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

the committee will come into order with no objection the chairs 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 stand for four minutes to give an opening statement i would like to welcome back to the chair Powell, as I mentioned earlier and in our last hearing with you, I remain very concerned about the President's efforts to interfere with the independent

monetary

policy

of the Feds. A recent news story noted that Trump has tweeted more than 100 times about the Federal Reserve since 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 swayed by these aggressive tactics to defend the independence of the feds, you should also take into account the perception public, 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 Res.

After his irresponsible trade war and the GOP tax may have blown up the national debt, slowed our economic growth and hurt working American families. More recently, by proposing a further reversal of the Volcker rule, the Dodd-Frank Act made our financial system more secure, but it depends on agencies like the Federal Reserve for Prudential II, use available tools to monitor and mitigate threats to our

economy

, the committee is carefully monitoring developments. on the repo market and the Fed's response, the Fed should not arbitrarily lower liquidity requirements in response to the repo market disruption as some on Wall Street have called for; we have strong capital rules that cannot be played with window dressing a practice in which banks alter their balance sheets to appear less risky and reduce 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 Clement's inclusion of weather-related losses in supervisory stress tests of large banks, to address this growing risk. I would also like to discuss recent developments related to the Community Reinvestment Act, which is the CRA. We have had a number of hearings on this issue and I am very concerned about the OCC. The controller files a damaging proposal to convert the CRA into the Community Divestment Act and allow banks to evade their obligation to make responsible investments in communities where they are permitted.

I urge Safed to take a careful and deliberate approach to any change in CRA implementation and not join the misguided efforts of the Comptroller's hood statement by Governor Brainard and I will quote that it is more important to get reforms right that doing them quickly, in quotes, is absolutely correct, the OCC and FDIC should also heed that advice and extend the public comment period, as community banks, state regulators, community and civil rights groups have called, as well as the Democrats on the committee. because to give all interested parties an opportunity to voice their concerns, I also encourage the Federal Reserve to keep an eye on 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 competing with our own US dollar in light of the many risks of Facebook's plans Other Democrats and I have called on Facebook to halt its plans until Congress can examine the problems associated with a large technology that develops these digital products and take action. testimony today chair hal and discuss these matters and now recognize the ranking member of the committee gentleman leman from north carolina mr.

McHenry for four minutes for an opening statement thanks to Chairman Powell for appearing before us once again under the trump administration we have the best economy we've had in decades the numbers are damning we added 225,000 new jobs in january and the rate 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, working-age labor force participation hit the 2.2 million people who were previously out of the labor force and, unsurprisingly, consumer confidence has risen sharply since the month before the president's election.

All members of Congress should celebrate these remarkable results that have resulted from Republican leadership on pro-growth policies like tax reform and sizing regulations, while also maintaining our economic prosperity. The penny depends on the Federal Reserve having good policy The ral bank is currently conducting a review of its monetary policy framework to determine what tools it may need going forward. Chairman Powell, I raised the concern that we have regulatory policy that is affecting your ability to make adequate monetary policy and that is why I think it is important that you have a regulatory review of the limitations that those regulations may place on your monetary policy decisions. broader, 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.

Thank you for 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 is concerning. I also expressed my concerns with the LIBOR benchmark transition that we have nine months later I am still concerned that consumers will be affected by the transition We still have written contracts t or the library benchmark rate and I think given the recent volatility and In repo markets, I am concerned about subsequent volatility and consumer-facing products, including mortgages, auto loans, business loans, and other consumer loans, as this new benchmark raised derives from overnight secured funding at hearings.

I have previously 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 troubling and is a wake up call to every single lawmaker that we must take the threat of China and the communist regime c It's done pretty seriously if we don't take them seriously don't be afraid they'll take us very seriously and now they have basically all of our data so the side effects of this Chinese policy thing are significant not just for cyber security but what we are seeing with the corona virus and the destabilizing effects it has on the world. although i know you are not a global health expert but you can give us some insight into your measurement techniques and response to these economic changes that are being pushed out of the challenge of coronavirus and china and the side effects it has for your neighbors in the supply chain also which is derived through China, the nature of the Chinese regime may not be a perfect fit with the risk assessments of the feds, the Fed has acknowledged in its financial stability report that cyber risk is also not a perfect fit, but the risks are real even though our data is limited coming from China and the limited data we have still makes us question that we need to properly reflect on what we know and how we respond as a US government and the Western world in response to these threats, both cyber and health risks as the indirect effect it has on our economy, so again, Chairman Powell l, thank you for being here, thank you for your openness, thank you for your focus as chair of the Federal Reserve to be in the language of the people instead of just that language of the doctors that I test with now I recognize the

chairman

of the Subcommittee on national security, international development and monetary policy, mr. klieber for a minute thank you madam chair mr.

Chairman, first of all, I really appreciate his willingness to travel across the country to do the 14 feed and listen sessions and one of them he did in Kansas City at our Fed building and I think it's a great opportunity. so that most people have a chance to sit in a room and talk economics with the president so thank you very much when you came to get the people from the city who sat around the table with you and gave you a image of their struggles and efforts. I'm trying to succeed in the economy and people are worried about inflation too they think it's like toothpaste once you get out of Harlech it's hard to get back in so we're concerned and we also appreciate your work and I hope looking forward to going a little further as we move forward with the canoeing venture Thank you, I now recognize the ranking member of the subcommittee, mr.

French Hill for a minute thank you ma'am chair chair friend thank you for being here today we appreciate your willingness to come and answer our questions and provide your ideas. I want to take a moment to echo the comments from the ranker on Community Reinvestment Law I know this got a lot of attention. I read Governor Brainard a very comprehensive view on the subject and we had Mr. Strange here recently to discuss the OCC point of view as a former community banker it is my view that ultimately we should have a focus for the CRA among financial services regulatory agencies.

I've had 40 years of dealing with the inconsistency and delivery of regulatory proposals and so I think ultimately it would be productive for us to have an approach to that regulation and modernize it for the digital world that we live in today. I look forward to your presentation today and Madam President. 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 its Chairman since 2017 mr. Powell has testified before the committee and I believe that he needs no further presentation without objection, his written testimony from him will become part of the record, mr.

Powell, now you can present oral testimony from him, thank you very much, shut up, sure, woman, ranking member of Waters, McHenry and other committee members. I am pleased to present the semi-annual monetary policy report from the Federal Reserve. My colleagues and I strongly support the goals of maximum employment and price stability that Congress has set 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 I get the obligation to explain clearly how we pursue our goals today. review the current economic situation before turning to monetary policy the economic expansion is in its 11th year and 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 at As the economy appeared resilient to the global headwinds that were intended to intensify last summer inflation has been low w and stable, but has continued to perform below the FOMC is symmetrical 2 percent target job earnings averaged 200,000 per month in the second half of last year and an additional 225,000 jobs were added in January the pace of job gains has remained above what is needed to provide jobs for new workers entering the labor force, which allowed the unemployment rate to drop further over the course of last year. one year job openings remained plentiful employers are increasingly willing to hire workers with fewer skills and train them as a result the benefits of a strong labor market have become more widely shared people who live and work in low-income communities and media are finding new opportunities job gains have been widespread across all racial and ethnic groups and education levels wages have risen, particularly for lower-paying jobs GDP increased at a moderate pace during the second half of the year past.

Consumer spending growth moderated towards the end of the year after previous strong increases, but the fundamentals supporting household spending remain strong. Residential investment increased in the second half, but business investment and exports increased. weak largely reflecting slow growth in theabroad and trade developments, these same factors weighed on activity at the country's factories, whose production declined during the first half of 2019 and has changed little on net since then. The February monetary policy report looks at recent weakness in manufacturing in some of the Uncertainties around trade have eased recently, but risks to the outlook remain, in particular we are closely monitoring the emergence of the coronavirus, which could trigger disruptions in China that would spill over to the rest of the world economy.

Inflation was below the FOMC's symmetrical 2 percent target. throughout 2019 for the 12 months to December Amber headline inflation based on the price index for personal consumption expenditures was 1.6% Core inflation, excluding volatile food and energy prices, was also 1.6% in the coming months We expect inflation to approach 2% as unusually low early 2019 readings abandon 12-month estimate, nation faces significant longer-term challenges labor force participation of people in their prime working years is at its highest rate in more than a decade, yet it is still lower than in most other advanced economies and there is a worrisome labor force. market disparities between racial and ethnic groups and between regions of the country in addition, although it is encouraging that productivity growth is the main driver for increasing wages and living standards long-term productivity gains have increased recently have been unsatisfactory throughout this long economic expansion, finding ways to boost the workforce, 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 In In 2019, the FOMC shifted to a more accommodative monetary policy stance to protect the economy from weaker global growth and trade developments and to promote a faster return of inflation to our symmetrical 2 percent target. We lowered the target range for federal funds in our July September and October. meetings raising the current target range from one and a half to one and three quarters percent and our subsequent meetings with some uncertainties surrounding the decline in trade and amid some signs that global growth may be stabilizing the committee left the policy rate unchanged the FOMC believes that the current monetary policy stance will support continued economic g For a strong labor market and inflation returning to the committee's symmetrical two percent target, as long as incoming information on the economy continues being broadly consistent with this view, the current monetary policy stance will likely remain appropriate, of course, policies do not follow a preset course if developments arise that cause a material reassessment of our outlook we would respond accordingly by taking a broader view there have been a decline over the past quarter century in the level of interest rates consistent with stable prices and the economy operating at its maximum potential this low interest rate environment may limit the ability of central banks to reduce policy interest rates enough to support the economy during a recession with this concern in mind we have been conducting a review of our monetary policy strategy tools and communication practices public participation is at the center of this effort through our Federal Reserve listen events we have been hearing from consumer representatives work business community and other groups the February monetary policy report shares some of what we have learned the insights we have gained from these events have informed our framework discussions as reported in the minutes of our meetings we will share our conclusions when we finish the review probably mid this year the current low interest rate environment also means that it would be important to the health of fiscal policy to help support the economy if it weakens putting the federal budget on a sustainable path when the economy is strong would help ensure that policymakers policies have the space to use fiscal policy to help stabilize the economy during a recession a more sustainable federal budget could also support long-term economic growth finally i will briefly review our planned technical operations to implement monetary policy February Policy Brief provides details of our operations to date.

