completing your assessment? Will you continue searching until you reach a final decision? We're ready, don't you think? the public should have the opportunity to have more time to do that too and they will when the time comes. I mean, I think at the moment what we're doing is we're looking forward to reading the comments on the proposal. I think we'll all learn a lot from those comments and be able to incorporate that thinking and whatever changes are made to the proposal, There may be substantial changes to the existing proposal that arise from the comments, so I think our view is that we want something that leaves everyone better off and has broad support, and that's what we're going to work on well, as you know. all the Democrats on this committee.

Regulators must provide a public comment period of at least 120 days on any major CRA reforms instead of the 60 days that the OCC and FDIC have provided to Community Bank. State regulators and community groups have asked these agencies to extend the comment period and although you said it is not your place to comment on whether this should be extended or not. I wish you would think about this and I wish you would do so as you do the review and, as you said, it is important that the public can comment on the review. what you're thinking and if you change your mind, let us know whether or not you should extend the comment period.

You don't need to respond. Thank you very much, the gentleman from the ranking member from North Carolina, Mr. McHenry is recognized for five minutes, so he is always rich, so when someone else has a negative comment about the Federal Reserve, that is bad, but when I, as a policymaker on the hill, have a negative comment about the Federal Reserve, it's good, so it's all about the eye of the beholder when it comes to the political debate here in Washington Congress made the decision more than hundred years of outsourcing monetary policy to the Federal Reserve you are a construct of law, you have independent operations and you have a fixed term of office and therefore the independence of the Federal Reserve for monetary policy is appropriate and, Since a long time ago, every president in the last 100 years has received some private criticism and at some point we become aware of that criticism, either through press reports at the time or later or some biographers work on the president, but here on the hill we can make negative comments about the Fed and attack the president for having negative comments about the Fed, so this is all just rich politics, let's get to the heart of it.

The biggest regulator in town when it comes to the financial world. I am concerned that I want to address our regulatory nature, which I think affects monetary policy, the repo market, for example, these operations that you said are temporary in nature, are still true. Yes, our expectation. is that we will continue our bill purchases at least until the second quarter and we will continue with harvest operations at least until April and in the sense of April, that is, we are accumulating a level of reserves for a level that will mean that we will not have to engage in open market operations on an ongoing basis and that will take that period of time and as the underlying level of reserves increases due to our bill purchases, the need for repo will decrease and sometime around mid-year we will reach that level of ample reserves from that moment on the balance will grow to a trend demand for our liabilities we will continue to expand with the economy and we are you. making a review of its capital requirements for institutions that should participate in the repo market.

Well, I think we have reviewed the supervisory and regulatory practices that may be affecting the flow of liquidity. Our main focus, of course, is thefederal funds market. our ability to transmit our policy decisions seamlessly to the money markets through the federal funds rate. What happened last September in early September was that there was unusual tightness and volatility and we attribute that to the fact that what appeared to be ample levels of liquidity did not float where they should have and it is very strange that we actually do two things: one, we are raising the underlying level of liquidity towards us by raising reserves to a level that is higher than what we had thought we needed and that process as I mentioned will take until mid-year and part of that is also a supervisory assessment to ensuring that policy is being driven in terms of the institutions, that's fine, so we've been doing that since September, so I raised this in my opening statement on China, now that you've spoken publicly about your assessment, you're thinking at the See what's happening with China's response to the coronavirus, we wish you the best, we have high hopes that you can address this crisis, this public health crisis that you're facing, but explain to me your thinking and assessment of the situation in China now. in terms of the economy and that potential spillover effect, so I'll start quickly by saying again that we find the US economy is in a very good place performing well, we see signs that global growth is bottoming out, we see a reduction in trade policy uncertainty, in general, we see strong job creation, continued moderate credit, all those things that we see, all of this is happening in the context of a strong and good US economy, and that includes the coronavirus, so the question is how do we think about that, of course, first we look at the human tragedy, which is terrible for us, the question for us really is what the effects will be. in the US economy, will they be persistent?

Will they be material? That's really the question. I think we know there will be effects on China for part of the first half of the year and also on China's close neighbors and its major trading partners in Europe. like Asia and we know that there will most likely be some effects in the United States. I think it's too early to say that we have resisted the temptation to speculate on this, so we will be watching it closely again and the question we will be asking is whether these will be lingering effects that could lead to a more material reassessment of the outlook, a question duration and whether or not it is a temporary interruption.

Yes, thank you, the lady from New York, Mrs. Valez gas is recognized for five minutes. Thank you, Chair, Chair Powell. I would like to follow up on Miss Waters' question about the CRA. What aspects of the proposed changes to the CRA do you find most concerning? So, again, I would like to ask if Maybe it's not so much about commenting directly on the other proposal, but rather talking about how we are looking at this and again thinking and I will mention the areas where we have differences. Okay, I hear you and I respect that, but I would just like to ask you if the Fed can't come to an agreement with the OCC and the FDIC on a joint rule, do you expect the Fed to issue its own proposal?

We have not made a decision on this yet. Right now our focus is Our focus has been on trying to get on the same page, we haven't been able to do that now our focus will be on learning from the process and I think we will learn a lot if you meet periodically with OSI OCC and FDI C on this issue, so we did for a long time, we currently haven't met with them about this, so would you agree with The governor comments that it's more important to get the rule right than it is to get it done quickly.

Yeah, I mean, I think that's been our focus and will continue to be. Thank you, Chairman Farrell, as you know, Representative Porter and I have been concerned about the increasing dependence on banks. cloud-based service providers for data storage needs, does the Federal Reserve have all the access authority it needs or are there contractual or legal limitations that restrict the Federal Reserve ABI from obtaining the data held What third parties do you need to properly understand and manage this growth? Trust I think we have the legal authority that we need, we can look to third-party service providers and we're doing that more and more because of, as you mentioned, the prominence and size of these cloud service providers. thank you, you're back, the lady from missouri, mr. she recognizes herself for five minutes.

I thank the president and thank you for being here, friend president, we are all very interested, since it happened on January 29 to increase the peak of the repository. I know the ranking member mentioned it. I know you're in the middle. from your review and stuff like that, but could this have a slightly more specific question? Could this turmoil in the repo market be symptomatic of deeper difficulties for the financial system? It really doesn't seem to be that way at all, since since we took the actions that we took in early September, the repo markets and the money markets have been performing very well, there has been no return to volatility, they were operating very normally, actually not including the end of the year, so we haven't had any return to that, it's pretty clear that the measures we take directly address the issue.

You know, when the drug is working, you can really see and it seems to be working well here and we had a confluence of things that happened, I know at the time, with the quarterly federal taxes. along with the auction of the debt treasury of something over I think around 78 billion, it wasn't like that, yes, I think it was a function of maybe this, this coincidence, could you call it, we knew all that, the other The thing is that we knew that and what we did was ask the banks to tell us what their lowest and most comfortable level of reserves is.

Thank you, we got those numbers, we added them up, we put a cushion on them and it still suggested that there were There were a lot of reserves in the system and this happened and I think that makes us think because we knew of those big changes that were definitely on the horizon, well , and you're doing a review, you know, I hope you do. I discovered that there is nothing symptomatic of deeper difficulties and we hope that the page will turn. Chairman Powell in December of last year I asked Vice Chairman Quarles for an update on the status of the g-sib surcharge update and plans to finalize the stress capital buffer proposal, which I understand will require a break with the comment period in In January, Vice Chairman Quarles gave a speech in which he discussed bringing reasonable transparency to various aspects of the Federal Reserve's regulatory and supervisory framework last week.

The Federal Reserve released the search for our stress testing scenarios, as far as I know there has been no progress or update on the status of the stress capital buffer other than continued assertions by you and Vice President Corals of which aspects of the proposal will be incorporated into the

2020

report. C Orders given the recognition by the heads of the Federal Reserve of the importance of transparency I guess I am concerned about the lack of transparency in this process, when can we expect progress on this proposal? “My God, it’s been in the works now, I think,” April says. 2018 we are still waiting and we intend to have the core of the stress capital buffer incorporated into the framework in time for the

2020

stress tests, so we are making progress on that and we are on track to achieve what you feel. interact to do that, so yeah, okay, Republicans on the committee have underscored the importance of cyber threats as a potential systemic risk.

We've recently seen malware attacks undermine government infrastructure and, according to research last month by economists at the New York Federal Reserve, a simulated cyberattack on just one. important usa The bank could have indirect effects that would impact 38% of the wholesale payment network. What can the United States do? do better, Chairman Powell, to prioritize this steady stream of cyber risks and strengthen the resilience of our financial sector. I think we can continue, and we have to continue, doing what we are doing, which is making this really a maximum, if not the maximum, supervisor. priority not only for the banks but for the Federal Reserve and for institutions throughout the American landscape.

We have very high expectations, especially from the larger banks, in terms of their ability to defend against cyber attacks that we constantly encounter within the government, to ensure that our system is resilient, redundant and strong against cyber attacks, but there's never a sense that it's gotten to a comfortable place, we just have to keep working and stay in the minute learning what the new attacks are, making sure that the banks are doing the basic housekeeping and all of that is in process and you know that you will have to continue like this. I think for a long time.

I thank you that my time has expired. Thank you very much for being here again. Jaron Powell and me. Give me back the gentleman from California mr. Sherman also chaired the Trinova Investment Subcommittee for five minutes, a couple of responses to what the ranking member had to say: Yes, the stock market has raised wages, they're up a little over 1% in terms real after inflation, wages in the have increased primarily in those states where we increased the minimum wage and when we have a Democratic majority in both chambers we will increase the minimum wage across the country and we will effectively address and address those states that have not seen such expansion of wages in the background I have not aged completely but I have spent many decades in this room I have seen your predecessors predecessors predecessors and every time they come in and the Republicans attack them for an expansionary monetary policy both traditional and new and now we have a new president and suddenly they are pushing the other side, all I will say is that I have done it consistently since the days of mr.

Greenspan has been pushing for somewhat lower interest rates and expansionary policy, particularly quantitative easing, because last year he returned $55 trillion to the Treasury and that I don't know what his purpose is, but think about the children that they will receive an education because we could finance the aid. to local education, think about medical research and the lives that will be saved because we were able to fund medical research. I don't think that the 55 billion should be considered irrelevant or a shame and, finally, in terms of the job growth that we will have. What I've seen recently, I should point out is that jobs grew much faster in the last three years of the Obama administration than they did in the first three years of the Trump administration.

It's like Trump inheriting a plane, like he inherited a lot of other things the plane was involved in. autopilot and he was going in the right direction and he didn't completely screw it up, we have an issue that I think should be completely bipartisan and there's LIBOR that's going to hit us in a couple of years, Chairman Powell, should Congress just give the Fed Federal the right to prescribe support rates when debt instruments do not or should we explicitly adopt Sofer or what can we do and hope to do this year and solve the problem 12 months in advance, so with LIBOR like you?

We know that our process is ongoing and we are really committed to having banks ready by the end of next year to abandon LIBOR if that date is no longer published. It's good, they need to know legally what to switch to and we. They want to avoid multi-million dollar lawsuits when someone can say it should be this instead of that. Not only do they have to have the technology to make the change, they don't have to legally know what they are supposed to do if we need a change in federal law, they will. we will make knowing.

I think well, now we have less than two years. Have you not figured out if you need a change in federal law or I don't think we think we need it? a federal law would change well if it could give us an answer because there are people who want to wait up to two or three months before things blow up and then come to Congress and say now fixing it two years is actually too short a time because we are hurting the economy today because you and I are talking about this and there is a slight risk of litigation and uncertainty around legacy LIBOR and we should eliminate it, that's one of the things we can do to help the economy. so I hope you will act within a month to let us know what you proposed instead of waiting until next year.

Another area we have talked about before is the bank transfer system. We have seen one hundred and fifty million dollars lost to scams and Those scams arise mainly because when you transfer money you do it to a number but notThere is no beneficiary identified. The British have resorted to a beneficiary confirmation system. The international standards organization has prescribed changes that would at least require identification of the beneficiary. We do not. I know you've raised state law issues. I've discussed that I don't see what would stop the Fed from prescribing what the wire transfer system would be and it looks like I'll have to ask you to come back as soon as possible for the record.

Regarding that question, the witness is asked to give an answer and write for the record the gentleman from Oklahoma, Mr. Lucas is recognized for five minutes, thank you Madam Speaker, Chairman Bell, during his testimony before the Joint Economic Committee last year. In his testimony, he was asked what steps the Federal Reserve is taking to assess the impacts of climate change on our financial system. The distinction between the purely informational stress test for climate risk carried out by the Bank of England and that carried out by the United States. The underwater car's stress testing regime affects and informs capital requirements for capital distributions.