Last October, the FOMC announced a plan to purchase Treasury bills and repo these shares have been successful in providing an ample supply of reserves to the banking system and effective control of the federal funds rate as our purchases of bills continue to accumulate reserves towards levels that maintain ample conditions that we intend to gradually transition away from the active use of repo operations also as reserves reach ample and enduring levels we intend to reduce our purchases at a rate that allows our balance sheet to grow in line with trend demand for our liabilities all of these technical measures support the efficiency and effectiveness of monetary policy implementation, they are not meant to represent an opportunity, sorry, a change in monetary policy stance, as always, we are ready to adjust the details of our technical operations as warranted set the conditions. five minutes for questions in December 2019 when the OCC and FDIC issued a notice of proposed rule Regarding the Comptroller's exit proposal, the Federal Reserve did not join this proposal.

FDIC board member Mark Gruenberg voted against the Comptroller's exit proposal, describing it as a deeply missed proposal that would fundamentally undermine and weaken the Community Reinvestment Act, in quotes and comments last month. Federal Reserve Board Governor Brainard said the quote given that reforms to CRA regulations are likely to set expectations for a few decades, it is more important to get the reforms right than to do them quickly, which requires that external stakeholders have sufficient time and analysis to provide meaningful comment on a variety of options for modernizing regulations Governor Powell,

chairman

without quotes, Brainard, also suggested in a speech last month that the Federal Reserve created a database of 6,000 public CRA assessments looking at how various CRA investments support low- and moderate-income communities. used this database to assess how Bank's activities would be assessed under the OCC S and the FDIC's proposal, the CRA.

If I understood his question, it was whether we have used our database to evaluate your proposal. That's how it is. I'm not entirely sure that we have. Perhaps I can provide you with some context, if it's appropriate, if I may, which is just that we agree that this is a good time to update CRA in light of changes in technology and demographics and we do agree on the goals, we put a lot of work into this. We tried hard to get on the same page and we couldn't do it. We have a few different ideas, as the Federal Reserve intends to do this assessment.

Excuse me. Do you attend to do the evaluation that I refer to regarding the database to evaluate banking activities? to know how the assets would be evaluated based on the CRA proposal from the OCC and D FDIC, so really the real point of that term from that database was for us to create our own set of metrics, we want to be very, very sure that that of out there comes a proposition that t from us that will make all the major players in CRA better off and so we think it's important that every metric, every change we make, be data driven and that was the purpose was to help us develop our thinking and our proposals and that's essentially what we've been using it for, so given the magnitude of the CRA reform and regulations, do you think the comment period should be extended to allow the public to evaluate a company so important that it is really a decision for the OCC and the other?

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, so are you completing your evaluation, are you continuing to look until you reach a final decision, we're, we're running, you don't think the public should have the opportunity to have more time to do that as well and they Wisconsin when the At the moment, I mean, I think at the moment what we're doing is we're looking forward to reading the feedback on the proposal, I think we'll all learn a lot from that feedback and be able to incorporate that thinking and whatever changes are made to the proposal, there may be substantive changes to the existing proposal that come out of the feedback so I think our view is that we want something that will leave everyone better and will have broad support and that's what we're going to work on well as you may know everyone Democrats in this committee urge regulators to 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, state regulators and Community Bank community groups have asked these agencies to extend the comment period, and while you said it's not your place to comment on whether to extend or not, I wish you w You should think about this and I wish you would as you are doing the evaluation and as you have said it is important that the public be able to comment, review what you are thinking and if you change your mind please let us know about commenting yes or no we should extend the comment period you don't have to respond to that thank you very much gentleman from north carolina ranking member mr McHenry gets recognized for five minutes, so he's always rich, so when someone else has a negative comment on the Fed, that's bad, but when I as a legislator on the hill have a negative comment on the Fed , it's good so it's all about the eye of the beholder when it comes to political debate here in Washington Congress made the decision over a hundred years ago to outsource monetary policy to the Federal Reserve you are a construction of law , you are given independent operations and you have a set term of office and so Fed independence for monetary policy is appropriate and for a long time every president in the last 100 years has had some private criticism and we find out about those criticisms at some point through press reports at the time or later or some biographers work on the president, but here on the hill we can do c negative comments on the fed and attacking the president for having negative comments on the fed so this is all ff just rich politics let's get to the gist of this you are the biggest regulator in town when it comes to the financial world , I have concerns that I want to address, that our regulatory nature that I think affects monetary policy, the repo market for example, these operations that you said are temporary in nature, is that still true?

Yes, our expectation is that we will continue our bill purchases at least through the second at least through the second quarter and we will continue harvesting operations at least through April and in However, April feels that we are building a level of reserves to a level that will mean that we do not have to engage in open market operations on an ongoing basis and that will take that length of time and as the underlying level of reserves increases due to our purchases of bills, the need for repos will decrease and, sometime in the middle of the year, we will hit that level of ample bookings from then on.

The balance sheet will grow with trending demand for our liabilities, we will continue to expand with the economy, and we are reviewing their capital requirements for institutions that should participate in the repo market. Well, I think we've reviewed it. Supervisory and regulatory practices that may be affecting the flow of liquidity. Of course, our primary focus is the federal funds market and our ability to seamlessly transmit our policy decisions to the money markets through the federal funds rate. What happened at the beginning of last September. September was when there was unusual stickiness and volatility and we put it down to the fact that what appeared to be ample levels of liquidity didn't float where they should have and it was very rare that it actually did two things: one, we're raising theunderlying level of liquidity for us increasing reserves to a higher level than we had thought we needed and that process as I mentioned will take until the middle of the year as part of that there is also a supervisory assessment to make sure that this politics is being pushed in terms of the institutions okay so we've been doing it since September so I brought this up in my opening statement on China now you've spoken publicly about your assessment you're thinking seeing what's happening with the China's response to the coronavirus we wish them the best we have high hopes that they can address this crisis there this public health crisis they are facing but please explain to me your way of thinking and assessing the situation in China now in economic terms and that possible spillover effect as well So I'll quickly start by saying again that we find the US economy and in a very good place doing well. we see signs that global growth is bottoming out we see a reduction in trade policy uncertainty across the board we see strong job creation continued moderate credits all of those things that we see all of this happening in the context of a good and good US economy strong and in that image comes the coronavirus and so the question is how do we think about it, of course, first we look at the human tragedy, which is terrible to see, the question for us is really what the effects will be. in the US economy, will it be persistent, that is really the question. like Asia and we know that there will very likely be some effects in the United States.

I think it's too early to say that we've resisted the urge to speculate on this, so we'll be looking at it closely again and the question that I'll be asking is these going to 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, kindness. Oman from New York Mrs. Valez's gas is recognized for five minutes. Thank you, president, president, Powell. I'd 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? it may not be so much to comment directly on the other proposal, but to talk about how we're looking at this and again we think and I'll bring up the areas where we have differences, okay, I hear you and I respect you, but I would just like to ask you if the Fed cannot reach an agreement with the OCC and the FDIC on a joint rule.

Do you expect the Fed to issue its own proposal? We haven't made a decision on that yet. Right now our focus is on our focus has been 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 regularly with OSI OCC and FDI C on this topic , so we did it for a long time, currently we don't meet with them about this, would you agree with the governor's brains comment that it's more important to get the rule right than to get it done quickly. cloud-based service providers for data storage needs, does the Fed have all the access authority it needs or are there contractual or legal limitations that restrict the Fed's ABI from obtaining data held by third parties that You need to properly understand and manage this growing trust, I think we have the legal authority we need, we can look to third-party service providers and we're doing that more and more because, as you mentioned, the prominence and size of these is the growing importance of these cloud service providers thank you for your return lady from missouri mr. is recognized for five minutes.

I thank the president and thank you for being here, friend of the president. We are all very interested, as January 29 just raised the repository peak. I know the rank member mentioned it. I know you're in the middle. from the review of her and such, but could this have a little more specific question? Could this repo market disturb the sign of deeper difficulties for the financial system? beginning of september the repo markets and the money markets have been doing very well there hasn't been a return to volatility they were running very normal really excluding year end so we haven't had any return to that it's pretty clear that the the steps that we took directly address the problem you know, 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 just know a At that time with the quarterly federal taxes due along with the Treasury debt auction of a little over I think around 78 billion it wasn't yes I think it was a function of maybe this this fluke would you call it we knew everything else is we knew it and what we did what we did it was asking the banks to tell us what their lowest comfortable level of reserves is thanks you got those numbers we added them up we put a buffer on top of that and it was still suggesting that there were a lot of reservations in the system and this has happened and I think that makes us think because we knew about those big changes that were definitely on the horizon okay and you're doing a review that you know I hope you find there's nothing symptomatic of some deeper difficulties and we hope you turn the page.

President Powell in December of last year asked Vice President Quarles for an update on the status of the upgrade. the big g-sib surch and plans to finalize the stress capital cushion proposal which I understand will require a break 'the with the comment period in January Vice President Quarles gave a speech in which he talked about bringing reasonable transparency to various aspects of the Federal Reserve's supervision and regulatory framework last week the Fed released the stress test search scenarios, to my knowledge there has been no progress or update on the status of the stress capital buffer other than the Continued assertions by you and Vice President Corales that aspects of the proposal will be incorporated into Orders C

2020

given the Federal Reserve directors' recognition of the importance of transparency.

I guess I'm concerned about the lack of transparency in this process. When can we expect progress on this proposal that has been in process? now I think it says April 2018 we're still waiting and we intend for the core of the stress capital buffer to be incorporated in or the framework in time for the

2020

stress tests so we're making progress on that and we're on track to do it, if you feel you interact to do it, then yes, all right, the Republicans on the committee have stressed the importance of cyberthreats as a potential. systemic risk, we've recently seen malware attacks that undermine government infrastructure and, according to research last month by economists at the New York Federal Reserve, a simulated cyberattack in just one major US state on bank could have indirect effects that would affect 38% of the wholesale payment network.

What can the US do? do better, Chairman Powell, to prioritize this constant stream of cyber risks and strengthen the resilience of our financial sector. I think we can continue, and we have to continue to do what we're doing, which is to make this really, if not top, oversight. priority not only for banks, but also for the Federal Reserve and for institutions across the US landscape. We have very high expectations, particularly of the largest banks, about their ability to defend against cyberattacks. We constantly meet within the government, to make sure that our system is resilient and redundant and strong against cyberattacks, but there's never a feeling that it's gotten to a comfortable place where we just have to keep working and stay in the minute learning what the new attacks are to make sure the banks are doing the basic housekeeping and all of that is very much going on and you know you're going to have to keep doing that I think for a long time thank you my time is up thank you so much for being here from new jaron

powell

and i give back to you the lord of california mr.

Sherman was also the chair of the subcommittee on investing at trinova for five minutes a couple of responses to which the rank member said yes the stock market is going up wages are up a little over 1% in real terms after the Wage inflation in the have risen primarily in those states where we raised the minimum wage and when we have a Democratic majority in both houses, we will raise the minimum wage across the country and we will effectively deal with and deal with those states that have not seen such an expansion of wages in the background.

I haven't quite aged, but I have spent many decades in this room. I've seen your predecessors, predecessors, predecessors and every time they come in and the Republicans attack them for expansionary monetary policy, both traditional and novelty, and now we have a new president and all of a sudden they're pushing to the other side, everything that I will say is that I always have since the days of mr. Greenspan has been pushing for slightly lower interest rates and easy policy, particularly quantitative easing because you put $55 trillion back into the Treasury last year and I don't know what your purpose is, but think about the children who will get a 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 have seen it recently. I should point out 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 inherited an airplane like he inherited many other things that the airplane was in. autopilot and it was going in the right direction and you haven't managed to completely screw it up we have an issue that I think should be completely bipartisan and it's LIB Or we'll be in a couple of years Chairman Powell if Congress just gives the Federal Reserve the right to prescribe support rates when debt instruments don't, or if we should explicitly adopt Sofer or what can we do and hopefully do this year and actually fix the problem 12 months in advance, so that on LIBOR, as you know, our process is ongoing and we're really committed to having the banks ready by the end of next year to switch from LIBOR in the event that date is no longer published that's okay they need to legally know what to switch to and we want avoiding 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 switch, they don't. they have to know legally what they're supposed to do if we need a change in federal law we'll let them know I think well we're less than two years old now.

Haven't figured out if you need a federal law? change or not i think we think we do i need a change in federal law well if i could just get an answer because there are people who want to wait until two or three months before things blow up and then go to congress and say now fix it two years is actually a very short 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 regarding legacy LIBOR and we need to remove that that is one of the things we can do to help the economy, so I hope you act within a month to let us know what you proposed instead of waiting until next year.

Another area we've talked about before is the bank transfer system. and these scams arise mainly because when you transfer money you transfer money to a number but there is no identified beneficiary the british resorted to a beneficiary confirmation system the international standards organization has prescribed changes that would require at least identification of the beneficiary, we don't know I know you have raised state law issues I have discussed that I cannot see what would prevent the Fed from prescribing what the wire transfer system would be and it looks like I will have to ask you to contact me immediately for the record on that question if asks the witness to provide a response and to write for the record the gentleman from Oklahoma, mr.

Lucas is recognized for five minutes thank you ma'am chair Bell during his testimony before the Joint Economic Committee last year he was asked what steps the Federal Reserve is taking to assess the impacts of climate change on our financial system in his testimony that he made the distinction between the purely informational stress test for climate risk that the Bank of England does and what the US government does. The stress testing regime that the underwater car does impacts and informs capital requirements for capital distributions . I understand that the Bank of England is conducting an investigation and asking financial institutions to look at their portfolios and howcould be affected, but they are not currently integrating those measures.

On capital requirements, could you summarize some of what the Fed is doing in terms of research and participation in global climate risk? Of course, I should start by saying that climate risk is very important. Climate change is a very important issue that Congress has largely assigned. However, for other agencies it influences our work as it relates to the public's very reasonable expectation that we would ensure that the financial sector of the utility banks we supervise is resilient to long-term risk. and climate change, so what we're doing is we're in the early days of understanding what all of that means, so there's work. ing around the world than central banks to try to figure that out, you talked about the Bank of England central stress tests, you know they're not meant to inform current capital requirements, but more informed to understand what might be the effects on the banks that you plan to join the network to green the financial system we have not made a decision on this we have always attended your meetings i mean i guess my theory is that we are you when you join an organization like that there is no you don't necessarily know how to sign up for everything everyone there thinks you can you can benefit from the work being done there work doing that now we haven't made a decision on membership vice president disputes recently outlined changes that would increase transparency and accountability of supervision and those comments encouraged me and I will follow this closely, of course, a change What the vice president described is that the Federal Reserve should restore supervisory observations that will allow for the notification of a supervisory concern without raising it to the level of a matter for attention.

Can you tell us what the schedule is that you see in those proposals to improve the supervision schedule? It's hard to say. I mean. I would just say that what the vice president did was he pointed out this tension that exists between the very fundamental expectations of transparency and fairness of due process around everything the government does and should have been associated with that, but also with the oversight that by its nature it's private and somewhat discretionary, not really public and confidential, so you pointed to that tension and the need to shed more light on that and ask if there are places where oversight needs to bring in more of those who think about processes, I think. that's a very healthy thing to think about and it's something we'll be working on in light of the coronavirus Chai rman, I can't stop thinking about when I was young, as a kid, I spent a lot of time with my parents, my grandparents, I must To say that my great aunts and uncles were born just before, just after the previous century, so their stories of First-hand experience in the 1918 and 1919 pandemic was very graphic as it spread through the rural areas of 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. i was stuck for weeks in rural western oklahoma now my mother's family my father's family was very lucky no one ever died of what was called the spanish flu but it brought society to a standstill 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 the perspective of your fellow central bankers in those countries, I think they are really responding now to the outbreak to contain it and the Chinese government is obviously taking very strong measures in that you see businesses closing down in the affected areas, they see those kinds of things in terms of the economy, as you asked, the People's Bank of China has done a number of things to support economic activity and I think it can expect the Chinese government to do a lot of things to support economic activity and they've said that If they're open to cushioning the economic effects, we're not, we're not seeing that you know we can't get to estimating the size of the economic effects.

There are many estimates. out there, but i think you will see governments acting in asia, particularly china, to offset those thank you mr. president give up 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, ma'am, chair, welcome, Mr. The chair, I mean, he was quick to initially refer to asymmetric growth. It has been discussed that it will drag on in my community and others, that 40 percent of Americans do not have adequate savings for a $400 emergency, and similarly, one in five Americans skip essential health care or does not pay monthly important. bills due to lack of funds, so ultimately a large part of the population is also banked or unbanked and we've talked about that a lot in the community and in the committee of which I chair the subcommittee that I chair, so my first question by then is why haven't circumstances improved more rapidly in recent years for low and moderate income Americans given the so-called state of the economy the pattern was that at first it was more high end people who had just leaving the workforce maybe did it again in what we've actually seen though in the last two or three years wages have gone up more at the lower end of the pay scale so w I see you know that during this expansion very long there are now significant effects in low and moderate income communities and it's great to see where as I mentioned if our Federal Reserve listens to events we've heard a lot about that so let's that's very positive. more to your point even though you know waiting for the 10th, 8th, 9th, 10th, 11th year of an expansion isn't really a strategy you know we see those things now because the job market is strong but we really need it really other programs to address the long-term needs of those communities in addition to the economic cycle and monetary policy, so also during this time period, would you say a lot of us have been discussing and finally moving towards $15 per year? hourly minimum wage for the people at the bottom, do you think that has anything to do with helping them?

Also the fact that many states have adopted a minimum wage that is $15 higher than would have been established. I'll answer your question directly let me say first that we don't of course we don't take a position on minimum wage that's a classic we had a position from the beginning that legislators have to understand so there is research on exactly what is increasing wages. on the low end it suggests there is a role there for minimum wage increases states that have had minimum wage increases have seen there is a noticeably higher increase but it is actually much broader than that and the most important factor really it's very low unemployment and a strong job market high job creation that's the main driver so the other concern I have because it also seems like you know unemployment goes a cetera lower still when you look at black unemployment it still remains almost double that of mild unemployment and it seems to stay that way whether the cycle is down or up, so is there any sign of how we close those gaps and me why is there?

There are always these gaps that seem to occur between the black community and whites, we know it's a good economy that the gap stays the same, there are persistent gaps and they are very concerning and not long term. something that monetary policy can address really depends on other policies by governments, state and local governments in the federal government and frankly, businesses as well to do what they can to close that gap that we have is an interest rate tool and we can do what we can what we do is support the objectives that has given us maximum employment and stable prices, we see positive effects of that, but in the long term you really need broader education policies and other things that would help with that problem, let me ask i know chairwoman waters asking some questions about C well there came up some questions that maybe you could answer you know kid the framework Governor Brainard put out not long ago is the same framework the work of the Reserve Board Federal it's just some say it's just their opinion and it's not the board's so maybe they can clarify it's that the board has a similar seat to the Governor Brainard, so we haven't actually taken a proposal to the board yet, but no, that represents the thought that she's been working on this and I asked her to lead this effort for us, she led that committee for some time.

I feel very comfortable with the thinking that goes into it. speech and you know you support that set of ideas and that approach, but you're not in a place where we can say that this is a Federal Reserve proposal because we haven't brought it to the board yet. Thank you gentleman from Florida Mr. Posey is recognized for five minutes thank you madam chair mr. President, the world is experiencing a spectacular growth and space economy, and many are genuinely concerned about the expansion of civilian space launches. I represent the Kennedy Space Center, and obviously we're very excited about what various estimates now put at the current level of global space. economy at 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 Economics Satellite Account, a new collaborative effort to measure the relative importance of the space sector in the US economy with a special emphasis on the growing commercial space segment, this effort will utilize input from industry experts and multiple government agencies, obviously I remember over the years that the Atlanta Federal Reserve has applied its experience 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 to avoid funding social bottlenecks and keep this important space industry on the path to a healthy growth rate.

I'm the first I hear about. Sure, I'm happy to assure you that we'll look at it closely and if it's something that would be productive I'd be involved over the years we've developed quite an expansive policy of federal reserve independence and I believe in ensuring the freedom of the Federal Reserve to act accordingly. independently on a day-to-day basis to manage our economy and the critical payment system. I would not expect to recall Congress or any other official or government being involved in a decision of the Federal Reserve, chairing the board of directors, the Open Market Committee, or monetary policy. of the Fed and I Congress does not run day-to-day monetary policy and Congress does not run generals on the battlefield nor should we reward the GAO for routinely conducting policy audits of defense policy and strategy, but the GAO is restricted from conducting policy audits at the Federal Reserve I am challenged to understand how policy audits Critical national defense strategy ethics are fine, but Fed policy audits are off limits.

The defense industry is surely at least as sensitive as monetary policy and I would like to know your opinion about it. so the GAO doesn't do policy audits on the Fed constantly all over the place on the Fed with just one exception and that's our specific monetary policy function that Congress chose a long time ago to create a bit of a step of distance from the GAO in to underscore our independence I think that was a smart move I think changing that would clearly be seen by the public as inflexible you know a lessening of our independence we look at this committee and the equivalent committee in the senate side of oversight of Monetary policy in our system of government our path to oversight and transparency goes right through this committee and also the Senate Banking Committee so that's us but anyway t that's what I would tell you about the GAO, what do you think makes the Fed more immune to review than defense? audit everything and you know these are policy audits it's not like a financial audit the public needs to understand we're audited our business model is really as simple as a very small media it's not complicated and we were constantly audited what what what What this exemption does is that it prevents the GAO from stepping in and scrutinizing the evaluation of individual monetary policy decisions that Congress saw fit that you saw fit that your Congress saw fit to exclude from thelaw and again I think it was an appropriate thing to do and I think it would be unwise to take a step back from that I don't see any harm that it's doing well the former Fed chair has indicated they just did it I don't want to be a second guest on their decisions that the public really have no right.