As I understand it, the Bank of England is carrying out research and asking financial institutions to look at their portfolios and how they might be affected, but they are not currently integrating those measures. On capital requirements, could you describe some of what the Federal Reserve is doing in terms of research and engagement on global climate risk? Of course, I should start by saying that climate risk is a very important issue. Climate change is a very important issue that Congress has largely allocated. However, for other agencies it influences our work as it relates to the public's very reasonable expectation that we will ensure that the financial sector of the banks of the utilities we supervise are resilient to long-term risks. and climate change, so that we can What we're doing is we're in the early days of understanding what all of that means and that's why we're working around the world for central banks to try to figure out that, you talked about the central , the Bank of England stress tests, you know, are not intended to inform current capital requirements, but are more informed to understand what the effects could be on banks if they plan to join the network to green the financial system .

We have not made a decision on this yet. We have always attended their meetings. I guess my theory is that it's you when you join an organization like that. You don't necessarily know how to sign up for everything that everyone thinks you can. benefit from the work that is being done there, work doing that, now we have not made a decision on membership, the vice president's disputes recently outlined changes that would increase the transparency and accountability of oversight and I was encouraged by those comments and by Of course, I will follow them closely. One change the vice president described is that the Federal Reserve should reinstate supervisory observations that allow a supervisory concern to be reported without it rising to the level of an issue requiring attention.

Can you tell us what the timeline that you see in those proposals to improve the oversight timeline is hard to say. I mean, I would just say that what the vice president did was point out this tension that exists between very fundamental expectations of transparency and fairness of due process around everything that the government does and should have been. associated with that, but also with supervision that by its nature is private and somewhat discretionary, not public and confidential really, so he pointed out that tension and the need to shed more light on that and ask if there are places where supervision must be incorporated. more than those who process thought.

I think it's a very healthy thing to think about and it's something we will be working on in light of the coronavirus. President. I can't help but think about when I was young, when I was a child. I spent a lot of time with my parents, my grandparents, I should say, my great aunts and uncles, they were born just before, just after the previous century, so their accounts of first-hand experiences in the pandemic of 1918 and 1919 were very graphic as they passed. Rural western Oklahoma and the reason I bring this up is your description of that particular virus at that particular time in that particular rural society, it literally made everything stop for weeks in rural western Oklahoma.

Now my mother's family, my father's family, they were very lucky. one died from what was called the Spanish flu but it brought society to a halt. The reason I ask is with 43,000 cases worldwide and the critical impact in China. Could you describe for a moment how China and its neighboring countries are responding to the economic impact of the coronavirus in general and from your country's perspective? I think the central banker colleagues in those countries are really responding now to the outbreak to contain it and the Chinese government has obviously taken very strong measures on this. Businesses are seen closing in the affected areas.

You see that kind of thing. In terms of economics, as you asked, the People's Bank of China has done a number of things to support economic activity and I think the Chinese government can be expected to do many things to support economic activity and they have said that they are all open to cushioning the economic effects. We are not, we are not seeing. You know that we cannot estimate the size of the economic effects. There are a lot of estimates out there, but I think you'll see. governments that act in Asia, particularly in China, to compensate for those.

Thank you, sir. president give way madam chair the gentleman from new york mr. Meeks, who also chairs the Subcommittee on Consumer Protection and Financial Institutions, is recognized for five minutes. Thank you Madam President, welcome sir. President, I mean, initially you touched quickly on asymmetric growth. It has been discussed that in my community and others, 40 percent of Americans do not have adequate savings for a $400 emergency, and similarly, one in five Americans skips essential medical care or misses important monthly payments. . bills due to lack of funds, so ultimately a large portion of the population is also underbanked or unbanked and we've talked a lot about that in the community and on the committee that I chair the subcommittee that I chair, so my first question So why haven't circumstances for low- and moderate-income Americans improved more rapidly in recent years?

Given the so-called state of the economy, the pattern was that at the beginning it was more high-level people. those who had just left the labor force perhaps returned to what we have actually seen, although in the last two or three years wages have increased more at the lower end of the wage scale, so we see it during this same prolonged expansion has significant effects now in low and moderate income communities and it's great to see where, as I mentioned, if our Fed is listening to events. We've heard a lot about that, so it's very positive that you know more about your point, although you know to wait. for the eighteenth ninth tenth and eleventh year of expansion is not really a strategy, you know, we see those things now because the labor market is strong, but we really need it, really other programs to address the problem longer term. - needs of those communities in addition to the economic cycle and monetary policy, so also during this period of time, would you say that several of us have been discussing and are finally moving towards a minimum wage of $15 an hour for the people below?

Would you believe that has anything to do with helping them? Also the fact that many states have adopted a $15 higher minimum wage than would have been implemented. I'll answer your question directly, first let me say that of course, we don't take a position on the minimum wage, which is a classic. I had a position from the beginning that legislators should have. I get it, so there is research into what exactly is driving wages at the lower end. It suggests there is a role there. for minimum wage increases, states that have had minimum wage increases have seen that there is a noticeably larger increase, but it is actually much broader than that and the most important factor is actually very low unemployment and a labor market strong and high job creation. that's the main factor so the other concern I have because it also seems that as unemployment goes down, yet when you look at black unemployment, it's still almost double that of light unemployment and it seems to stay that way if the cycle is a down cycle or an up cycle, so is there any sign of how we close those gaps?

And I because there are always these gaps that seem to occur between the African American community and white people. You know it's good. In the economy, that gap remains the same, there are persistent gaps and they are very worrying and are not something that monetary policy can address in the long term. It really depends on other government policies, state and local governments, the federal government and Frankly, businesses also need to do what they can to close that gap that we have is a tool for interest rates and what we can do is support the objectives they have given us, maximum employment and stable prices.

We see positive effects from that, but in the longer term. Running it really needs broader education policies and other things that would help with that problem, let me ask. I know that Chairwoman Waters asked some questions about C. All right, some questions came up that maybe you could answer, you know, boy, the framework that What Governor Brainard put forward not long ago is that the same framework of the Board of the Fed is just something that says it's just their opinion and not the board's so maybe you can clarify that. I seat similarly to Governor Brainard, so we haven't actually brought a proposal to the board yet, but it doesn't represent the idea that she's been working on this and I asked her to lead this effort for us, she was ahead of the curve. of that committee for a long time.

At some point I feel very comfortable with the thinking that's in that speech and you know, I support that set of ideas and that approach, but it's not a place where we can say that it's a Federal Reserve proposal because we haven't taken it to the board of directors, but thank you, gentleman from Florida, Mr. Posey is recognized for five minutes, thank you, Madam President, Mr. President, the world is experiencing a dramatic growth and space economy and many are talking about the expansion of civil space launches. I represent the Kennedy Space Center and we are obviously very excited about everything that various estimates now place at the current level of global space. economy to more than $400 billion a year with a growth rate of 8 percent from 2018 to 2019 In December, the Bureau of Economic Analysis announced the creation of a Space Economy Satellite Account, a new collaborative effort to measure The relative importance of the space sector in the US economy, with special emphasis on the growing commercial space segment, this effort will utilize input from industry experts and multiple government agencies.

Obviously, I remember that over the years the Atlanta Federal Reserve has applied its expertise to report on the economy of the space district. The first question can you work with me to ensure that the Federal Reserve joins this multi-agency effort with an eye toward avoiding financial bottlenecks and keeping this important space industry on track for a healthy growth rate. I'm the first one I hear about. Surely it was. I'm happy to assure you that we will look at it closely and, if it is something that is productive, we will engage over the years. We have developed a fairly expansive policy of independence from the federal reserve and I believe in guaranteeing freedom. of the Federal Reserve to act independently on a day-to-day basis to manage our economy and critical payments system.

I wouldn't expect you to remember Congress or any other official or government getting involved in a decision by the Federal Reserve, chairs the Open Market board. The Federal Reserve Monetary Policy Committee and I, Congress, do not direct day-to-day monetary policy and Congress does not direct generals on the battlefields, nor should we prevent the GAO from routinely conducting monetary policy audits. defense policy and strategy, but the GAO is restricted from conducting policy audits of the Federal Reserve. I am challenged to understand how policy audits of the critical national defense strategy are fine, but policy audits of the Federal Reserve are off limits;

The defense industry is surely at least as sensitive as monetary policy and I like your thoughts on this, which is why the GAO does not conduct policy audits onthe Federal Reserve constantly in all places at the Federal Reserve, with one exception and that is our specific monetary policy function that Congress chose a long time ago to create a bit of a step away from the GAO to underscore our independence. I think it was a wise move. I think changing that would clearly be seen by the public as inflexible. You know, a decrease in our independence. We look to this committee and the equivalent Committee on the Senate side for oversight of monetary policy in our system of government.

You know, our path to oversight and transparency goes directly through this committee and also through the Senate Banking Committee, so that's us, but anyway, that's what I would tell you about the GAO, what do you think makes the Fed more immune to review than the defense? Well, what is the rationale behind the ideal? Again, everything we do in payments and financial regulation, every single thing we do is subject to the Gao audit, and it's you know these are policy audits, it's not like a financial audit, the public needs to understand that We are audited, our business model is actually as simple as that, being a very small media outlet, it is not complicated and we were constantly audited to know what this exemption does.

Is this what prevents the GAO from going in and looking at when evaluating individual monetary policy decisions that Congress thought appropriate, you thought appropriate, your Congress thought appropriate to exclude from the law and, again, I think it was appropriate and I think it would be unwise to take a step back. I don't see any damage. He's doing fine. The former

chairman

of the Federal Reserve has indicated that they simply did not want to be second guests in their decisions that the public really has no right, no, that seems illogical to me, frankly, and that is why I ask you these questions.

I mean, we were very transparent, we published minutes, we published transcripts, I know we published, we published everything, but and and it's just you. I know I think the waiver is overdue, the gentleman from Missouri, Mr. Clay, who is also Chairman of the Subcommittee on Housing Insurance and Community Development, is recognized for five minutes. Thank you Madam Speaker and thank you Speaker Powell for being here today. Most voters in my congressional district are not focused on the maintained dial. at the 30,000 level but just trying to make ends meet, in fact, the st. Louis Fed in an essay as part of his series on the demographics of wealth examines the connection between race or ethnicity and the accumulation of wealth over the last quarter century, was the result of an analysis of data collected between 1989 and 2013 through from the Federal Reserve's consumer survey.

Finance More than 40,000 heads of households were interviewed during those years. The median wealth levels of Hispanics and blacks are about 90 percent lower than the median wealth level of whites, but the median income levels of Hispanics and blacks are only about 40 percent lower. The larger racial wealth gap could be due to Hispanics and Blacks investing in low-yielding assets like housing, as well as prohibiting borrowing at higher interest rates. Hispanics and blacks may also feel less need to save for the future because society's progress and old-age safety net programs will replace a relatively larger proportion of the normal income they earned during their working years.

Could you comment? Why do many communities continue to lag behind and how could the Federal Reserve, through its monetary policy, seek to address some of the underlying factors that have led to high inequality? What can we do and what can we do? What we have been doing is taking seriously his order to seek maximum employment and that is what we are doing. I think we've learned that we just learned because we've been watching what's been happening, that unemployment may be lower than many have had. It's expected without raising inflationary or other concerns, so that's what we can do and will continue to do and I think that's playing out in communities around the world.

I think other governmental and other tools are necessary to address long-term problems, such as how can we address wage inequality, how can we convince corporate America that it does this country no good to have a persistent pay inequality among its workers, especially when you look at the disparities within and within careers and to pay unequally, shall I say? I think it is important that those issues be addressed; actually, it's not for the Fed to prescribe the measures, to address them we have to stay in our lane, we have this grant of independence, including the Gao waiver, and I think to maintain it We have to continue with what you have given us to do, which is maximum employment, stable prices, supervise the banks, examine their finances there, on another topic.

Well, the Federal Reserve is releasing its own proposal for the Community Reinvestment Act, one that takes needs into account. of low- and moderate-income communities, we have not yet made a decision on this. I think our focus right now is on the ongoing process of the other agencies' proposal and comments. I think we are going to learn a lot from those comments. and I suspect there will be changes to that proposal as a result of the comments and, as you know, we have not made a decision on our own proposal. Well, traditional monetary policy works through a single variable for the entire economy, a single interest rate. rate or perhaps the money supply of credit growth credit policy on the other hand aims to direct credit in specific ways towards specific groups of borrowers credit policy consists of central bank operations directed at specific segments of the private debt and credit market values ​​What is your opinion on the change from traditional monetary theory to one that involves the use of more tools to improve the indebtedness of a segment of society?