No, I find it illogical, frankly, and that's why I'm asking you these questions. we post we post all but and and i just, you know, i think the but waiver is overdue the gentleman from missouri mr. Clay, who is also the chair of the Housing and Insurance Community Development Subcommittee, is recognized for five minutes, thank you, madam chair, and thank you, Chairman Powell, for being here today because the majority of the voters in my district of Congress are not focused on holding the 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 demography of wealth examining the connection between race or ethnicity and the accumulation of wealth over the past quarter century was the result of an analysis of data collected between 1989 and 2013. through the Federal Reserve Consumer Finance survey More than 40,000 heads of households were interviewed during those years. Median wealth levels for Hispanics and blacks are about 90% lower than the median wealth level for whites, but median income levels for Hispanics and blacks are only 40% lower. Hispanics and blacks investing in low-yielding assets like homes, as well as to prohibit loans at higher interest rates.

Hispanics and blacks may also feel less need to save for the future because network programs old age security from society's progress will replace a relatively larger part of the normal income they earned during their working years, could you comment on why many communities continue to lag behind and how the fed through its monetary policy might try to address some of the underlying factors that have led to great inequality what we can do and what we have been doing is take seriously your mandate to seek maximum employment and that is what we are doing i think we have learned we just learned because we have been looking at what has been happening that unemployment may be lower than many expected without raising inflation concerns narias or others, so that's what we can and will continue to do and I think that's showing up in communities around the world.

I think other government and other tools are needed to address longer-term issues, for example, how do we address pay inequality? persistent wage inequality among your workers, especially when you look at disparities in and across careers and to pay inequity. I will say that I think it is important that those issues be addressed. It's really not up to the Federal Reserve to prescribe the measures that to address them we must stay in our lane. We have this grant of independence, including Gao's exemption, and I think to maintain that we must stick with what he has given. us to do what is maximum employment stable prices oversee the banks look at their finances there on another topic well the Federal Reserve publishes its own proposal on the Community Reinvestment Act that takes into account the needs of low and moderate income communities that we have I've made a decision on that, but I think our focus right now is on the ongoing process of other agencies' proposal and feedback.

I think we will learn a lot from that feedback and I suspect there will be changes. that proposition that comes out of the comments and they know we are so we haven't made a decision on our own proposition well traditional monetary policy works through a single variable across the economy a single interest rate or maybe money supply from credit growth credit policy, by contrast, aims to direct credit in specific ways toward specific groups of borrowers borrowers credit policy consists of central bank operations targeting specific segments of the private debt and stock market What is your opinion about the change from traditional monetary theory to one that implies the use of more tools to improve the indebtedness of a segment of society?

I think historically it has not been a function of the Fed and central banks in general. as one tool pointed out, which is our interest rate policy when you talk about affecting different sectors of the business community or the population, that really should be another agency or Congress itself on fiscal policy rather than the witnesses requested to continue thank you the gentleman from missouri mr. Luetkemeyer is acknowledged for five minutes, thank you, Madam President, and welcome to President Powell. He was glad to see you, sir. I'm sure he bought into the speech and probably read or heard Vice President Quarles' speech about the need to reform Banking Supervision in one area.

I think what needs clarity in the supervisory regime is the role of guidance I pushed regulators to clarify the path of guidance use and in 2018 came out with an interagency statement on guidance our Vice President Quarles in his speech urged an additional step making a rulemaking the role of guidance this fits with the trump administration recent and recent actions outside the office of budget management my question is do you think we need an official rulemaking from the Federal Reserve on the role of guidance that we haven't taken on a decision. Like the other agencies we are looking at the OMB memo as you know the guidance is not enforceable it is not so we understand the guidance is not a rule Mr.

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 the rest then be clarified as strictly guidance and I think that's a great approach but I think I think the question is if you anticipate a rule to be able to do that and force that in the future, then you're looking to try to do that, that's something we're looking at and we're looking at our guidance and and and asking if any of that should be is more like a rule, okay , Mr.

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 proper supervision and you have no enforcement measures. specific protection, in fact, the GAO said this. it 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's appropriate that we draw clearer lines around ik list membership and as vice president Quarles mentioned in a recent speech that that's the path we're on, okay, very okay, one thing that worries me is the fact that we have a lot of banks and non-banks that are in the non-bank space home mortgage lending in general ended up roughly around 250 billion in 2016 next year is projected to triple to 750 thousand million dollars in 2019 non-banks originated 85% of all Ginnie Mae-guaranteed securitization loans 53% of loans sold by Freddie Mac and 60% only by Freddie Fannie Mae and the composition of non-bank mortgages 87% from the FHA portfolio and your most recent F share report Non-bank mortgage originators were designated as a potential systemic risk, you are a member of F sock, can you explain this o o would you like to talk a bit about that or do you have any concerns or that obviously f sock did what you mentioned? that in F sock and I think it was part of the recent annual report that the idea is that now these are very, very important channels through which mortgages are originated and in the event of a downturn, banks have a lot of capital, they have a lot of regulation a lot of liquidity and and that's in a good place, but these institutions are operating at times low, you know, financing themselves with lines of credit that might not be available, so there's a risk there and we're in the process of getting ass out that and figuring out what to do about it is you know the timeline kill it we've highlighted it as a risk and we're working on do you have a timeline on what you might come out with a statement and say you will or you won't and if you want to do something, I can come back to you This is something that the Treasury has the lead on, but okay, okay, okay, one of the things that I was a little worried about as well is with respect to home loans they're just the stack of forms that you have to go through.

I mean, we had a gentleman here who represented that he was actually crediting at the time, but the stack was literally this high and he asked him how many pages are there. He said Congress no I don't know, I measure by the page we measure by the pound. I said this. This is how we get off the charts when you have such a high stack of papers to make a home loan. I have spoken with the FDIC and the CFPB. and hopefully we can get you involved in a way to narrow that down to what Before it's manageable there are still protections for the consumer when you sign a loan and there's enough information that allows the bank and regulators to see it but this has to change , this can not continue to grow. this is this is crazy you have an opinion on it well to the extent that it's not legally required a lot of that stuff is legally required by state law to the extent that it's not and we try to make assessments on what what's necessary and what's not necessary but it's a big challenge I agree q I just want to point out for the record that I didn't ask a question about Cecil today thank you very much the gentleman yields the gentleman from Georgia mr.

Scott Is Recognized For Five Minutes Welcome Chairman Paul It's Nice To Have You Chairman Powell About The Library The Alternative Benchmark Committee Is Looking At New York Legislation To Address Legacy Contracts In New York State What The Feds Support The Action federal in that sense mr. Scott, so it's actually some members of the arc or the alternate reference, our committee itself is not looking at legislation, but some members have approached the New York legislature in terms of the need for federal legislation, we're not quite there to a point where we believe it will be necessary. We have plans to do it.

If we think federal legislation is necessary, we'll be here to tell you, and by the way, we understand that's not something you can do in 24 hours. So we'll know that the time for that is soon, very good, let's move on to Britain for a moment, the UK regulators have been very direct with their financial institutions and recently set a goal for their institutions to stop lending based ​in LIBOR for the third quarter of 2020, so why hasn't the Federal Reserve been so direct and does it have plans to set clear goals and guidelines for its regulated institutions?

Yes, we will, we will at some point. Mae and Freddie Mac have said they won't accept LIBOR referenced 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 its rule on accommodation in the hopes of providing clearer and more well-defined risk indicators to determine the regulatory requirements placed on companies based on their size and risk, but the board has never disclosed or provided clear, quantitative criteria. under which he signs a place under his enhanced oversight regime which is called the Large Institutions Oversight Coordinating Committee and even his vice-chairman Mr Quarles recently gave a speech saying he would like to align his portfolio with the tailoring categories and make the designation criteria fairly transparent and even recently you indicated that you agreed with the need for brighter lines, could you describe what changes?

Ford is considering doing in this oversight framework we are just in the process of working out the details but I agree we should provide more clarity on what is an allistic company and that will really be category one companies thank you I know let's move on to and you are a great man and a good man, a good friend, I respect you enormously, but it is a problem of the president, the Federal Reserve is the lynchpin of our financial system, you are the most powerful regulator and I want you to stand up Al Mr. adding this matter that you come with this rule changing Community Reinvestment Act let him know that not only do you have a mandate for inflationary monetary policy but you have a dual term job and here's the other thing to remind Mr.

Harding that this piece of legislation, this law, the Community Reinvestment Act, is precious to the nation, but it's precious to African Americans more than anyone else because the unity civil rights law, the Voting Rights Act, whichit addressed the big issue facing African Americans, financial stability and the two anchors for that's a home owning a home and having a job and this bill was the bill that outlined the red line that kept African Americans out he needs to come home for that he needs to assume his power and this and let him know that we are serious and to go back on this rule he changes to the gentleman from Ohio mr.

Stivers is recognized for five minutes. Thank you, Madam President. I thank you for holding this audience. 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. He covered them in his testimony, but just to remind everyone that the labor participation rate is now 83 point 1 percent, increasing in the last three years that's correct I think that's the maximum age sorry primate that's the age maximum adults sorry yes it has increased or decreased in the last has yes and salary growth has exceeded inflation for workers in the last three years well at least it is currently exceeding inflation correct yes it is and the growth of workers is good wages have actually gone up the last four by about three percent the last few quarters in foreign and annualized rates is correct in the last few years if you look at a variety of measures of what you would see wages rise by about three percent and we have record low unemployment rates for Americans of American origin and Hispanics that's right that's right so the economy is in fundamentals from the eco The economy is in very good shape, would you say that is correct?

I would and I did and you thanked him for that testimony, which is why your colleague at the Federal Reserve Bank in Atlanta recently declared that the economy and economic expansion do not die of old age. I think it's a great quote. That the fundamentals of the economy are strong Do you think that many companies and investors are trying to convince themselves of a recession? I don't think so and I certainly hope not. There is no reason why the expansion cannot continue. There is nothing about this expansion. that's it's unstable or unsustainable great and I think the fundamentals are strong but I think a lot of people are worried and and you know I hope they don't buy into a recession.

I agree with you on that since about two-thirds of all lending in capital formation occurs in the capital markets. I'm curious what the Federal Reserve is doing to coordinate this year with a Foreign Exchange Commission and the CFT C as prudential regulators for the capital markets to make sure that there is real coordination in the capital markets, well, I mean, so the SEC really and the CFTC really have the primary regulatory authority for those markets and they know we have the supervisory regulatory authority over banks. where we really overlap is in 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 The lines between the securities banking and the capital markets are blurring more than ever and I would ask you and Vice President Quarles to redouble your efforts to achieve 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 US investor and to the US economy.

I have a couple of other quick questions here: what do you think is the most significant risk to the financial system today? So I want to say that I have to start by saying that I think the financial system is strong and has strengthened materially since the financial crisis, particularly the Banks have high capital and high liquidity. Stress tests keep them on their toes and now they are there. They have actual resolution plans. much are cyber attacks. I think we have a great game plan for traditional problems, you know, like bad loans and things like that.

There are more cyber attacks. It's really the border that you were concerned about and we work very, very hard on that which all the agencies do. we all work together, the institutions themselves work very hard, but I would say that it is an important focus, thank you and an interesting note, mr. President, you agree with the CEOs of the largest institutions. I asked them the same question and the consensus, although not complete agreement, the unanimous agreement was that cyberattacks were the problem. I think Congress should focus on that. I think our regulators need to focus. in two quick things because I'm running out of time.

I know you're focused on the transition between the library and so far a few people have asked that question. I hope you will pay particular 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 you will continue to focus on the origins of the problem that caused it some are regulatory, others are market based and I know you're focused on that, you and I have had private conversations about it, but I would like to see it resolved in a way that you don't have to provide capital from the Federal Reserve to the end of every quarter at the end of every year, so if you can focus on those things, I don't have time.

Thank you Mr. President thank you gentleman from Texas mr. green was also the chair of the Oversight and Investigation Subcommittee acknowledged for five minutes thank you madam chair thank you for appearing today mr. Powell Mr. Powell, this is an observation, not a criticism, you indicated that the fundamentals are strong, however, you also indicated at the last Fmoc press conference that you were a bit surprised that wages have not managed to rise despite being in an expanding economy sustained historically low unemployment levels and rising labor force participation the fundamentals are strong but nearly half of the 42.4% of American workers in 2019 earned less than $15 an hour the fundamentals they are solid well many of the people in my congressional district Mr.

Powell are more concerned with supermarket prices than the stock market when they go to the supermarket they are concerned with the price of Procter & Gamble products not the price from the Procter & Gamble stock market, the stock market means nothing to them. what they have to pay for produce in this supermarket this leads me to my question has there been a study to give us an idea of ​​what a $15 hourly wage will do for the economy a study of what a $15 hourly wage per hour will do for the economy the Fed has done such a study the Fed hasn't done it that's not something we would do well let me address that if I may I don't want to be rude crude and unrefined but let me just let me bring to your attention a study that I found the good Carbon Disclosure Project quite interesting based on thousands of disclosures has concluded that the largest 500 companies by market cap are exposed to $1 trillion dollars in risk now someone might argue that's pr Probably not something you should do , although I understand that climate change is something that is important to the Federal Reserve because it will have a global impact, but I think you can look at this more closely, since it gives the highest authority on price stability. wages Let's do a study to determine what impact a minimum wage of $15 an hour will have on the economy.

A wage disclosure project. power, can you help us please? There's a lot of research that's been done on minimum wages and I'm not aware of one in particular, but there has to be some research on the federal $15 wage increase and I agree with you I agree I've read some but they don't come from the Federal Reserve, they don't come from the entity that has the dual mandate of price stability, unemployment or employment, it would mean something to workers if we could get a study like this despite what others have done and these are remarks mr. Powell no no criticism I have enjoyed visiting despite what others have done this would be meaningful to the workers btw I think $15 an hour is not enough as minimum wage I think it should be at least 20 now but I'll still settle for 15 if we can get that.

So can we work with you? Discuss with you the possibility of a salary project or one more time. I will go back and talk to our labor people who know this topic very well. well and if many of them have published on these topics let me let me come back I will thank you I have 46 seconds and I will applaud you for that personal applause ma'am chair with that I will give in I recover the balance of my time thank you very much it is a gentleman requesting an answer and write for the record on this question to the president yes madam president thank you the witnesses requested a written response for the record thank you gentleman from kentucky mr. recognized bars for five minutes thank you madam chair chair friend welcome back to our committee and i want to address first your testimony on the importance of fiscal policy and supporting the economy in general what would you say is the lag time associated with a major change? on fiscal policy, well, it can tend to be long, as you know, we can with monetary policy, we can go into a room and change interest rates and obviously, fiscal policy tends to take a lot of work and some time. i ask you this let me ask the question this way fiscal policy has changed profoundly in the last three years tax cuts deregulation a less constrained energy sector a withdrawal from dodd-frank individual mandate repeal new trade agreements do any of these change Politics is impacting current economic conditions I'm sure they are but of course not we're not trying to assess that that's not really what we do when we look at the economy but yes they would be impacting as you didn't ed in your testimony the US economy is currently exceptionally strong since the 2016 election seven million new jobs have been created the unemployment rate is at a 50-year low more Americans are employed today than ever before wage growth is the highest highest in a decade and the lowest income workers have seen the fastest wage increase with growth of 16 percent since the 2016 election and just over the weekend this was the headline in The Wall Street Journal which I'm sure follows and the report was that a tight US job market is pulling out Americans off the bench at a record pace despite this after last week's State of the Union speaker Pelosi said it was terrible to hear the president citing trying to take rennet unlisted for an economy that now inherited President Powell.

I'm not going to ask you to weigh or arbitrate a domestic policy dispute, but when the FOMC conducts monetary policy, given what you said about delaying fiscal policy, is it fair to say that this president's policies are affecting economic conditions? current economic conditions at a high level, of course they do, let me follow up on Rep. Wagner's question about the sibling surcharge g in your response to our letter, you maintain that your goal is to have the key components quoted in quotes from the stress capital cushion finalized in time for the 2020 C car can you describe in more detail what the key components are and a more precise timeline given that the Fed announced last week scenarios for the 2020 C car so I think the schedule is what we do?

I think we intend to and will put the stress capital cushion core to work in time for the 2020 C auto cycle, so that's coming up. I prefer to leave the exact details of that so you know they are still being worked out but it will happen in a timely manner for the 2020 cycle get that right let me try to get a little more detail is it still the feds view that the Activation of the countercyclical capital buffer is a reasonable replacement for the dividend supplement in light of the November board's financial stability report which indicated that vulnerabilities have not changed significantly.

I haven't made a decision on that, okay, thanks for that, we're looking forward to that decision. of shareholders, a large investment firm recently announced its intention to divest from fossil energy, effectively limiting investment options for clients to a subset of sectors that check the social environmental governance box. I am concerned that companies that arbitrarily limit investment offerings based on social and political pressure could stifle capital to hone the legally profitable and productive sectors of our economy and spark return All investors miss out on the returns they need to finance your future as a leading voice in theFinancial Stability Oversight Board, would you commit to raising this issue with your colleagues at F sock and urge that body to examine the extent to which misallocation of resources away from shareholders to serve unrelated political diligence could stifle capital formation compromising investor returns and ultimately undermining financial stability I don't know if I fully understand your concern, but I'd be happy to discuss it with you and I know that if shareholders are not a primary concern of companies corporate boards and directors, if non-ownership stakeholders are the focus of a corporation, then I would say there is a tremendous risk of misallocation of resources outside of the top shareholder returns and I would like F stock to look at that the gentleman yields I will bring it to the authorities for the sake of eff thank you woman from Ohio mr.

Beatty is also the chair of the Subcommittee on Diversity and Inclusion is recognized for five minutes thank you chair and rank member and thank you chair Powell for being here today let me also recognize the advocates in their green shirts for being here today and thank you for come to my office yesterday and share what I consider to be valuable information with my team. outburst among whites, blacks, and Hispanics as it relates to their net worth and we've heard the statistics. I think my colleague Congressman Meeks talked about it and I'm a few others so I'll spare myself going through all those details but what's very interesting to me while that data sounds great to those who are looking into the issue, is there any way your office can break them down by regions or cities because when we go home this is one of the number one things I hear people come into my office once they go through healthcare and this is coupled with jobs and education what's happening is we're looking at the wealth gap that's widening it's not coming while we're talking about unemployment rates being better many people have to work two out of three jobs just to try to survive someone You talked about minimum wage, certainly since we're advocating for a higher number, it's not enough in my district.

I have to make between $18 and 70 cents and $20 to make a living wage, so the first question is can this information be localized to a region or city to help us as members of Congress when we return home? the second thing is i recently introduced a bill that closes the racial wealth gap that requires the federal reserve to further disaggregate the data and this is something i didn't realize until i actually studied the federal reserve listening to some of people like the folks here today have some really good ideas so my second question is could you tell me if you would consider having your people look at salary as a measure because often when you look at a lot of people they don't have a job full-time, but they're on salary, so could we be a little more creative in looking at the data based on some of the things I'm hearing from the group that came in and I'm sure they've met? with his parents and you know some of his problems, so I'll start with: can he be reached? can we entertain ourselves by looking at some of the things that you think we should be looking at when we calculate or present all the good news that is not the good news for many of the people sitting here or in my district.

I think you're probably making some of our data people very happy on the board of governors. every time we do that we learn things that I don't really know the precise answer to your question of whether we can do it regionally or in what dimensions we can, but we'd be happy to look into that for you and what about some of the individual ideas on how Consider wages in your calculation, yes, can we? I think we can do that. I think well, they wouldn't be willing to work with them on some of the ideas to at least start discussing them because now we're marrying people to the power and how nice that would be a win-win for all of us since actually we are talking about all of our lives and especially those who know they have to work a little harder than the rest of us and then the next one Will your agency work with my office?

I'm very excited about this bill, and as I understand it, part of the reason for asking for the data is that the Federal Reserve actually collects the data that sets the policies that then marry the appropriations that come with it. back to the districts so I want to make sure I'm on the right track when I come home and say I have a bill that asks the Federal Reserve to collect data that can help us in the end is yes, in the ballpark of baseball, we should have the experts speak directly to you and your staff and tell you what we do and how we do it and how that might be helpful.

I don't know if we need legislation at all, but we certainly have great sources of data and we cut it in different ways, so why don't we try to follow up with you on that German thank you from Colorado, Mr. Tipton is recognized for five minutes. Thank you, Madam President and friend of the President. Thank you for taking the time to be here this morning. He wanted to follow up on the CRA. to be able to get the clarity that the Fed has been involved in the CRA process with the OCC and the FDIC is correct from the start great and I also want to get some clarity if you felt comfortable with not only Governor Brainard giving the speech but the content of your speech regarding the CRA, yes, okay, to what extent has the Fed been doing.