I think historically that has not been a function of the Federal Reserve and central banks in general. As you pointed out, a tool that is our interest rate policy when talking about affecting different sectors of the business community or population, should really be another agency or Congress itself on fiscal policy instead of the requested witnesses . to continue thank you the gentleman from Missouri mr. Luetkemeyer is recognized for five minutes, thank you Madam Chair and welcome Chair Powell. It was a pleasure to see you, sir. I'm sure he sold the speech and probably read or listened to Vice President Quarles' speech about the need to reform banking supervision in one area.

What I think needs clarity in the supervision regime is the role of guidance. I lobbied regulators to clarify the pathway for using the guidance and in 2018 submitted an interagency statement on the guidance. Our Vice President Quarles in his speech urged an additional step to develop standards. guidance role this fits with the Trump administration's recent and recent actions outside the budget management office. My question is, do you think we need an official rulemaking from the Federal Reserve on the guidance role that we haven't made a decision on? Like the other agencies, we are evaluating the OMB memo, as you know the guidance is not enforceable, it is not, so our understanding is that the guidance is not a rule, sir.

Quarles was here recently and I think he made the comment that he intended to look at all the guidance and separate out what he thought should be under the Rule and then clarify the rest as strictly guidance and I think that's a great approach, but I think the question is if you anticipate a rule to be able to do that and force it in the future and therefore you are trying to do that, that is something that we are looking at and we are considering our guidance and and asking if something should be like that is more like a rule, okay, sir.

Quarles also discussed how the regulations have a framework under the Administrative Procedures Act, but there is no real framework for supervision and you use AIESEC arles ik as an example of supervision that was carried out without adequate supervision and has no guardrails specific. In fact, the GAO said this. should have been carried out as a regulation do you think we need to change the ik lists and what should we do with the companies that are already under this regime? So, I would agree that it is appropriate that we draw clearer lines around ik list membership and as Vice President Quarles mentioned in a recent speech that that is the path we are on, okay, very good, Something that worries me a little is the fact that we have many banks and non-bank entities that are dedicated to home mortgage loans.

Nonbanks overall completed approximately $250 billion in 2016 and are expected to triple next year to $750 billion in 2019. Nonbanks originated 85% of all securitized loans guaranteed by Ginnie Mae. 53% of Freddie Mac sold loans and 60% alone, so Freddie Fannie Mae and non-bank mortgages make up 87% of the FHA portfolio and its most recent F-share report. Nonbank mortgage originators were designated as a potential systemic risk. You are a member of F sock. Can you explain that? Or would you like to talk a little about that? Do you have any concerns or that obviously F Sock did what you mentioned? We've looked at that at F Sock and I think it was part of the recent annual report. that the idea is that these are now very important channels through which mortgages are originated and in the event of a recession the banks have high capital, they have a lot of regulation, a lot of liquidity and that is in a good place, but these institutions sometimes they're operating under, you know, funding themselves with lines of credit that might not be available, so there's a risk there and we're in the process of evaluating that and determining what to do about it, you know, the timeline for killing it, which We have highlighted how it is a risk and we are working on whether you have a timeline for what you could do with a statement and say that you will or will not do and if you want to do something, whatever it may be, I can come back to you at this time. it's something that the Treasury has the lead on, but okay, very good, one of the things that worried me a little bit also regarding home loans is just the stack of forms that you have to fill out.

I mean, we had a gentleman here who represented, he was actually crediting at the time, but the stack was literally this high and I asked him how many pages are there, he said Congress, we don't know, I measured it by the page, we measure by the pound, I said this, that's how it is, that's how it is. the graphs we got when you have such a high stack of papers to grant a mortgage loan. I've talked to the FDIC and the CFPB and I hope we can engage them in a way to reduce that to where it is manageable.

There are still protections for the consumer when signing a loan and there is enough information that allows the bank and regulators to see it, but this has to change, it can't continue to grow, this is crazy. you have an opinion on it, well, to the extent that it's not legally mandated, many of those things are legally mandated by state law to the extent that it's not and we try to make assessments about what is necessary and what not, but it is a great challenge. I agree that I just want to state for the record that I didn't ask any questions about Cecil today.

Thank you so much. The knight is returned to the Georgia knight. He recognizes Scott for five minutes. Welcome to President Paul. It's good to have it. President Powell regarding the library. The Alternative Reference Rates Committee is following New York legislation to address legacy contracts in New York State. The feds support federal action in that regard. Scott, so it's actually some members of the arch, the alternative reference, our committee itself is not looking for legislation, but some members have approached the New York legislature, you know, in terms of the need for federal legislation, We haven't gotten to a point where we think it's going to be necessary, we have plans to do it, if we think that that federal legislation is necessary, we'll come tell you and, by the way, we understand that that's not something you can do in 24 hours. , so we will know that The timing for that will soon be very good, let's move on to Britain for a moment.

UK regulators have been very direct with their financial institutions and recently set a target for their institutions to cease LIBOR-based lending by the third quarter of 2020, so why? The Federal Reserve has not been as direct and does it have plans to establish clear goals and guidelines for its regulated institutions? Yes, we will, we will. At some point you may have seen thatFannie Mae and Freddie Mac have said they will not accept. LIBOR refers to mortgages after or sometime later this year, so those kinds of things will start happening now. I think well before the deadline which is late 2021, okay, and Chairman Pao, the Fed board recently finalized their rule on accommodation with hope. to provide clearer and more well-defined risk indicators to determine the regulatory requirements imposed on companies based on their size and risk, but the board has never revealed or provided clear, quantitative criteria under which companies must fall under its improved supervision regime that is called the Coordinating Committee for Supervision of Large Institutions and even its vice president, Mr.

Quarles recently gave a speech in which he said he would like to align his portfolio with the tailoring categories and make the designation a fairly transparent criterion and even recently indicated that he agreed on the need for clearer lines, so could describe what changes? Ford is considering creating this oversight framework. We are in the process of working out the details, but I agree that we should provide more clarity on what an allistic company is and that will really be category one. Thank you. You know, let's move on to a and you are a great man and a good man a good friend I respect you enormously but a president's problem the Federal Reserve is the axis of our financial system you are the most powerful regulator and I want you to stand up To Mr.

Adding that he comes with this rule making changes to the Community Reinvestment Act, let him know that you not only have a mandate for inflationary monetary policy, but you also have a dual mandate for jobs and here's the other thing you should remind the Mr. Harding that this piece of legislation, this law, the Community Reinvestment Act, is valuable to the nation, but it is valuable to African Americans more than anyone else because unity civil rights is a voting rights law that addressed the great problem that African Americans face, financial stability and the two anchors for that are a house, owning a home and having a job, and this bill was the bill that outlined the red lines that kept African Americans away , he needs to return home, for that he must assume his power and this and let him know that You are serious and to back off this rule changes to the gentleman from Ohio, Mr.

Stivers is recognized for five minutes. Thank you Madam President. I thank you for holding this hearing. Good morning, Mr. President, how are you doing today? Great stuff, great, thanks for being here. I want to ask some yes or no questions that you covered in your testimony, but just to remind everyone that the labor participation rate is now 83 point 1 percent, increasing over the last three years are that right, I think. which is the optimal age, sorry primate, that's the optimal age for adults, sorry, yes, it has increased or decreased in recent years, yes, and wage growth has outpaced inflation for workers in recent years three years, well, at least that's how it is. it's currently outpacing inflation, right, yes it is and it's good, wage growth has actually increased in the last four quarters by about three percent in terms of foreign and annualized rates, that's right correct in recent years if we look at a variety of measures. than you would see wages increase about three percent and we have historically low unemployment rates for Americans and Hispanics.

Is it that correct? So the fundamentals of the economy are in pretty good shape. Would you say that is correct? I would say I did and you thanked him for that testimony, which is why your colleague at the Atlanta Federal Reserve recently stated that economic and economic expansion does not die of old age. I think it's a great quote given that the fundamentals of the economy are solid. Do you think many companies? and investors are trying to convince themselves to enter a recession. I don't think so and I certainly hope not. There is no reason why the expansion cannot continue.

There is nothing in this expansion that is unstable or unsustainable. Great and I think the fundamentals. They are strong, but I think a lot of people are worried and, you know, I hope they don't talk themselves into a recession. I agree with you on that, given that about two-thirds of all lending for capital formation occurs in capital markets. I'm curious what the Fed is doing to coordinate this year with an Exchange Commission and the CFTC as prudential regulators of the capital markets to ensure that there is real coordination in the capital markets. Well, I mean, so the SEC really and the CFTC really have primary regulatory authority for those markets and you know we have supervisory regulatory authority over banks where we really overlap is in the public financial market services where we regulate some and the SEC regulates some and the CFTC regulates some and We collaborate on all of that, so we collaborate pretty closely on that well.

I urge you to increase that collaboration because the lines between securities banking and capital markets are blurring more than ever and I would ask you and Vice President Quarles to redouble your efforts. efforts for that coordination because I hear from some of the companies that are regulated that they feel that it is not coordinated, so if you could redouble those efforts, I really think that would pay dividends to the American investor and the American economy. A couple more quick questions here: what do you think is the most important risk to the financial system today? I mean, I have to start by saying that I think the financial system is strong and has become materially stronger since the financial crisis, particularly the banks.

High liquidity and high capital stress tests keep them on their toes and now they are there, they have real resolution plans. None of that was really implemented before, so I think the financial system in general is in a good place, you know what worries us. many are cyber attacks. I think we have a great game plan for traditional problems, you know, like bad loans and things like that, it's more cyber attacks, it's really the frontier where you were worried and we work very, very hard to get all the agencies to do it. Everyone works together, the institutions themselves work very hard, but I would say it is an important approach, thank you and an interesting note, Mr.

President, you are in line with the CEOs of the largest institutions. I asked them the same question and the consensus, although not completely an agreement, was unanimous that the problem was cyber attacks. I think Congress should focus on that. I think our regulators need to focus. Two quick things about this because I'm running out of time. I know you're focused on the library transition and so far a few people have asked that question. I hope you pay close attention to the impact on both small businesses and our community banks as we make that transition are particularly vulnerable and with respect to the repo market I hope they continue to focus on the origins of the problem that caused it some are regulatory others are market based and I know you are focused on that you and I have had private discussions about it but I would like to see that resolved in a way that does not require providing capital from the Fed in the end of every quarter, at the end of every year, so if you can focus on those things, I'm out of time.

Thank you, Mr. Chairman, thank you to the gentleman from Texas, Mr. Green also chaired the Oversight and Investigation Subcommittee for five minutes. Thank you Madam President. Thank you for appearing today. Mr.

powell

mr. Powell, this is an observation, not a criticism. You indicated that the fundamentals are solid; However, he also indicated in the last Fmoc press conference that he was a little surprised that wages have not increased despite being in an expanding economy, sustained historically low levels of unemployment. and increasing labor force participation the fundamentals are strong, however, nearly half of the 42.4% of American workers in 2019 earned less than $15 an hour the fundamentals are strong, many of the people in my district of Congress, mr.

Powell is more concerned about Super Mark supermarket prices than the stock market. When they go to the supermarket, they are concerned about the price of Procter & Gamble products, not the stock market price of Procter & Gamble itself. The stock market means nothing to them. what they have to pay for products in this supermarket this brings me to my question: has there been a study that gives us an idea of ​​what a wage of $15 an hour will do for the economy? a study on what a $15 an hour wage will do for the economy the Fed has done such a study the Fed has not done that is not something we would do well let me address that if I don't want to be rude, crude and unrefined , but let me draw your attention to a study that I found quite interesting the Carbon Disclosure Project good project based on thousands of disclosures you have concluded that the 500 largest companies by market capitalization are exposed to a trillion dollars at risk now someone could argue that that's probably not something you should do.

Although I understand that climate change is something that is important to the Fed because it will have a global impact, but I think you can take a closer look at this and get the ultimate authority over price stability. in salaries. Let's do a study to determine. What impact will the $15 per hour minimum wage have on the economy? A salary disclosure project. If you could give me some ideas, mr. power, can you help us? Please, there has been a lot of research done on minimum wages and I don't know of any in particular, but there has to be some research on what a $15 federal wage increase is and I agree with you.

I agree. I have read some, but they do not come from the Federal Reserve or the entity that has the dual mandate of price stability, unemployment or employment. It would mean something to the workers if we could get a study like this despite what others have done and these are observations mr. Powell, no, no, criticism. I have enjoyed visiting it despite what others have done. By the way, this would be significant for workers. I think $15 an hour is not enough as a minimum wage. I think it should be at least 20 now, but I'll still settle for 15 if we can get it.

So can we work with you? We will talk to you about the possibility of a salary project or again. I will go back and talk to our work staff who know this topic very well. well and yes many of them have published on these topics so let me go back I'm going to thank you I have 46 seconds and I'm going to applaud you for that personal applause lady chair with that I'll give up Give back the rest of my time. Thank you so much. This is a gentleman requesting a response and writing for the record about this question to the President.

Yes, Madam President. Thank you. The witnesses requested to provide a written response for the record. Thanks sir. from kentucky mr. bars recognized for five minutes thank you madam president president friend welcome back to our committee and first I want to address your testimony about the importance of fiscal policy and supporting the economy in general, what would you say is the delay associated with a major change ? In fiscal policy, well, it can tend to be long, as you know, with monetary policy we can walk into a room and change interest rates and do it, obviously fiscal policy tends to take a lot of work and some time.

I ask you this, let me ask you this way: tax policy has changed profoundly in the last three years. Tax cuts. Deregulation. A less restricted energy sector. Current economic conditions, I'm sure they are, but of course not, we don't try to evaluate that's not really what we do when we look at the economy, but yes, they would be affecting, as you pointed out in your testimony, the U.S. The US economy is currently exceptionally strong, seven million new jobs have been created since the 2016 election, the unemployment rate is at its lowest level in 50 years, more Americans are employed today than ever before, wage growth is the highest in a decade and the lowest-income workers have been seeing the fastest wage increase with 16 percent growth since the 2016 election and just over the weekend, this was the headline on The Wall Street Journal, which I'm sure you'll follow, and the report was that a tight U.S. labor market is pulling Americans out of the at a record pace despite this after Pelosi, the State of the Union speaker the Union last week, said that it was, in quotes, horrible to listen to the president, quote, try to take rennet in quotesfor an economy he inherited, now President Powell.

I'm not going to ask you to intervene or arbitrate an internal political dispute, but when the FOMC directs monetary policy, given what you said about lagging fiscal policy, it's fair to say that this president's policies are impacting current economic conditions. at a high level, of course they let me Follow Rep. Wagner's question about the g-sib surcharge in his response to our letter. You maintain that your goal is to have the quote-unquote key components of the stress capital buffer finalized in time for Auto C 2020. Can you describe in more detail what the key components are and a more precise timeline given the Fed announced last week past scenarios for Auto C 2020, so I think the timeline is that we believe we intend to and we will implement the core of the stress capital buffer in time for the Auto C Cycle 2020, so that's coming up.

I'd rather leave the exact details of that so you know they're still being worked out, but it will happen in a timely manner for the 2020 cycle. Understand, let me try. For a little more detail, do the feds still consider activating the countercyclical capital buffer to be an adequate replacement for the dividend supplement in light of the board's financial stability report from November, which stated that vulnerabilities were not have they been significantly reduced? changed, we haven't made a decision on that about using countercycle fast capital before versus the other approach, we haven't made a decision on that, okay, thanks for that, we're waiting for that decision, final question, the Roundtable of Business.

As you probably remember, announcing last summer that it was redefining a corporate purpose to elevate so-called shareholders above shareholders, a large investment firm recently announced its intention to divest from fossil energy, effectively limiting investment options for investors. customers to a subset of sectors. that tick the environmental social governance box. I am concerned that companies that arbitrarily limit investment offerings based on social and political pressures could suffocate capital to perfect legally productive and profitable sectors of our economy and cause retail investors to miss out on the returns they need. finance your future as a leading voice on the Financial Stability Oversight Board, will you commit to raising this issue with your F sock colleagues and urge that body to examine the extent to which a misallocation of shareholder resources to accomplish tasks Unrelated policies could stifle capital formation, compromise investor returns and ultimately undermine financial stability.

I don't know if I fully understand your concern, but I would be happy to discuss it with you and I know the concern is that if shareholders are not the principals, a primary concern of companies' boards and directors, if stakeholders who do not have an ownership stake in the company are the focus of a corporation, then I would say there is tremendous risk of resource misallocation away from maximum shareholder returns and I would like F shares to take a look at that. At that the gentleman gives in, I will take him to the authorities for the love of God, thank you woman from Ohio, sir.

Beatty is also the chair of the Subcommittee on Diversity and Inclusion. He is recognized for five minutes. Thanks to the Chair and Ranking Member. Thank you Chairman Powell for being here today. Let me also recognize the advocates in their green shirts for being here today and thank you for coming to my office yesterday and sharing what I thought was valuable information with my team. I appreciate you sitting through Chairman Pao's hearing in the latest edition of the Federal Reserve's survey of consumer finances that was released in 2017 and broke out among whites, blacks, and Hispanics when it comes to their wealth. net and we have heard the statistics.

I think my fellow Congressman Meeks talked about it and I'm a few others, so I'll spare you from going over all those details, but What's very interesting to me, while that data seems great for those who are researching the topic, is there a way that your office can break it down by region or city because when we come home this is one of the number one things I hear? People come to my office once they go through healthcare and this is combined with employment and education. The thing is we look at the wealth gap that is widening, it's not getting there and while we talk about unemployment rates improving, many people have to work two out of every three jobs just to try to survive someone talked about the minimum wage Certainly, since we are advocating for a higher number, it is not enough in my district, you would have to earn between $18 and 70 cents and 20 dollars to be able to have a living wage, so the first question is: can this information be located in a region or city to help us as members of Congress when we return home?

The second question is that I recently introduced a bill to close the racial wealth gap. which requires the fed to break down the data even further and this is something I didn't realize until I really studied the fed listening to some of the people like the people here today, they have some really good ideas so so my second question is could you tell me if you would like your people to consider salary as a metric because often when we look at a lot of people they don't work full time but they do have a salary so we could be a little bit more creative when considering. in the data based on some of the things I heard from the group that came and I'm sure they met with their people and you know some of their problems, so I'll start with: can it be? localized, can we entertain ourselves by looking at some of the things that they think we should consider when we calculate or present all the good news that is not good news for many of the people sitting here or in my district?

I think they're probably doing Some of our data people are very happy on the board of governors. Well, you know, they love to slice the data in different ways and we learn every time we do it, we learn things. Actually, I don't know the precise answer to your question. about whether we can do it regionally or in what dimensions we can do it, but we'd be happy to look into that for you and what about some of the individual ideas about how to consider salaries in your calculation? Yes, we can, I think we can. do that, I think well, your people wouldn't be willing to work with them on some of the ideas to at least start from a starting point to discuss it because now we're marrying the people with the power and what a good victory. -winning that would be for all of us since we are really talking about all of our lives and especially those who you know have to work a little harder than the rest of us and then the next thing your agency will work with In my office , I'm very excited about this bill and, as I understand it, part of the reason for requesting the data is that the Fed actually collects the data that sets the policies that are then married to the allocations that go back to the districts, so that I want to make sure that I'm on the right path when I come home and I say I have a bill that asks the Federal Reserve to collect data that can help us in the end is that yes, in the stadium we should have the experts speak directly with you and your staff and tell you what we do and how we do it and how you could be useful.

I don't know if we need legislation at all, but we certainly have excellent sources of data and we slice them in different ways, so why don't we try to follow up with you on that Colorado German thanks, mr. Tipton is recognized for five minutes, thank you Madam President and friend President, thank you for taking the time to be here this morning. I wanted to follow up a little bit on the CRA. We've had quite a bit of conversation about that and we just wanted to. being able to have clarity that the Fed has been involved in the CRA process with the OCC and the FDIC is that correct from the beginning, great and I also want to clarify if you are comfortable not only with Governor Brainard's speech. but the content of his speech regarding the CRA yeah, okay, to what extent has the Fed been doing it?

I know you're talking about doing some of the analysis comments that come in, but being able to work on modernizing the CRA early in the process. We said yeah, it sounds like a great idea, it's a good time to update the CRA, let's try to make it more transparent, more objective, let's try to make it more effective and serve the intended beneficiaries, so the two of us toured the country where I think we had 29 events around the country where we talked to different groups of people about CRA, their experience with CRA and it took us in a particular direction that we created, we had a lot of ideas and I know it's unfortunate that we were We couldn't get on the same page, no We were able to completely agree with their approach and they couldn't completely agree with ours, so, you know, we kept pushing and we kept learning, and I would agree. with mr.

Hill previously commented that ideally you want to know that you agree 1:1, that you know a set of standards. I would agree with that too. I think harmonization is something that we certainly strive for. I was very encouraged to read his comments in his statement that People living and working in low- and moderate-income communities are finding new opportunities. Wages have increased, especially for lower-paying jobs. That's an area that worries me a lot. In my state of Colorado, I represent rural areas and many times economies where metropolitan areas, tourist areas have done well, rural areas often continued to struggle, now we're starting to see some of that movement real, but when we look at CRA reinvestment, talking about community banks, I would really encourage you to be able to look at the OCC and FDIC proposals.

I think they go further in rural America and you talked about policy. Have you given me an assessment in terms of the opportunity zones that were included in the tax cut and the Jobs Act? We are certainly seeing some benefits and some investments in the rural areas of my district. These are some of the policies we should consider. I'm not aware of any research we've done on opportunity zones, but you know we probably have this in the system. I imagine we've done some research on that and we'll be happy to share it with you. Thank you very much and Fannie Mae and Freddie Mac just took some action talking now that Sofer will accept it. base mortgages and I have noticed that other agencies have been taking this step separately.

Is there some kind of uniform high-level effort to coordinate the adoption of Sofer? Yes, there is a lot and we are doing it. We are coordinating with the other agencies and also with the market participants and you will see more of that, you will see more cases where LIBOR will no longer work, it will no longer be usable in a particular context and that is what Fannie and Freddie did this week. or announced this week and to follow up on a mr. Stivers' question regarding community banks: Do you see any advantages and disadvantages to the use of LIBOR so far for community banks?

Yes, I think we are good, I think we are LIBOR itself. It is really a problem in the sense that the rate There is no guarantee that the rate will continue to be published after the end of 2021, but there is a question of having a credit-sensitive rate in addition to four, so four will be the main substitute of LIBOR, but you know, we are working with regional authorities and Some of the larger banks talked about the idea of ​​also having a credit sensitive rate and that is something that is ongoing and we have had a little conversation about the coronavirus China, the impacts on the economy that the president just signed into law in the US.

MCA, do you see that, as creating a runway for further economic expansion in the US, employment opportunities and wage growth, we don't give trade policy advice on that, but I would say I would just say this that I think the signing and enactment of an implementation of the American law. The MCA will be positive at least in the sense that it eliminates uncertainty around trade policy and I think that has been part of the problem of the last year, not knowing what the rules of the game will be. I think getting those rules in place is certainly a positive thing Gregg, thank you, my time has expired, thank you, gentleman from Illinois, mr.

Foster is recognized for five minutes, President Paul. Well, first of all, I would like to thank you for facilitating our meeting with Governor Brainard, Representative Hill and myself. I had a digital currency. We really enjoyed it, as well as meeting the staff there.excellent and it's great to see how connected they were to this issue now in a speech last week, Governor Brainard highlighted the role of central bank digital currencies in ensuring that sovereign currencies remain at the center of every nation's financial system , Do you agree with her? characterization in particular do you think establishing a digital dollar would help ensure that the US dollar continues to serve as the core of the US and world financial system?

Well, to take the first part of that, I think having a single government currency at the heart of the financial system is something that has served us well, it's something very basic that hasn't really been challenged and I think before we move away from that we should really understand what we're doing, so I think Preserving the centrality of a widely accepted central currency that is accepted and trusted is huge. Read, something important. I think whether a digital currency takes us down that path or not is an open question, as you know all major central banks are currently taking.

A deep look at that, we feel it is our obligation, technology has now made it possible, the private sector is innovating, they are doing it, so I think it is up to us and other central banks to understand the costs, the benefits and the trade. -offs associated with a possible digital currency, so how would you characterize? Know your status of progress in this compared to other countries. Meet the Swedish central bank developing an e Crona. Well, the Chinese. Know the reason why there was someone. One of the reasons there was so much concern about the Libre project is that they would immediately have scale if they simply released the product.

The other entity and position to do it is that the Chinese government will implement it at scale using their already established plan. using cell phone systems would immediately have a scale comparable to Facebook if they implemented it and so how would you characterize our ability to respond to this potentially competitive threat? That's why we are working hard on it. We have many projects underway. of the efforts that are being made at the moment we have not had the problem that many of you mentioned Sweden. There are many Northern European economies that have moved away from cash to a notable degree and that hasn't really done it? happened in the US economy, although it seems like it must have happened to our children who don't use much cash, however, the amount of cash in the US economy the cash in the US economy The U.S. continues to grow at a faster rate than nominal GDP, so if you look, If you look at the cell phone payment adoption curve, you know it starts slowly and then all of a sudden it just happens and it looks like that transition.