I know you're talking about making some of the analytical comments that come in, but to be able to work on modernizing the CRA from the beginning of the process. we said yes that sounds like that sounds like a great idea it's a good time to update CRA let's try to make it more transparent more objective let's try to make it more effective and serving the intended beneficiaries and so we both toured the country where I think we had 29 events across the country where we talked to different groups of people about CRA, their experience with CRA and it led us in a particular direction that we created.

We had a lot of ideas and I know it's unfortunate that we weren't. we couldn't get on the same page, we couldn't fully agree with their approach and they couldn't fully agree with ours, so, but you know, we kept pushing and we kept learning and I would agree. with Mr. Hills commented earlier that ideally you would know that 1:1 agreed that you know a set of standards. I would also agree with that. I think harmonization is something that we certainly strive to achieve. people working in low and moderate income communities are finding new opportunities wages have risen particularly for the lowest paying jobs that is an area that I am very concerned about we in my state of Colorado represent rural areas and many times the economies in where the metropolitan areas, the tourist areas have been doing well, the rural areas continued to struggle often, now we're starting to see some of that real movement, but when we look at the reinvestment of the CRA, speaking of the community banks, it really I would encourage you to look at the OCC and FDIC proposals.

I think they reach rural America more and you talked about policy. Have you done an assessment on me in terms of the opportunity zones that were included in the tax cuts and the Jobs Act, we are certainly seeing some benefits and some investments coming into the rural areas of my district are some of the policies that we should analyze. I'm not aware. from any research we've done on opportunity zones, but you know we probably have this in the system. I guess we've done some research on that and we'll be happy to share it with you. Thank you very much, Fannie Mae and Freddie Mac just took a few steps now talking about Sofer accepting base mortgages and I've noticed other agencies have been taking this step separately.

Is there some kind of uniform effort at a high level to be able to coordinate the adoption of Rather, yes, there is a lot and we're doing that, we're coordinating with the other agencies and also with the market participants, and you'll see more of that, you'll see more instances where LIBOR will no longer work. be usable in a particular context and that's 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 or disadvantages to the use of LIBOR so far for community banks?

Yeah, I think we're good. I think we are at LIBOR. there is no guarantee that the rate will continue to be released after the end of 2021 but there is a question of having a credit sensitive rate on top of four so four will be the main surrogate for LIBOR but you know we are working with regional and some of the larger banks to the idea of ​​having a credit sensitive rate as well and that's something that's ongoing and we've had a little conversation about the coronavirus china the impacts on the economy the president just signed the law the usa MCA, do you see this as an avenue for further economic expansion in the US?

Job opportunities and salary growth. We do, we don't, 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 US MCA will be positive at least in the sense that it eliminates the uncertainty around trade policy and I think that's been part of the problem for the last year or so has been not knowing what the rules of the game are going to be. those established rules is definitely a positive thing gregg thank you my time has expired thank you the gentleman from illinois mr.

Foster is recognized for five minutes, Chairman Paul, well, first of all, I'd like to thank you for facilitating our meeting with Governor's Representative Brainard, Hill, and I had a digital currency that we really enjoyed, as well as the meeting with the staff that this is excellent and it's great to see how connected they are to this issue now in a speech last week Governor Brainard highlighted citing 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 global financial system? the heart of the financial system is something that has served us well it's something very, very basic that hasn't really been questioned and I think you know that before if we get away from that we really should 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 or not a digital currency moves us down that path as an open question as you know all the major central banks are currently taking a deep look we feel that that's our obligation, technology has now made this possible, the private sector is innovating, they're doing it, so I think it's very much incumbent on us and other central banks to understand the costs, benefits and trade-offs associated with a potential currency digital, so how would you characterize the state of progress on this compared to other countries that the Swedish central bank knows about? developing an e Crona, the Chinese know well why there was one of the reasons there was so much concern about the Libre project is that they would do it right away.

The other entity and position to do it is the Chinese government to implement it at scale using their already established cell phone system. They'd immediately have scale comparable to Facebook if we implement that, and so how would you characterize our ability to respond to this potentially competitive threat? So we are working hard on it. We have many projects underway. There are a lot of efforts being made at the time. I had the problem that many of you mentioned Sweden. Many of the Northern European economies have moved away from cash to a noticeable degree and that hasn't really happened in the US economy.

Although it seems like it must have happened with our children they don't use much cash, however, the amount of cash in the US economy Cash in the US economy continues to grow faster than nominal GDP, so if you look at the curve of a Cell phone payment adoption starts slowly and then all of a sudden it just happens and it seems like that transition may happen in a period of just a couple of years, so we need to be able to respond. You know, if that's the driving factor, then we have to be in a position where we can respond by implementing, say, a digital dollar and on a couple of your timescale, so I'm completely okay with that and I think frankly Libra really lit a fire underthat and it was a bit of a wake-up call that this is coming fast and could come in a way where you know it's pretty pervasive and systemically important pretty quickly if you use one of these big tech networks like Libra did, for so we're working hard on it we fully appreciate the importance of making rapid progress we haven't decided to do this it's not I think there are a lot of questions that need to be answered around a digital currency for the United States Sta tests including cyber issues, you know, cyber issues, privacy issues, there's a lot of operational alternatives laid out, so we're going to work through all of that and we're going to do that work thoroughly and responsibly, but you feel like you have adequate visibility into what they're doing the Chinese. on this, do you have some sort of job level contact to give you an idea of ​​what your implementation is likely to do?

Yeah, 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 know everyone's payments, that's not something that would be particularly attractive in the US context it's not a problem in China so it's probably a point though because they claim they'll roll it out to belt and highway countries at some point very quickly and so , you know i urge you to keep the fire burning than k thank you gentleman from texas mr. Williams is recognized for five minutes.

Thank you, Madam Chair, and thank you for coming back to our committee chairs. We appreciate it, as baseball season is slowly approaching. that Experion recently released their 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 main street businessman and the economy is really good in this moment. the US economy beat expectations record job growth sent unemployment rates falling to record lows while the stock market flexed throughout the year consumers in return showed their confidence as they continued to borrow and spend with energy, evidenced most recently by the strong holiday shopping season of 2019 the report goes on to say that the consumer credit score is the most recent all-time high at nineteen twenty nineteen at an average of six five hundred three this translates to people being able to get better rates to borrow money to buy a house, get a small business loan or whatever they need financing to live their american dream so president dude what would or should we be? focusing on this committee to continue the explosion of jobs and new jobs that we have seen in recent years.

I honestly think the focus for me really should be on things that address our long-term issues that can be addressed by legislation and are really two important things one is workforce participation what are the things that you can do that we can't really do that will help people stay more attached to the labor market we still have low labor force participation compared to pretty much all of our economic competitors and the other one is productivity so what is driving the productivity? It is a stable legislative environment. It's a legislative and administrative environment that supports growth, innovation, investment and that kind of thing, so those would be my main ones for me.

I know you are aware of the work of the feds on the international insurance capital standard being developed for the world that I have 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 our government was given to develop an equivalent solvency standard that would better suit our insurance ecosystems, so my question is how does the Fed plan to ensure that the standards being developed in the US will be considered equivalent by the international group given this continued resistance faced by the Europeans.

I can only say that we will not be part of the approval of any international standard that does not conform to our own US insurance regulation. theoretical framework that's great we are leaders not followers some of my colleagues across the aisle from the aisle have called for a financial transactions tax I think this is an extremely myopic approach to raising revenue that will have a huge impact on the amount and forms how Americans save for the future; furthermore, the idea that adding an additional layer of Haitian taxes to other assets is redundant, since capital gains taxes already exist and should be reduced to take money away from successful investments, so if we want to continue to expand growth economically, we need to focus on continuing to lower personal and corporate tax rates so Americans can keep more of their hard-earned income and businesses can invest those earnings in their operations, so Chairman, can you explain how implement a financial transaction and a transaction? the taxes would affect the US economy.

I am not commenting on particular taxes. I'm worried about where that might go, so I'm fine. I understand that I will tell you from the point of view of Main Street. It will really hurt the economy. So looking at financial trends around the world and having been in business for over 50 years like myself, one data point is that you catch my negative interest rates. Can you help me understand the economics behind negative interest rates and talk about the potential threats this phenomenon poses? poses well to financial stability a number of countries around the world The world, as you know, faces the problem of what to do when its policy rate hits zero and some of them actually fell below zero.

The United States chose not to. We decided not to. And those were forward-looking 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 that's our instinct, is that in the US context, that's not a tool that we're looking at, You know the intermediation question is when you have negative rates, you end up creating downward pressure on bank profitability, which limits credit expansion, and there's some evidence of that, so in any case we were looking at others and other institutions around the world that have done that and we can see what the results are thank you for being here the lady from michigan is talib is recognized for five minutes thank you madam president i don't know if you know what in 2013 the president detroit filed for Chapter 9 bankruptcy, which was marked as the largest municipal bankruptcy filing in US history.

Back in July when you were here, I asked why if the Federal Reserve is diss set to back or support large banks and corporations during periods of credit market distress that we would not want to make sure state and local government had access to credit as well and you mention ned that you did not have the authority to lend to local and state governments, madam chair, I'd like to bring up 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 buy municipal debt without objection, like you ordered, so president, since you really have the authority, can you explain to me why we shouldn't know why the Federal Reserve shouldn't ensure that state and local governments have access to funding in times of Emphasize that, as you know, we have a limited authority.

I think it is due to short-term municipal obligations. We did it briefly in the 1970s and then haven't done it since I think a series of FOMC and Fed chairmen in all sorts of different policy environments. that they have thought of that as something that is not really appropriate for us in the sense that it is the finances of the government, we know that they should be treated by the fiscal authorities instead of the monetary authority ority we focus on the work that has given us given, which is maximum employment, stable prices, and to some extent we're with another agency as well, we work on financial stability and banking supervision, so Jamie, as opposed to creditworthiness, yes or no, retains the Reserve Federal. opus open's ability to open emergency lending facilities is accurate and stabilizes the economy well - yes - to financial institutions we do uh-huh so when the Federal Reserve steps in to bail out banks in a crisis it's because you think that its role in the economy is really vital because we had no choice but to keep the financial system from collapsing in 2000 no i mean my city could go bankrupt it was devastating to so many retirees sir 4050 years working for the city of detroit saw their pensions completely diminished gone do you not believe that the governments of Detroit in Puerto Rico also play a vital role that must be preserved even if the financial crisis makes it difficult for them to borrow money what I believe is that this is not a job for the Federal Reserve, it has a particular role in particular authorities and you know, lend to state and local governments and support them when they're in bank arrota is yes, let's draw glee at odds. have the authority now that you've mentioned that in the face of another financial crisis you would use the same tools to expand your balance sheet in buying long-term bonds, in other words, more of the same, right, yes, so I'm afraid I just don't it is so. good enough i mean i think your predecessors former chairmen yellen and i think vernon ecchi seemed on the same page based on comments they both gave last month for example chair bernanke suggested that a tax program funded with money could be useful during the next downturn, do you agree with that would it be useful, you know, I think that's really an unproven perspective and not widely supported.