It can occur over a period of more than a couple of years. of years, so we have to be able to respond, you know, if that's the determining factor, then we have to be in a position where we can respond by implementing, for example, a digital dollar and on a couple of its time scale , etc. I just completely agree with that and I think, frankly, that Libra really lit a fire under that and was kind of a wake-up call that this is coming quickly and it could come in a way that you know, which is pretty widespread and It is systemically important quite quickly if you use one of these big technological networks like Libra did, so we are working hard on it, we fully appreciate the importance of making rapid progress, we have not decided to do this, it is not, I think there is many questions that need to be answered around a digital currency for the United States, including cyber issues, you know, cyber issues, privacy issues, many operational alternatives are presented, so we will work on all of that and we will do that work thoroughly and responsibly, but feels it has adequate visibility into what the Chinese are doing in this.

Do you have any contacts at the working level to give you an idea of ​​what your implementation will likely achieve? It seems so, I mean. I know we certainly have that, but you know it's a completely different institutional context. There are things that, for example, the idea of ​​having a ledger where you can know everyone's payments, is not something that is particularly attractive in the United States. The US context is not an issue in China, so it's probably a point nonetheless because they claim that they will implement it in the Belt and Road countries at some point very quickly, so you know, I urge you for you to move forward. the fire lit thank you thank you the gentleman from Texas mr.

Williams is recognized for five minutes thank you Madam Chair and thank you for returning to our committee chairs. We appreciate it now as baseball season slowly approaches. I wanted to make sure of one thing before we continue: you are still in team capitalism. Oh yes, thank you. that Experion recently published its 2019 Consumer Credit review and I want to read a section of the report because I think it accurately describes the state of our economy, as you know I'm a big businessman and the economy is really good right now. The US economy exceeded expectations, record job growth caused unemployment rates to fall to record lows, while the stock market flexed throughout the year, consumers in return showed their confidence as they continued to order borrowing and spending aggressively, as evidenced most recently by the strong 2019 holiday shopping season, the report said. goes on to say that consumer credit scores reached a recent all-time high in 1921 with an average of 73, this means people can get better rates to borrow money to buy a home, get a loan for small businesses or whatever they want.

They need funding to be able to live their American dream, so, my friend President, what should we or should we focus on in this committee to continue the explosion of jobs and new jobs that we have seen in recent years? Honestly, I think the focus for me is the focus. it really should be on things that address our what are our long term issues that can be addressed by legislation and those are really two important things one is workforce participation what are the things that can be done that we really can't do. do that help people stay more attached to the labor market we still have low labor force participation compared to essentially all of our economic competitors and the other is productivity so what drives productivity?

It is a stable legislative environment. It is a stable legislative environment. and an administrative environment that supports growth and innovation and investment and those kinds of things, so those would be my top priorities for me. I know you are aware of the feds' work on the international insurance capital standard that is being developed for the world. I had reservations about entering into an international agreement that does not fit our current state-based approach to regulating our national insurance companies. One particular part of the international standard that I want to ask you about is the flexibility that was given to our government to develop an equivalent solvency standard that would better suit our insurance ecosystems, so my question to you is how does the Reserve plan Federal ensure that the standards being developed in the US are considered equivalent by the international group, given the continued resistance they face from Europeans?

I can only say that we will not participate in the approval of any international standard that does not conform to our own American insurance regulatory framework. That's great, we are leaders, not followers, some of my colleagues across the aisle have called. for a financial transactions tax, I think this is an extremely short-sighted approach to raising revenue that will have a huge impact on the amount and ways Americans save for the future, plus the idea that adding an extra layer of Haitian taxes on other assets is redundant since Capital gains taxes are already in place and should be reduced, which takes money away from successful investments, so if we want to further expand economic growth we must focus on continuing to reduce personal and corporate tax rates so Americans can keep more of their income. -Income earned and companies can invest those profits in their operations, so President, can you explain how implementing a financial transactions and transactions tax would affect the US economy?

I think I should stay in my lane here. You know that we do not do fiscal policy. I don't want to start commenting on private taxes. I'm worried about where that might go, so I'm okay, I understand I'll tell you from a Main Street standpoint that it's really going to hurt the economy even more. tax layer, we really need to reduce taxes, so looking at financial trends around the world and having been in business for over 50 years as I have, one data point is that it captures my negative interest rates or Can you help me understand the economics behind negative interest rates? and talk about the potential threats that this phenomenon represents to the financial stability of various countries in the world.

The world, as you know, faces the problem of what to do when its official interest rate reaches zero and some of them actually fell below zero. The United States decided not to do so. We decided not to do it at the Federal Reserve. We use other tools when we get to the lowest level. And those were future guidance and large-scale asset purchases. I think going forward our inclination would be to rely on the tools that we use rather than negative rates, so our instinct is that in the US context, that's not a tool that we're looking at, you know, the question about the intermediation is when you have negative rates, you end up creating downward pressure on bank profitability, which limits credit expansion, and there is some evidence of that, so in any In this case, we were looking at other and other institutions in everyone who has done that and we will be able to see what the results are.

Thanks for being here. The lady from Michigan is talib. She is recognized for five minutes. Thank Mrs. president I don't know if you know what in 2013, President Detroit filed for Chapter 9 bankruptcy, which was marked as the largest municipal bankruptcy filing in U.S. history. In July, when you were here, I asked you why if the Federal Reserve is willing to support or support, you know the big banks and corporations during periods of difficulty in the credit market and wouldn't we want to equally make sure that state and local governments also had access to credit and you mentioned which he did not have the authority to lend to him. local and state governments, Madam Speaker, I would like to put for the record section 14 2 B of the Federal Reserve Act which states that the federal government, the feds, actually have the authority to purchase municipal debt without objection, As you ordered, President, since you actually have the authority, can you explain to me why we shouldn't?

Do you know why the Federal Reserve should not ensure that state and local governments have access to financing during times of stress? As you know, we have limited authority. I think it's for short-term municipal obligations, we did it briefly in the 1970s and then we haven't done it since I think a number of FOMC and Fed chairs in all sorts of different political environments have thought that That is something that is not appropriate. really for us in the sense that these are government finances, we already know that they should be dealt with by the fiscal authorities rather than the monetary authority.

We focus on the job you have given us, which is maximum employment, stable prices and, to a certain extent, us too. With another agency we work on financial stability and banking supervision, so Jamie, unlike solvency, yes or no, the Federal Reserve retains the ability to open to open emergency lending services, it is that precise and stabilizes Well the economy, yes. We do it to financial institutions, so when the Federal Reserve intervenes to rescue banks in a crisis it is because you believe their role in the economy is vital, in reality because we had no choice but to prevent the financial system from collapsing in 2000. , I do not want to say. my city was able to declare bankruptcy it was devastating for so many retirees sir 4050 years who work for the city of Detroit saw their pensions completely diminished disappear don't you think that the governments of Detroit in Puerto Rico also play a vital role that must be preserved even ifThe financial crisis makes it difficult for them to borrow money.

What I think is that that's not a job for the Federal Reserve, it has a particular role in particular authorities and you know, lending to state and local governments and supporting them when they're bankrupt. is yes, let's draw Glee disagree. I think you have the authority now that you mentioned that in another financial crisis you would use the same tools of expanding the balance sheet to buy long-term bonds in other words. more of the same right, yeah, so I'm afraid that's just not good enough. I mean, I think your predecessors, former chairs Yellen and I think it's Vernon Ecchi, seemed to agree based on comments they both made last month, for example, Chair Bernanke suggested money.

A funded fiscal program could be helpful during the next recession. Do you agree with that? It would be useful. Knows? I think it's really an untested perspective and not widely supported. I don't think President Bernanke said a phonetically backed tax money. I see a policy. It would be something we should do. I know. I know there was a group of people who pushed that idea, but I don't think it included former President Bernanke. You see something I don't know and the president looks. The federal government is supposed to be about people and I don't see that we're dealing with, you know, pensioners in a city like the city of Detroit, which are frontline communities that have really been hit hard by the financial downturn.

In fact, they keep saying that Detroit is coming back. If I show you the neighborhoods, you'll say we don't know what you're talking about because poverty is actually increased access to housing has decreased. I mean, all of those things that Start thinking about understanding that I think the Federal Reserve Act actually gives us the authority to help beg, just as we bailed out the big banks, that we can do the same for our people, the residents of the city of Detroit, so I thank you for that and again. In fact, I would ask and press you to look at this from a different perspective than the same old policy-shaping process that I think hasn't really worked for working-class people.

Thank you very much and I will dedicate the rest of my time to you, thank you. the gentleman from Arkansas mr. Hill gets a five-minute thank you, encouraging Waters again, Chairman, welcome back to the House Financial Services Committee. I want to thank him for the conversation he had with dr. Foster, a few minutes ago, I also want to thank you for your work with Governor Brainard and our discussion we had with the governor and staff about the concept of a digital dollar and the work being done at Treasury on it. I will detail some of the points that Representative Foster raised, but I would like to make a couple of comments to him about whether he would advise our committee or ask the Federal Reserve to inform our committee of what legal authorities the Federal Reserve might require to consider use. of a digital dollar, yeah, I mean that's a good question, when we're looking at it, a lot will depend on the design of that contract and one thing that we also talked about and we've had a lot of discussions about and our FinTech task.

The strength here has to do with Europe's approach to this idea of ​​a payments provider license that is now part of its financial services code, part of its open banking movement and the idea that one would have a regulatory license here in the United States to be a payment provider. It could be a bank or it could be a non-bank entity, it's something that the feds are looking at, but they wouldn't say we're specifically focused on that, but more generally, we think it's a good idea to look at the entire oversight landscape of our payment system and that would be a part of that and, as you know, Governor Brainard talked about that in another of her speeches last week.

Thanks for that, Chinese regulators rescued Fang Bank last month. a fourteen billion dollar loan they arranged through one of their sovereign wealth funds Chinese banking assets of forty one trillion dollars now represent forty seven percent of global GDP instability in the Chinese banking industry represents a threat financial for the global financial system It is a financial virus as if they had already contributed to a physical virus. They know this generally, and I'm sure they know that China has had very high debt to GDP for an economy in its development stage and that includes the banking system and the government.

It's actually been for several years now and they are taking measures put in place, I think, by the central bank to try to control the growth of the debt and they have stuck to that for the last few years even though those were difficult years economically for them, so that's something they're addressing. The other thing I want to say is that they have a lot of fiscal space, if you look at the fiscal aspect, they have a lot of power to respond to recessions, so I would do that. I'm not going as far as to say they're dead, it's a systemic threat to the global economy or anything like that, but it's something that they need to address in our I think it's something that I think deserves review, sir.

Barr spoke of his misallocation of resources at 47 percent of global GDP, which appears to be an overallocation in the banking sector in China and could pose a threat to our system. In your report on page 24 you talk at length in your financial stability section about the decline in bond yields, particularly in the high yield market, ratings have fallen and the other day I was looking at a mutual fund annual report and says a particular concern is the continued high rate of issuance of triple B bonds, the lowest investment category. grade-rated bonds if the economy stumbles and the issuance of downgrades could be an avalanche of fallen angels in this particular mutual fund said they are staying away from the lower end of the high-yield market are you worried about the high-yield market performance?

Well, that's the so-called triple B cliff and the idea is that there are a handful of very large issuers that, if they were downgraded, would not be investment grade and the idea is that some holders are not allowed by the terms of their agreements with their investors to hold non-investment are great and they don't trigger sales so that's an issue that we've been monitoring for some time really you know with leveraged loans in general yeah we are. monitoring it very carefully, you see, you know, low, low compensation for the risk taken, you see high leverage, you see a lack of deals, you see all of that.

I think it's a complicated picture, although that role is now largely held in CLOs rather than in and mutual funds and exchange-traded funds rather than on bank balance sheets, so those vehicles tend to have stable funding in the sense that their liabilities are actually longer than the expected maturity of the underlying instruments, still remains a source, I think. of financial concern for Sock F. I think you know this and therefore I congratulate you for noting it in the report and thank you for your continued attention. Thanks to the gentleman from Illinois, mr. Casten is recognized for five minutes, thank you Madam President and thank you President, friend.

I appreciate that he stayed until the end of Dyess Air. If I get elected eight more times, I'll cross my fingers I'll have the same experience. In this line of work, as I do on the energy side, I still come here primarily as an energy nerd and I have a real concern that we are not dealing with the realities of climate change scientifically, we viscerally understand what it means. cybernize sea levels, but we haven't really thought about what it means to have an accelerating rate of change. Compound interest confuses people and compound changes in the environment we don't even think about it as well as we should, just a couple of facts.

Points I hope we can all appreciate The first evidence that hominids made fire is a million-year-old cave. James Watt invented the steam engine two hundred and forty-four years ago, ushering in the Industrial Revolution and 50 percent of all the CO2 we produce. have emitted as a species since Back to the Future came out in 1985, this is this enormously accelerated change and if tomorrow we go to zero CO2, we will see two feet of rise in sea level, the most realistic trends are at least a rise of six feet at sea level and at that level around twenty-three billion dollars of economic losses are estimated for the system. $900 billion of US property at risk before you factor in debt losses and, you know, pulling out of insurance and there are some serious systemic problems. risks to the economy if we don't address them and I just want to understand a little bit how you and the Fed are thinking about those number one risks, given that assets exposed to climate change exceed the entire subprime mortgage market before the financial crisis global.

How is it that the Federal Reserve is thinking about climate change as a systemic risk to the economy, so climate change is once again a very important issue that is really within the purview of elected representatives and to set the general direction of the society about how we will respond? In terms of climate change and its challenges, we have a job to do and that is to think about the potential implications for the financial system for the economy and I think we are in the early stages of filling in what exactly that means in terms of you know things like particular assets, these are longer-term considerations, you know we are essentially concerned primarily with business cycle issues, that's what we focus on, issues for the medium.

Long-term climate change is a much longer cycle. Another thing, if I'm part of the concern I have, is that actors in the space don't have planning horizons that match the reality that you and we do it right. There are people signed. 30 year mortgages right now for properties in Miami Beach and they may plan to resell that mortgage several times but someone is going to be stuck with the paper with sea levels rising, the insurance industry generally has a holding period of a year, so even if the United States manages to reduce carbon emissions, there is still a massive reallocation of capital.

Have you looked at the transition risks in thinking about how that starts to move and dislocate the economy, so those are the things that needed to be finalized in the research stages, as you obviously know there's a lot going on in the financial markets, there's a lot of disclosure. and expectations around disclosure or significant changes for publicly traded companies on what that will have that will have an effect on, but that's not really what we do we do monetary policy banking supervision our banks you know, we, our banks have What to give, they have to take into account the risk of severe weather events and potentially I guess the increase is increasing, well, let me give you something specific that has been bothering me lately if you look at the fossil fuel industry, the oil companies and gas, coal companies, the debt they have in relation to their assets.

Since their assets are so heavily dominated by fossil fuel reserves, if they extracted all of their fossil fuel reserves, things would be much worse than the twenty-three trillion dollars I just told you about. Have you ever considered performing stress tests to see if your failure? fully monetizing their reserves could effectively make them fiscally insolvent because yes that sounds like a materially adverse event to me, but I wouldn't want to bet that the economy is going to commit suicide, but if I look at the financial statements of those companies it's not clear to me if they can monetize those assets, which has a significant effect on the risk of money that has helped today.

I think seven hundred billion dollars have been lent to fossil fuel companies in the last two years. Have you considered that as a systemic risk well, for us it is a systemic risk for the financial system and we would be testing the banks, as you know the Bank of England is doing some of that now and we will be watching to see what they learn and I took that decision, thank you. I will continue offline. I will give back my time. Thank you Jeremy, gentleman from Georgia, mr. Loudermilk is recognized for five minutes, thank you Madam Chair, Powell, thank you again for being here, first of all, I want to touch on Lisak again.

I know some have already touched on this topic and, as you know, several weeks ago, Vice President Quarles. He gave a speech in which he outlined a series of changes he would like to make to the Federal Reserve's regulatory and supervisory process. He said that he intends to bring transparency to the lawful regulatory regime by developing clear and transparent standards for the designation of companies. He also proposed aligning roster assignments. with the fedsadapting categories and limiting them to only category one companies, so my question is at a press conference after the Federal Open Market Committee meeting last month, you said that you generally agree with Vice President Quarles and what he had expressed I appreciate it, but can you give us an idea of ​​when you expect the lawful designation to be confirmed with new adaptation rules.

I actually don't have an idea where that is in terms of the timing where you know, at any given time we have a lot of things in the pipeline to do and that's certainly one of them, okay, hopefully, sooner than late, I don't want to commit to something that you know there are a lot of things we're working on all the time, but that you know the vice president gave a speech on. I'm aligned with that and I hope we move forward, but it's really good to hear that quickly. I would like to talk about the CRA.

I think all three banking agencies need to have a unified CRA framework. and I know you're hesitant to speak on behalf of the other agencies, specifically the OCC and the FDIC and their proposals, if you don't want to comment on that and understand what some of their ideas are or the feds' ideas for modernizing the CRA. Well, then I would say let me talk about the process. You know, we agree on the general goals and the questions about how to get there after that. So our thinking was to try to come up with a you know, a set of improvements that would really lead to a more efficient and effective CRA, so we're looking at ways to make test evaluation clearer in our thinking, there's a separate test for retail level for community development and for retail lending. and also that the other thing we're saying is let's make sure that everything is very dated in data-driven data, so we have, as the president mentioned earlier, 6000 data sets that we analyze, so I think we really know When to make a change in the metrics, we know what the effects will be and we feel good about that, so we tried to build our proposal around there are a lot of overlaps, but there are only a handful of differences that have prevented us from reaching an agreement total and general objective.

Do you think we can eliminate some of the ambiguity about which projects qualify and which don't qualify at all? I mean ex-ante transparency, more ex-ante transparency as to what qualifies and where else. objectivity, all of that should help encourage banks to do more if they really know what qualifies and what doesn't. I think all of that is very constructive, it's really about how to implement it and we want to have a high level of very important laws very, very important laws we want to have a high level of confidence that what we change will have the desired effects and that's where we are, That's what we're focused on, I appreciate that because I would like to see us make changes where it's not about financial institutions just checking boxes to get credit, but actually investing in projects that help revitalize these communities.

As you know, the FY 2020 appropriations bill directs the Treasury Department, in consultation with banking agencies, to study whether any changes and banks' regulatory capital requirements are necessary due to Cecil, if the study concludes that that If so, are you open to modifying regulatory capital requirements accordingly? Well, yes, I think we have said that with Cecil we are going to monitor very carefully what the implementation shows because of some of the concerns that have been raised. Fine, thanks. You probably don't have time to get into other questions, so with that I give you back my time. Thank you, gentleman from California, Mr.

Porter is recognized for five minutes. Thank you, Chairman Powell, you spoke frequently about his belief in Mandi and the importance of maintaining the independence of the Federal Reserve. Do you still have that belief? I'm not going to make anything change in the new year, because we don't want the Federal Reserve to make decisions about things like where to set interest rates based on any factor other than the best interest of the country and I know you've had some experience with the president who publicly and aggressively tried to pressure him to lower interest rates. and I appreciate that you continually affirm the importance of the independence of the Federal Reserve, but it's not just about our president, there are many people who would love the opportunity to have a say in the decisions of the Federal Reserve, outside of the administration officials, what other types of people could do.

I want to influence you and with respect to the feds' decision making, what other people might want to influence, this could potentially be a pretty wide range of people. I think the mainstream investors, the financiers, I don't know if people are really looking to do it, I mean it. you say you might want to influence this site. I don't know the answers. I really don't know the answer. Many follow what we do and respect what we do. I think people often, when I meet them, really avoid giving advice. they really do it they feel like they don't do it they don't brag about doing it so you don't feel unduly pressured by political or special interests you wouldn't say that someone like Jeff Bezos, the CEO of Amazon, could be one of the richest men in the world could benefit from having influence over the decisions of the Federal Reserve.

Actually, I do not know. What's up with Jared and Ivanka Trump? They are very rich people. Do they have savings and make different amounts of money depending on what the Fed does? What does it have to do with interest rates, yes, and what about Kellyanne Conway? Did she in her role as advisor to the president and the president express these public opinions? Does she potentially have an interesting role in amplifying the president's message? After all, it's her job. I guess that's okay, sir. Powell, I'm going to project an image here so the public can see it, but I'm also going to show it to you, and this is Hugh, mr. survey meaning, um, where are you?

That's right, it's a party after the alfalfa dinner and after the party I went to at UM where that party was held Jeff Bezos is at home Jeff Beezus is at home and what was it taken Excuse me, when was it taken this picture? On Saturday night after the alfalfa dinner, more or less, you will stipulate that it will generate the end of January 2020. Yes, recently, can you imagine how to attend a lavish party at Jeff Bezos is a twenty-three million dollar house together with Jared, Ivanka and JPMorgan Chase CEO Jamie? Dimon could give the audience the sense that you are, in fact, not immune to external pressures.

I certainly hope not. What did you talk about about the party with them? I did not do it. I didn't talk to any of the people you mentioned. I didn't talk to anyone. I didn't talk to any of the people you named. Oh, can you tell me who you talked to? I mainly accompanied my son and his new wife there and actually introduced them to General Mattis. Okay, great, I would just suggest that this attendance at this type of event with these types of people is inconsistent with what would otherwise congratulate them for doing a very good job.

I plan to reaffirm to the public that this is planted in the public's mind. I think that goes against what you've been doing quickly, Mr. Powell, if you could name just a couple of the biggest drivers of economic growth in this country since the recession of the 1970s, what has been growing our economy , what factors have made it grow well, the hard work of the American people, hmm, you know? I think what we've seen is tremendous growth in some sectors and less in other sectors, of course, big tech companies didn't exist 40 years ago, so I think we've seen a lot of growth in some areas, I think in other areas a lot. less mr.

Poe, would you be surprised if I told you that women in the workforce are actually a major driver of economic growth and technology companies and in a four-decade span since the 1970s, thirty-eight million women joined to the workforce and without those women? our economy would be twenty-five percent smaller, so when we talk about the health of our economy and we talk about GDP growth, what I don't hear much about and would like to hear more from you is about the economic effect of things like the availability of care child care in those same four decades in which women grew the economy by twenty-five percent, the cost of child care skyrocketed by 2,000 percent, you know, sir?

Poe, how much does child care cost in the United States today, how much does it cost in the United States today, it costs a lot. Could you make it a little firmer? You are an economics expert. Could you give them a slightly firmer number? Yes, my children are older now. I understand. back the gentleman from Ohio mr. Davidson is recognized for five minutes, thank you Madam Chair, a German friend, thank you very much for your time here today, thank you for the good work that you and many of your colleagues are doing at the Federal Reserve, just to address the comments came from my colleague.

Recently, isn't it unprecedented for the chairman of the Federal Reserve to attend a party or reception? No, I mean, it's certainly not the first time that Federal Reserve chairs have attended a party. I'm sure this isn't the first time a member of Congress has attended. you attended a reception or party, so I don't know if we want to say hello just because you are at an event, in some ways this is disastrous. I mean, you may have talked to a Russian on the subway or something so you know. The way these things are tied together for political reasons is embarrassingly partisan and bad, and I just thank you for resisting all those pressures, a lot of them.

They're public, of course, but one that worries me right now is the repo market, you know. At home, many people don't know that there is such a thing as a repo, but it is an important factor for our economy and I think some of the warning signs in it have led the Federal Reserve to sort of mix up regulatory action and monetary policy. to inject a lot of cash into that market. President Quarles, you know, recently spoke about the need for that to continue for some time. Can you explain the process for how the Federal Reserve is going to review the factors that are contributing? to this repo increase and what you've learned from the review, what happened is, as you know, in early September there was an increase in repo rates and the federal funds rate moved slightly outside of our band, our target range for about a day and that's why we didn't see the next market participants doing it either and that's why we've been asking ever since why one clear reason is that the level of reserves, which is the cash deposited in the banks of reserve, it must be greater. than we had thought and then in that stream we immediately set up a plan and executed it and it worked well to create it so I mean some have called this quantitative easing.

I know you've objected, but we're essentially pumping in cash artificially to produce a result that the market isn't producing on its own, so I think it's strange that our action is to pump in cash from the Fed to grow the Fed's balance sheet. Instead of looking at the underlying regulatory issues, what have we talked about, and if, and if, what did the board talk about in terms of, you know, regulatory factors, that instead of injecting cash to solve a problem, address the root cause of the problem and changing the regulatory framework.framework we are doing both the reason we are expelling the cash is to meet the demand for cash for basically the banks who need to hold a certain amount of cash for liquidity purposes, moving to the second issue, although he also said that, without undermining safety and soundness, we would look at ways in which regulation and oversight could have interfered with the free flow of cash to where it was needed and I think we have done a lot of work on that and The vice president Quarles addressed a broad topic that I think is important, and that is the idea of ​​making the supervisory treatment of cash really the same as that of Treasuries for this purpose, so that better flow can be achieved. of liquidity through the system without affecting the overall level of liquidity in the system, which is just what we're looking for, so he addressed some ideas about how to do it and I think it's a very profitable line of research.