I don't think Chairman Bernanke said that a money-backed phonetic prosecutor I see a policy wo It could be would be something we should do. 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. I know and the president looks. The federal government is supposed to be about people and I don't see that we're treating retirees 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 going to come back if I show them neighborhoods and they'll tell them that we don't know what they're talking about because poverty is actually more affordable housing has gone down.

I mean all of those things that we start to reflect on with the understanding that I think the Federal Reserve Act actually gives us authority to help plead, just like we bailed out the big banks, that we can do the same for ourselves. people, the residents of the city of Detroit, so I thank you for that and again I would actually ask you and push you to look at this from a different lens compared to the same old policy-shaping process that I think hasn't really worked for working class people thank you very much and i give up the rest of my time thank you gentleman from arkansas mr.

Hill is recognized for five minutes. Thank you, cheering the waters again, Chairman. Welcome back to the House Financial Services Committee. I want to thank you for the discussion that you had with Dr. Foster a few minutes ago, I also want to thank you for your work with Governor Brainard and our discussion that we had with the Governor and the staff on the concept of a digital dollar and the work that is doing in the Treasury on that. Explain some of the points that Representative Foster made, but a couple of comments I have for you on whether you would advise our committee or ask the Federal Reserve to advise our committee on the legal authorities that the Federal Reserve might require to consider the use. of a digital dollar yes I mean that's a good question is when we're looking at a lot would depend on the design of that contract and one thing that we also talked about and we've had a lot of discussions and our task force FinTech here is about Europe's approach to this idea of ​​a payment provider license that is now part of your financial services code part of your open banking movement and the idea that one would have a regulatory license here in the United States to be a payment provider, you could be a bank or could be in a non-bank entity is something from the feds looking also I wouldn't say we're specifically focused on that but you more generally is we think it's a good idea to look at all thelandscape of oversight 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, thank you for bailing out the Chinese regulators last month.

Hing Fang Bank was a fourteen billion dollar loan that they arranged through one of their sovereign wealth funds. Chinese bank assets at $41 trillion are now 47 percent of world GDP. The instability in the Chinese banking industry poses a financial threat to the global financial system it is a financial virus as if they have already contributed a physical virus which you are generally aware of as I am sure you are aware that China has been heavily indebted high relative to GDP for an economy in its development stage and of that includes the banking system and the government is actually for several years and taking established measures, I think by the central bank to try to control the growth of the debt and They've been that they've stuck to that over the last few years, even though it was difficult years economically for them, that's something that they're addressing, the other is to say that they have a lot of fiscal space if you look fiscally, they have a lot of power to respond to downturns so I wouldn't go as far as saying they're dead is a systemic threat to the world economy or something but it's something they need to address in our I think it is something that I think deserves review mr.

Barr spoke about his misallocation of resources at 47 percent of world GDP which seems like an overallocation in the banking sector in China and could pose a threat to our system in his report on page 24 he talks extensively in his financial stability section on declining bond yields, particularly the high yield market, ratings have gone down and he was looking at a mutual fund annual report the other day and he says a particular concern is the continued high triple bond issuance rate B, the lowest investment category rated bonds if the economy stumbles and the rating goes down the problem could be a flood of fallen angels in this particular mutual fund they said they stay away from the lower end of the high yield market are you worried about the high yield market? 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 be non-investment grade and the idea is that some holders are not authorized by the terms of their agreements with their investors to hold a lot of non-investment doesn't trigger sales, so that's an issue we've been monitoring for some time. with leveraged lending more generally yes, we are monitoring that very carefully. you see you know low compensation low for the risk taken you see high leverage you see a lack of covenants you see all of that I think it's a complicated picture despite that document it now largely stays in CLOs and not mutual funds and traded funds on the stock market rather than on bank balance sheets, so those vehicles tend to be stable funded in the sense that their liabilities are actually longer than the expected maturity of the underlying instruments are still there, it's still a source of financial concern for sock F.

I think you are aware of this and therefore I congratulate you on noting it on the report and thank you for your continued attention. I am back thanks to the gentleman from Illinois mr. Casten is acknowledged for five minutes, thank you, Madam President, and thank you, President, mate. I appreciate him staying until the end of the Dyess Air. If I get elected eight more times, I'll cross my fingers. I will have so much experience. in this line of work as i do on the energy side so i keep coming here mostly 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 data points that 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 and ushered in the Industrial Revolution and 50 percent of all the CO2 we've emitted as a species since Back to the Future came out in 1985, this is this massive acceleration shift and if if we hit zero CO2 tomorrow we'll see a two foot rise in sea level which will be more realistic the trends were at least six feet of sea level rise and at that level it's estimated to be around twenty three trillion dollars of losses cheap for the system. and there are some serious systemic risks to the economy if we don't address them and I just want to understand a little bit how you and the Federal Reserve are thinking about those number one risks given that assets exposed to climate change outweigh the entire subprime market. before the global financial crisis, how come the Fed thinks of climate change as a systemic risk to the economy, so that climate change becomes a very important issue again that really not to province of elected representatives and to establish the general direction of society on how we will respond to 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're 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're essentially primarily concerned with business cycle issues in what we focus on is medium-term problems climate change is a much longer cycle another thing if i am part of the concern i have is that the actors in space do not have planning horizons that match the reality that you and we do well, there are people who 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 keep the paper with the sea level rise that is coming, the The insurance industry typically has a one-year waiting period, so even if the US is successful in reducing emissions carbon, there is still a massive reallocation of capital. thinking about how that starts to move and dislocate the economy, so those are the things that were going to be final stages of research, 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 in that that will have that will have an effect, but that's not really what we do, what we do, monetary policy, banking supervision, our banks, you know, our banks must have to give, they must take into account the risk of severe and potentially climatic events.

I guess from going up going up Well I mean let me give you let me maybe give you a specific one that's been bothering me lately if you look at the fossil fuel industry the oil and gas companies the coal companies the debt they have relative to their assets Since their assets are so heavily dominated by fossil fuel reserves, if they were to extract all their fossil fuel reserves, things would be much worse than twenty three trilli. In dollars, I just told you, have you ever considered stress testing to see if their inability to fully monetize their reserves could render them fiscally insolvent because if that sounds like a materially adverse event to me, but I wouldn't want to bet that? the economy is going to kill itself, 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 the money that helped today, I think there was seven hundred billion. dollars lent to fossil fuel companies in the last two years, have you considered that as a systemic risk, to us it is a systemic risk to 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're going to be watching to see what they learn and I made that decision thanks I'll stay offline I give my time back Thanks Jeremy gentleman from Georgia mr.

Loudermilk is recognized for five minutes. Thank you, Madam President, President Powell. Thanks again for being here. First of all, I want to return to the subject of Lisak. I know some of you have already touched on this topic and, as you know, several weeks ago, Vice President Quarles. gave a speech outlining a number of changes he would like to make to the Fed's supervisory and regulatory process said he intends to bring transparency to the lawful regulatory regime by developing clear and transparent standards for company designation you also proposed to align the listing allocation with the feds by adapting categories and narrowing them down to just category one companies so my question is in a press conference after the Federal Open Market Committee meeting last month you said that in General agrees with Vice President Quarles and what he had articulated I appreciate it but can you give us an idea of ​​when you expect lawful designation to be confirmed with new tailoring rules.

I actually have no idea where it is in terms of where you know at any given time we have a ton of things to do and that's definitely one of them, okay hopefully sooner rather than later. I don't want to commit to something that you know there's a lot of things that we're working on all the time, but the vice president made a speech about it. I'm aligned with that and I hope we move forward, but it's great to hear it really quickly, I'd like to address the CRA. I believe all three banking agencies should have a unified CRA framework and I know you are hesitant to speak for the other agencies, specifically the OCC and FDIC, and their proposals if you don't.

I don't want to comment on that and understand what are some of your ideas or the federal ideas for modernizing the CRA well then I would say let me talk about the process you know we agree on the overall goals and the questions how do you get there next of that, so our thought was to try and get to you now there's 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 is a separate test for the 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 out of date on data driven data so that we have, as the president mentioned earlier, 6000 data sets that we look at I think that we really know when you make a change to the metrics, we know what the effects will be, and we feel good about it, so we tried to build our proposition around that there's a lot of overlap, but just that. there are a handful of differences that have kept us from reaching full agreement and the overall goal do you think we can remove some of the ambiguity about what projects do and don't absolutely qualify?

I mean your ex-ante transparency plus ex-ante transparency as to what rates and where plus objectivity, all of that should help you encourage banks to do more if they really know what will rate and what won't. I think that's all very constructive. It's really about how you implement it and we want to have a very high kind of very very important law very very important law we want to have a high level of confidence that what we change will have the desired effects and that's who we are that's what I'm focused on I appreciate that because I would like to see us make changes where it's not about financial institutions just checking boxes for credit, but about investing in projects that help revitalize these communities, as you know, the FY 2020 appropriation law mandates the Treasury Department in consultation with banking agencies to study whether changes are needed and banks' regulatory capital requirements due to Cecil if the study concludes that is the case.

Are you willing to modify regulatory capital requirements accordingly? Well, yeah, I think we've said that with Cecil we're going to monitor very carefully what the implementation shows because of some of the concerns that have been raised. Okay, probably don. I don't have time to get into other questions, so that's giving you my time back. Thank you, the lady 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? We do something changed in the new year.

No, because we don't want the Federal Reserve to make decisions about things like where to set interest rates based on anything other than the best interest of the country andI know you've had some experience with the president publicly and aggressively trying to lean on you to lower interest rates and I appreciate you continually affirming the importance of Federal Reserve independence, but it's not just about our president, there's a lot of people who would love the opportunity to have a say in Fed decisions outside of administration officials, which other types of people might do. wants to influence you and with regards to the decision making of the feds, what other people might want to influence, this could potentially a wide range of people Please I think major financial investors I don't know if people are really looking at I mean you say you might want to influence this site I don't know the answers I really don't know the answer to that 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. They feel not. No political or special interests, would you say that someone like Jeff Bezos, the CEO of Amazon, could one of the richest men in the world could benefit from having influence over federal decisions? they are very rich people they have savings and they make different amounts of money depending on what the Federal Reserve does with interest rates yes and what about Kellyanne Conway she in her role as adviser to the president and the president expressed these public views she power Ally has an interesting amplification of the president's message which is his job after all i guess ok uh mr.