Okay, so thanks for that. One of the changes in you know is that LIBOR is disappearing and market forces are coming. We are talking about replacing the reference rate and of course the arc includes 250 entities, but you know there is a concern that by doing this, the best rate. it's not necessarily provided, so is the Fed taking the best proposed rate offered in these repurchase agreements or are we giving it at a special rate maybe to the top 10? So to our banks, I'm sorry I lost count, sowhen when when this liquidity is injected the repo rate that was a repo rate coming into the repo rate I guess not, it's been a little bit okay, sorry I missed it, so the rate that we've been offering in those in the repos that have been liquidating at a level that is a couple of basis points below I Oh er and, but that won't be a persistent problem, what are they liquidating at a rate that is when it pays at the high rate?

Do you pay the best available offer or do you pay the best available client? We do not distinguish. I mean, anyone who is eligible can bid and we don't know, as long as you are eligible, we will sell to you. Thank you, my time has expired. Could gentlemen ask the witness to provide further responses in writing for the record? I appreciate the president's suggestion. I'd love to see a written response on how that's actually working. He was asked to provide a written response for the record. Thank you, President, Mrs. North Carolina, Mrs. Adams is recognized for five minutes.

Thank you, President Waters, for convening today's hearing and friend President, thank you for her testimony. FDIC Board Member Martin Buber voted against the Ardennes Comptroller's proposal, describing it as a deeply flawed proposal that would fundamentally undermine and weaken the community. Reinvestment Act, so can you comment on the shortcomings of Comptroller Adams' misguided attempt to gut the CRA and a centerpiece of banking and civil rights law? I guess I feel like our role is not to comment on another agency's proposal that the public is making. Now we really want to see the comments you make. I can talk about how you know our own opinion on this, but it's really not our place to comment publicly on the other agency's proposal, any more than the Federal Reserve. publish their own proposal on the Community Reinvestment Act, one that takes into account the needs of low- and moderate-income communities, which of course was the reason we undertook this work and which we haven't actually made a decision on yet. whether to do it or when to do it. a proposal, but still the entire effort was made with a view to creating a 4c modernization proposal okay, okay, as you know, the Federal Reserve has a dual mandate of price stability and maximum employment, so does the Federal Reserve will set a target for wage growth?

Are you considering this? focus as part of framework review I don't see us focusing on wage growth as a stand-alone element, it's something we monitor very carefully our goal, as assigned by Congress, is maximum employment and stable prices, those are our two statutory objectives and those are the things that we are targeting. I don't see that we are targeting any particular level of wage growth. Well, then, have you considered adopting a floor for wage growth, for example, once we set a certain percentage increase in wages and salaries that the Fed might consider shifting to two percent inflation?

Well, we have said that the point of this project is that we want to make the two percent symmetrical inflation target more credible and we have been missing it and central banks around the world have been missing their targets for a decade. on the low side and we absolutely want to achieve 2% inflation, that is really the objective of this review that we have undertaken. Well, let me ask a question about the Volcker Rule, why has the Federal Reserve decided to support the changes to the Volcker Rule given that banks enjoy certain benefits, including access to the Federal Reserve discount window, and that The rule was intended to limit banks from engaging in risky investment activities that could contribute to a future financial crisis, which is why we just submitted a proposal in part. of the Volcker Rule and, of course, we believe that that proposal is entirely consistent with both the letter and the spirit of the law and, but we're going to read the comments, it's available for comment, now we'll just post it and we'll do it.

I'll be willing to take the risk of reviewing those comments. Well, I understand that you collect a lot of daily trading metrics from banks subject to the Volcker Rule, but it has never been made clear exactly how these metrics are used to determine whether the bank complies with the Volcker Rule. The rule nor any of the metrics have been made public is so true. I think it's true that we published the first vocal role, I mean, six or seven years ago and I think it was largely felt by regulators and financial institutions to be a little bit unworkable, so we set out to provide a simpler set of metrics. and ways in which companies could carry out perfectly legal activities and be more certain that they were doing so without having to demonstrate in each operation what they had in mind. in the heart of every merchant, so since there was going to be commercial activity around legal activities that were not covered by the Volcker Rule, I think that's what we're doing, we're trying to make that rule more effective and efficient , but we are doing it in a way that is consistent with the letter and spirit of the law.

Well, thanks man G, how did he meet the gentleman from North Carolina, mr. Bud is recognized for five minutes, thank you Madam President Jim Balligan and welcome. I want to begin by thanking you and Governor Quarles and his federal insurance regulatory staff for their collaborative work with U.S. state insurance commissioners on solvency regulation. I also wanted to thank you. you for rejecting European efforts to try to impose their system of insurance regulation on our uniquely robust 50-state insurance regulatory regime, despite the progress made to date, many in the industry tell me that the Europeans are still resist and ultimately seek to change our regulations to reflect theirs, as my question is: will they commit to communicating directly with their peers in Europe to explicitly tell them that the United States will not adopt a Europe-centric ICS or standard of international capital and that we have our own rules that work very well, so I will say clearly that we have a state insurance regulatory system and we know that the federal role is what it is and that we are not something that we are not. seeking to change and we are committed to that future president, they are seeking to change us and that is why I fear that if we are passive it will migrate towards them, but have you had any conversations with any high-level European leaders who are still left? the ICS International Capital Standard no, I haven't, is there a reason why not? or if that has not been something that has been avoided.

No, I'm just NOT, I'm not directly involved in insurance, there are high level people who are. I'm sure, Vice President Quarles, yes. I would encourage you again, Governor Quarles, to continue to insist that we have a great system that continues to work well, so also Mr. President, as part of the efforts to finalize Basel 3, a series of changes to the capital rules will have the effect of increasing capital requirements in capital market activities. Can you discuss your views on the appropriate level of capital markets-related activities, such as market making or underwriting? I am sure that those are critical activities in the functioning of our financial markets in our economy and they need to be adequately capitalized.

I would say that overall I think the level of capital in our banking system is correct and I think we don't see the need to raise more capital, so I know that we are moving forward with the fundamental review of the trading book and other final aspects of Basel 3, but I don't see them as necessary to increase overall capital levels. Chairman, can you share your views on capital requirements and aspects such as market making and underwriting? How might they affect the balance between bank-driven and market-driven finance and the US? system well, I mean, I think if you increase capital requirements and they have become quite found, they encourage activity to move out of the banking system into less regulated and supervised entities, then, sir.

President, there has been a lot of discussion in recent months about leveraged loans and F sock and others monitoring the market. In fact, you had a couple of questions today about this topic, but when people discuss the topic sometimes I think they are referring to different things. So to help us get on the same page here, in your opinion, how would you define the leverage lens? Yes, you're right, there are many different ways to think about it, right? You know a reasonable stadium would be something rated below triple. B or you could also say it could be a leverage amount, typically they will have leverage of maybe six times cash flow EBIT.

You know, there are different ways to think about it, but I mean, I think that's the best way to think about it. probably not investment grade do you think there is a difference in leveraged loans in the banking sector and in the non-banking sector? Yes, I mean, I think before the crisis there were. I think there has been a trend over time for leveraged loans to be held by longer-term holders outside the banking system and that is accelerating, so there are a lot fewer of them betting on the boring books of the banks. Known banks with deposit insurance and safety net instead of collateralized loan obligations. or exchange-traded funds or mutual funds or pension funds or hedge funds, that's where those loans are going now, so it's more like it's become a distribution business rather than a traditional lending business where The banks granted a loan and put it on the market. the balance sheet is not where it's really happening, you have a bank performing an origination function on behalf of a sophisticated investor who has stable funding, we hope, and in the case of heaven it is, but that's something we have to continue monitoring, thank you president. thank you gentleman from illinois mr.

Garcia is recognized for five minutes thank you Madam President and thank you for being here President I would like to come back to the topic of climate change a little bit, extreme weather events have had a huge impact on the Midwest and working class communities like that. in my district of Chicago and are often the hardest hit during such disruptions climate change is also a risk for the financial sector jim cramer host of Mad Money and CNBC in a discussion last week said that major institutional investors don't want to have anything that to do with fossil fuels because of concerns about climate change to protect against the impacts of climate change, the Bank of England has decided to carry out stress tests on the UK's capital banks, the largest banks for forgiveness and the companies insurance against the risks associated with climate change, and the Federal Reserve will follow suit and develop climate-related stress. tests, so we are monitoring what the Bank of England is doing and those are, by the way, stress tests which are not like our stress tests in the sense that they would have direct effects on the banks' ability to distribute, make distributions and things like that are really trying to do an evaluation, so we'll be watching closely that we haven't made the decision to proceed with something like that.

Damn, he encouraged that going forward, incorporating climate change into economic forecasts turns into bigger climate disasters. Such as Hurricane Maria in Puerto Rico or the wildfires that devastated California last year are currently listed as a temporary risk by the Federal Reserve, but we know that extreme weather events will become more frequent and severe, likely resulting in a corresponding increase. in economic losses and physical risks. the worst will be felt by communities of color and working class communities so presiding when the Federal Reserve develops its economic forecasts at what point should climate change go from being considered a transitory factor to a structural factor you know our forecasts, both the individual ones that FOMC people like me write down in the staff forecast or are not for this type of much longer term, really the important thing is the next year or the next two years, the next three years and the climate changes just operate gradually. a longer cycle than that, of course, as you suggest, as severe weather becomes more common and that's connected to climate change, you'll see those things that you know entering the forecast period and it's certainly entering our supervisory practices as well as oureconomic forecast in a recent speech at the San Francisco federal conference and the economics of climate change fueled by a Governor Lael Brainard said quoting by engaging more actively in climate-related research and practices, the Federal Reserve can be more effective in supporting a strong economy and a stable financial system, do you agree with Governor Brainard's statement?

If so, what else will the Federal Reserve do in the future to identify and mitigate the financial risks of climate change? So, I think it's up to us to do the research and understand the implications. of climate change for our oversight functions and our role in looking after financial stability and that is what we are doing. I think it's early days for that, but the public will expect us to do it and then take the steps that we need to take to make sure that the financial system is resilient do you agree with your statement in general that statement I do yes well thank you mergers of large banks and market concentration Three months ago the Federal Reserve approved a merger between BB and T and Central that created the sixth largest bank in the US with more than 450 billion in total assets and the Reserve's own investigation Federal suggests that the failure of a single $250 billion bank would be much worse for the economy than the failure of five separate fifty billion dollar banks, plus the first The FDIC Chairman, Mr.

Gruenberg has warned that the FDIC would not be able to liquidate a bank the size of the combined BB&T SunTrust without imposing significant losses on the deposit insurance fund and potentially destabilizing the financial system in this downturn, can the Federal Reserve justify its conclusion I quote that this transaction does not appear to be a result that generates significantly greater or more concentrated risks to the stability of the financial system. Yes, I think we can and I think we did. We evaluated these mergers under a very clear legal framework, in a very transparent manner, we had a number of public hearings about it and all the statutory factors were analyzed and, essentially, there are two banks that come together to form a regional bank that is similar or smaller than many of the other regional banks and do not seem to me to have significant implications for financial stability.

Thank you, thank you Jeremy, now come back Mrs. German German, the gentleman from Tennessee, mr. Custer is recognized for five minutes, thank you, Madam President, and thank you, Mr. president for appearing today, I heard your statements in your opening remarks about the corona virus and certainly with respect to some of the questions you had today, I noticed this morning in a report that Axios listed and they quoted from the global Port Tracker report and said that traffic at US ports is expected to decline in February by almost 13% and in March by nine to ten percent year over year, now assuming those numbers are true and correct, what impact would that have on the case there was? the retail sector and what impact, if any, that would have on the broader economy, so I think there's a lot of uncertainty about what the ultimate economic effects will be outside of China and particularly in the United States, and the question will be do we expect that? be consistent.

With that report that there would be some effects, the question really is going to be what their size and scope will be and also whether they will be persistent or will they be something that just happens and ultimately the fundamental question for us is: does it not represent a material change in the perspectives, it is something to which we should react with monetary policy; that's really the question for us as it's too early to say that we will monitor it like everyone else will very carefully and that's where we are in the same line and I'm also from Axios.

They got it from a Bank of America security report they surveyed. They said they surveyed 3,000 companies about the global supply chain and that many companies around the world are considering relocating. They called it in the report, quote, tectonic shift and global supply looking at other areas of South Asia, India and North America. My question to you, first of all, I don't know if you're familiar with the study. Bank of America securities study a report or not, are those numbers or are those anecdotal statements consistent with whatever the Fed is seeing? I am not familiar with that report and therefore cannot comment on it.

I would say it's their There are several channels through which this could have an effect, the first of which is just tourism, actually the second is that our ability to export to China is less because you know there will be less activity there. , so exports could decrease, as you mentioned. They really are supply chains so many US companies buy intermediate goods as part of creating their final product so we don't have any real evidence yet on supply chain issues and I would say the last channel are really the financial markets, that the financial markets themselves can be a channel for the transmission of risk aversion behaviors that can affect economic behavior, so we will look at all that.

It's too early to say if that will mean, we'll just have to wait and see if there is no way to have confidence in someone's assessment and there are a variety of assessments based on what you just said. I think I know your answer, but I'll ask the full report anyway and I mentioned a There are several reasons why one is the tariffs between our country and China and the impact they have had on China and its subsidiaries, but also automation and Increased automation, does this sound consistent with the relocation of these supply chains? Of course, it is separate from the questions about the virus, clearly there has been a lot of activity by American companies to move to other jurisdictions such as Vietnam in particular, it is mentioned quite a bit.

I saw a report last week, in several other countries, American companies have moved their manufacturing activities out of China to other locations and that has certainly happened, including the United States, yes, thank you, or relocate back to the United States . I guess in the same vein I represent part of Memphis and West Tennessee in Memphis, on the outskirts of my district. was an announcement that Amazon made two or three weeks ago that they were putting a new facility there, there will be a thousand jobs and by the way, you've had questions about the minimum wage, they're going to start earning wages of at least $ 15 per year. hour more benefits, but you talked about these new jobs in combination with automation in terms of packaging and shipping, you've talked about your concerns about automation and the effect that that will have on unemployment in the future.

Can you see the two coexisting versus? Just like with this Amazonian plant, over the last two and a half centuries we have seen technological advances and there has been concern that it will replace human labor and that has happened, but what has happened is that it has made human labor overtime. be more productive, so there is displacement of current workers, but over time the advancement of technology has led to an increase in income and that does not mean that there will not be interruptions and a lot of pain for people in the short term, but Even so, the process over time has led to an increase. income the gentleman from Florida mr.

Lawson is recognized for five minutes, thank you Madam President and Mr. Chairperson, welcome to the committee and I would like you to explain to me over the last almost three hours, two hours in maybe 45 minutes, when you were speaking and the members only committee was speaking in terms of how well the economy is doing. how do we have more job opportunities in the economy when you start talking, the Dow Jones is up 125 points, why are you talking? went down, can you help tell me why something like this happens? who is listening to your speech this morning in front of the financial services committee that will call the Dow Jones to go down because of interest rate cuts, how do you explain that I really can?

I'm not following the market as I sit here answering your questions. I know the president tweeted something similar: When you started, the Dow Jones was going up and then down. Do you react to that? It doesn't really mean much to you. Sorry, yes, do you react? to that other one, the president also goes into how the Dow fell and the interest rate cut, does he react to that? Something just happens that happens, you know we're colleagues and I are completely focused on using our tools to support the American people to support the achievement of our goals and that's really the only thing we're focused on, explain to me: in a report from the staff stated that starting in July of last year the interest rate was cut four to three different times. in a quarter percent, you know, how do you make decisions?

That stimulated the economy when you did that throughout October, quite a percentage cut in the interest rate, yes, so we were really looking at some things when we did that and yes, The intention was definitely to support the economy, part of it was to offset the effects of global factors. I would say that just the slowdown in growth and the global economy went on and on and we felt the need to offset that and we also took out some insurance against the effect it could have on US trade policy. The uncertainty was weighing on the economy. in the US we tried to offset any potential effects and took out some insurance there and the third reason was that we wanted to do what we could to protect against a longer inflation shortfall from our symmetrical 2% targets, so we have supported growth to support the decline in inflation, so those were the reasons why we did those three things and that is the idea that we had and that we announced, okay?

Now could there be electricity? It would be a correlation between the growing student debt crisis and the slowdown in the housing market, which we've talked a lot about in recent months, as you know many student loan bars are not capable. getting housing due to high debt-to-income ratio there could be a sign that there is a strong need to first address the growing student debt crisis, so I would say that rising student debt is certainly a concern, it has been increasing rapidly and it's Now big, there's more and more evidence showing that students who can't pay off that debt are having a hard time having a normal financial life and buying houses and things like that.

I haven't seen any evidence to suggest it's a major factor. Currently, the housing industry is driving the housing industry. I would say that the housing industry is really active; Housing has been going up here over the course of the last seven eight months as a result of lower rates and a generally good job market and things like that are showing up. in the Morehouse building and more and also in home sales, my time is about to expire. I have a lot of students in my district and in the 5th Congressional District and a lot of them are leaving school, one of the things that concerns them.

It's the housing issue, you know, as you enter the job market, you know how you can better share an American dream like your parents without getting help from your parents, so with that Madam President, I give in, thank you, the President would like to remind to the members that We have a strong stop at 1:00 p.m. Today, the lady from Massachusetts will be the last member to ask questions today and the gentleman from Indiana, Mr. Hollandsworth is recognized for five minutes. I appreciate the time and, both privately and publicly, have been extremely complimentary of the work that you and your colleagues have done to not only calibrate the conditions to match the current economy but also the framework through which I make many of his decisions and how he presents them in public I can really appreciate and know that a cornerstone of what he has been trying to do with the Federal Reserve is to bring even more transparency to the Federal Reserve and some of the decisions and the press conferences that has had a lot of transparency added to it, so it's hard for me to understand some of the challenges that are being sought and the stress capital buffers and some of the vaguer language or the inability to pin down a timeline for the changes. that expectation of changes so that especially when 2020 we see the car has already begun.

I know Miss Wagner asked about this too. She had claimed laurels about this in December. I believe I sent you a letter and chorales signed by everyone on this side of the aisle. in Financial Services I'm just trying to get an idea of ​​what changes are going to be made what's the timeline for those who are going to do these stress tests to get those changes are trying to make decisions with trillion dollar balance sheets, balance sheets of Billion dollar leaves trying to make their plans this timeIt's upon us now and I feel like we're still being very vague about what's coming and when we can expect even whatever is coming, when we could expect that to happen. came before us, so I was wondering if you could give more color to that or give some reasons why you and your colleagues have been a little more hesitant to answer that I can't get any more clarity than there is, so I'll just say of new We hope that the core of the stress capital cushion will be incorporated into this year's stress test, yes, and we will do it in a way that is timely for car C.

Well, in our previous conversations, I think we had had a kind of a general agreement, don't let me overstate that if that's incorrect, that some of the aspects of this need to be calibrated correctly, we implemented a lot of this after Dodd-frank, we felt like we were doing the right thing by doing it. so, but such Maybe we had unwanted effects, maybe the predicted effects weren't as big as we thought they would be or maybe this wasn't the area we needed to focus on and I think we had agreed that some of this requires important calibration going forward and Do you expect there will be further review and calibration of these tests to reflect current conditions or, alternatively, what have we learned since the crisis about what works and what does not work and what may be increasing significant reserves? at many of these institutions, so my strongest opinion is that at Capitol the capital levels, especially at the larger institutions, are correct and there is no need to increase or decrease them and if you tell us, it should reflect that just for curiosity.

When you say about the right buttress, the data helps me understand what you mean by this about the right, the capital levels are much higher and the quality of our capital is much higher, that is undoubtedly, but I think we are all agree that during the crisis or before the crisis the correct levels of capital were not adequate, so saying that they are higher is not definitive in terms of whether they are too high if they are still too low if they are more or less the correct type of what Did you use to indicate that this is the correct level of capital?

Well, for us, if you look at the stress test, you know it comes up with a scenario that is equivalent to or maybe even a little bit stronger than what happened during the global financial crisis. And you see, do these institutions have the means to remain reasonably well capitalized and well capitalized enough to continue to have the confidence of the markets? That's really the question. I have to be above certain minimums and they do, yes, but not by some giant. margin does not suggest that capitals are too high, yes, it suggests that it is about right and the stress tests are probably a great test for that, yes, so I think you could see how worrying that could be for institutions that They feel like they're stuck in some sort of circular logic, we come up with these stress tests and then if they clear the bar on the stress test, then we think it's right, it's exactly right, without going back and changing some of the underlying factors that involved in the stress test.

You can always say it's correct, you can always say, as long as they lower the bar, that's okay, no matter what the bar is, they want to go back and just look under the hood and say, God, are these assumptions still correct? the way we have done it? made these stresses, it's the right way to do it right, so maybe in a relative sense, yes, it is higher, the capital is higher than the stress tests have indicated, but in an absolute sense, we are not doing the Question: Is this test correct? Are we doing this test correctly?

Does it include all the correct variables? I think that's what they're looking for, just more clarification on when we can expect that comprehensive review that the Fed has talked about for so long. We've been doing that all the time, we had a conference on stress testing last summer with internal and external experts, you know, academics, people from banks. We're doing that all the time, everything we do with stress testing is, you know, public transparent. I'm ready to comment on things like that, maybe not ex ante, but people can look back, it's not like we haven't adjusted this, trust us, gentleman from Massachusetts, mr.

Presley is recognized for five minutes, thank you Madam Chair and I also want to thank the activists in the room who have been organizing for a more responsive Fed. I know that a tenants' rights organizer approached me about activism being full-time. job and so we thank you for taking it on and I think the president for testifying before the committee today just like with the Fed now the decisions he makes impact workers every day his decisions impact how many jobs we have who has what jobs how much they pay us and who is hurt most when unemployment is high now in the past you have said we want prosperity to be widely shared we need policies to make that happen, yet the feds approach has never successfully ensured there are enough jobs well Paid jobs available to all who want to work, even for a short time, in a 1944 speech, FDR called for a second Bill of Rights that included the right to useful and financially rewarding work.

Justice Thurgood Marshall argued that the right to a job is guaranteed by the Fourteenth Amendment. and martin luther king dr. Tomorrow the king asked the government to guarantee employment to all people who want and can work dr. King's legacy is often reduced to a single speech and the march on Washington is often mischaracterized. The march on Washington was actually the march on Washington for jobs and freedom. It was a march for economic justice. In fact, King and Coretta met in Boston. I represent Boston and I do not believe she received enough oxygen for the role she played in the movement and therefore after dr.

The Assassination of King Coretta Scott King took it upon himself to pressure the Federal Reserve to adopt a full employment mandate and actually stood behind President Carter when he signed the Humphrey-Hawkins Act and that is why you are here today, for reasons of time. If you could allow me to answer as succinctly as possible, yes or no, mr. President, given lingering concerns about inflation, do you believe the Federal Reserve can achieve full employment? And by full employment I mean that anyone who wants to work and can work will have a job available first. Thanks for that story.

I didn't know. So that's our goal, that's what we're working toward all the time and I think you know we'll never say we've achieved that goal, but we certainly made some progress. I'll take that as a yes. Federal job guarantees succeed where the Federal Reserve has no yes or no. It's difficult to answer. Do you mean I don't know? I'm guaranteeing a job. That's the story I was providing. I did it, but anyone who wants to work. and it is capable of working well, so, Chairman Powell, by all indications, the American economy has been producing well below its potential for eight of the last ten years and for most of the previous decade, is it Is it true that for most of that period unemployment has been well above the target?

While we've almost never seen inflation above target, that's true, okay, meanwhile black unemployment remains twice as high as white unemployment. Now the Fed started raising rates in 2016 even though inflation was still below target and when rates go up, unemployment tends to go up too. Consider how increasing rates would disproportionately affect those who were already struggling to find employment, such as communities of color, formerly incarcerated people, our immigrant neighbors, so I would say unemployment has continued to decline quite significant since we started raising rates. at the end of 2016, actually at the end of 15, but again the Fed considered how raising rates would disproportionately affect those who were already struggling to secure employment.

I think our consideration was really that the right thing to do was to bring back monetary policy. to a place where it reflected an economy that had recovered quite a bit for the benefit of all people, including low- and moderate-income people, including mine, many people are still recovering, but in the interest of time, since there has been no signs of recovery. The economy has overheated since then and now you're cutting rates. Is it possible that you started reducing rates too soon? I think history will judge that we have to make decisions in real time. Although we have really learned something since then and that is that unemployment may be lower than most people thought, so given that, knowing what you know, would you still have supported raising interest rates?

When did the Federal Reserve do it? I supported him then and, looking back in 2020, I think you have to judge those decisions. about what we knew at the time, how many Americans have jobs today if the Federal Reserve hadn't raised rates in the last three years. I don't know where the minimum of 50 years is. I'd say that's a fair question, thank you, thank you. I would like to thank Chairman Powell for his unchallenged testimony today. All members have five legislative days to submit additional written questions for witnesses to the President, which will be forwarded to the President for his response.

I asked him to respond as soon as possible. may, without objection, all members will have five legislative days to submit superfluous materials to the president for inclusion in the minutes. Thank you all and this hearing is suspended.