Powell, I'm going to project an image here so the audience can see it, but I'm also going to show it and this is Hugh mr. survey what's um where are you that's that's an after party alfalfa dinner and after party i went to um where was that party held jeff bezos is home jeff beezus is home and that's what he drank Excuse me when this photo was taken Saturday night after alfalfa dinner more or less will stipulate until the end of January 2020 yes recently can you imagine how attending a lavish party at Jeff Bezos costs twenty three million dollars at home along with Jared and Ivanka and JPMorgan Chase CEO Jamie?

Dimon might give the audience the feeling that you are not, in fact, immune to outside pressures. I certainly hope not. What did you talk about the party with them. I did not do it. I didn't talk to any of the people you named. I didn't talk to anyone. I didn't speak to any of the people you named. Oh, can you tell me who you talked to? I mainly escorted my son and his new wife there and actually introduced them to General Mattis. ok great um I would just suggest that I think this attendance at these types of events with these types of people is inconsistent with what I would otherwise recommend to you for doing a very good job.

I think to reaffirm to the public that this plant in the mind of the public. what have you been doing quickly mr. Powell, if you can name a couple of the main drivers of economic growth in this country since the recession of the 1970s, what has made our economy grow, what factors have made it grow well, the hard work of the American people. I think what you'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 much less mr.

Poe, would it surprise you if I told you that women are actually women in the workforce, are actually a bigger driver of economic growth and technology companies and in a span of four decades since the 1970s, thirty-eight millions of women joined 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 GDP growth which I don't hear much of and would like to know more yours is about the economic effect of things like the availability of child care in those same four decades that women grew the economy by twenty-five percent, the cost of child care skyrocketed 2000 percent, you know Mr.

Poe, how much does childcare cost in the United States today? How much does it cost today in the United States? It costs a lot. back the gentleman from ohio mr. Davidson is recognized for five minutes. Thank you, Madam President, a German friend. Thank you very much for his time here today. Thank you for the good work that you and many of your colleagues are doing at the Federal Reserve. recently it is unprecedented for the chair of the Federal Reserve to attend a party or reception I do not want to say that it is certainly not the first time that a chair of the Federal Reserve has attended a party I am sure that it is not the first time that a member attend you attended a reception or party and i don't know if we want to say hello just because you're at an event somehow this is ominous i mean heck you might have talked to a russian on the subway or something so you know the la The way that these things are tied for political reasons is embarrassingly partisan and bad and I just thank you for resisting all of those pressures, a lot of it is public of course, but one that worries me right now is the repo market.

Now back home, a lot of people don't know that repos exist, but it's an important factor for our economy, and I think some of the warning signs that you know have given rise to the Federal Reserve in kind. of a combination of regulatory action and monetary policy to inject a large amount of cash into that market. President Quarles, you know, spoke recently about the need for that to continue for a while. Can you explain the process of how the Fed is reviewing the factors that are contributing to this repo surge and what you've learned from the review of course what happened is as you know in early September there was a surge in repo rates and the fed funds rate moved slightly outside of our band, our target range for a day or so and we didn't see market participants coming in either so we've been asking ever since why a The clear reason is that the level of reserves that is cash on deposit from the reserve banks needs to be higher than we had thought and So we have to have in that flow, we immediately put a plan in place and executed it and it worked well to create that.

So I want to say that some have called this quantitative easing. I know you've been against it, but essentially we're artificially intervening. cash to produce a result that the market is not producing on its own, so I think it's strange that our action is to inject cash from the Federal Reserve to grow the Federal Reserve balance sheet instead of looking at the regulatory stuff underlying What have we talked about? And if? And if? What did the board talk about in terms of regulatory factors that instead of injecting cash to fix a problem, address the root cause of the problem and change the regulatory framework? cash is to meet demand for cash for basically banks that need to hold a certain amount of cash for liquidity purposes moving on to the second issue though he also said without undermining safety and soundness we would look at ways in which regulation and supervision they could have interfered with the free flow of cash to where it was needed and, you know, I think we've done a lot of work on that and Vice President Quarles touched on a broad topic that I think is important and that is the idea of ​​making supervisory treatment be really cash just like treasuries for this purpose, so you can achieve better cash flow through s of the system without affecting the overall level of liquidity in the system, which is just what we're looking for, so he came up with some ideas on how to do it and I think it's a very profitable line of research.

Thanks for that, one of the swings in you know LIBOR is going to go away and the market forces are coming. We're talking about replacing the benchmark rate, and of course the arc includes 250 entities, but you know there are concerns that you've done that. that the best rate is not necessarily provided so the Federal Reserve is either taking the best proposed rate offered in these repurchase agreements or we're granting it at a special rate for maybe the top 10 so to our banks, I'm sorry, I lost track of that so when, when, when this liquidity is injected, the repo rate that was a repo rate that went into the repo rate, I guess not, it's been kinda good, I'm sorry, I got I lost that so the rate we've been offering to those in the repos that have been liquidating at a level that's a couple basis points below I Ah but that won't be a persistent problem what rate will are they liquidating when paid? at the high rate you pay to the best available offer or you pay to the best available c customer we don't distinguish i mean anyone eligible can bid and we don't know as long as you are eligible we will sell to that thank you my time has expired, would you gentlemen like to ask?

Witness to provide one more written response for the record I appreciate the Chairman's suggestion I would love to see a written response on how it is actually working Witness is asked to provide a written response for the record Thank you Chairman , the lady from North Carolina mrs. Adams is recognized for five minutes. Thank you Speaker Waters for calling the hearing today and friend of the Speaker. Thanks for his testimony. FDIC board member Martin Buber voted against Controller Ardennes' proposal, describing it as a profoundly flawed proposal that would fundamentally undermine and weaken the community. Reinvestment Act, so can you comment on the shortcomings of Controller Adams' misguided attempt to gut the CRA and a centerpiece of civil rights and banking law, so I think I feel our role is not to comment on the Reinvestment Act the other agency that is doing the public? that now we really want to see the comments they make.

I can talk about how you know our own thinking on this, but it's not really for us to comment publicly on the other agency's proposal, just like the Federal Reserve. launch their own proposal on the Community Reinvestment Act, one that takes into account the needs of low and moderate income communities which of course the reason we undertook this work was to make that we haven't really made a decision yet on whether or when to make a proposal, but nonetheless, all the effort was made to create a 4c modernization proposal well well as you know the Federal Reserve has a dual mandate of price stability and maximum employment, therefore, Will the Fed set a target for wage growth and is it considering this approach as part of the framework review?

I don't see us targeting wage growth as a stand-alone item, it's something we monitor very carefully that our congressionally assigned goal is maximum employment and stable prices. Those are our two legal goals and those are the things we're going for. I don't see us targeting a particular level of wage growth. for wage growth, for example, once we establish a certain percentage increase in pay and salaries that the Federal Reserve can consider shifting to a two percent inflation rate, well, we've said that t The sense of this The project is that we want to make the symmetrical two percent inflation target more credible and we've been missing and central banks around the world have been missing their targets for a decade now on the low side and we want to want to achieve resoundingly 2% inflation, that's really the goal of this review that we've undertaken, okay, let me ask a question about the Volcker Rule, why did the Federal Reserve decide to support changes to the Volcker Rule given that banks enjoy certain benefits, including access? to the Fed's 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, so we just tabled a proposal on part of the Volcker Rule and of course we think that proposal is fully consistent with both the letter and the spirit of the law and but we're going to read the comments it's out for a comment now we just put it out and look forward to risk of reviewing those comments, ok, I understand that you collect a lot of daily business metrics from banks subject to the Volcker Rule, but exactly how these metrics are used to determine if the bank is compliant with the rule or has any has never been made clear of the metrics that have been released to the public is true, I think it's true that we put out the first vocal role, I mean, six or seven years ago and I think thatregulators and financial institutions in general found this a bit unfeasible and so we set out to provide a simpler set of metrics and ways that companies could conduct perfectly legal activities and have more certainty that they were doing so without having to prove each individual trade what was on the mind in the heart of all the traders, because there was going to be trading around legal activities that weren't covered by the Volcker Rule, so I think that's what we're doing, we're trying to make that rule e more effective and efficient but we are doing it in a way that is consistent with the letter and spirit of the law ok thanks man g how did you meet the gentleman from north carolina mr. bud acknowledges himself for five minutes thank you ma'am chair jim balligan and welcome i want to begin by thanking you and governor quarles and your federal staff in charge of insurance regulation for your collaborative work with the united states state insurance commissioners in regulating Solvency also wanted to thank you for pushing back against European efforts to try to force your insurance regulatory system into our only strong 50-state insurance regulatory regime.

Despite progress to date, many in the industry tell me that the europeans are still resisting and ultimately looking to change our regulations to reflect theirs, given that my question is: do you commit to reaching out directly to your peers in europe to tell them explicitly that the US will not adopt ICS focused in Europe or an international capital standard and that we have our own rules that work very good so i will say clearly that we have a state insurance ce regulatory system and we let you know that the federal role is what it is and that we are not something that is not something that we are trying to change and we are committed to that future president that they are trying to change us and so I am afraid if we are passive it will migrate to them, but have you had any conversations with any senior European leaders who have not yet left ICS International Capital Standard?

It has been something that has been avoided. No, I am simply NOT directly involved in the insurance. There are high-level people who are. I'm sure. Quarles Vice President. a great system that continues to work well too a mr. President as part of the Basel 3 completion efforts, a number of capital rule changes will have the effect of increasing capital requirements on capital market activities, so you can discuss your views on the level capital markets related activities such as market making or underwriting for sure those are critical activities in the functioning of our financial markets in our economy and they need to be properly capitalized I would say that overall I believe and that the level of capital in our banking system is right and I don't see the need to raise capital further so I know we're moving forward with the fundamental review of the trading book and the other Basel 3 final stuff but I don't see it as necessary to increase overall capital levels.

Chairman, can you share how your views on capital requirements and things like market making and underwriting how they might affect the balance between bank-driven and market-driven finance and t the us. well, I mean, I think that if as capital requirements increase and they've become quite a bit of discoveries, they encourage activity to move out of the banking system and into less regulated and supervised entities, well then, mr. Chairman, there's been a lot of discussion in the last few months about leveraged lending and F sock and others who monitor the market, in fact you've had a couple of questions on this topic today, but when people discuss the topic, sometimes I think they refer to different things.

So to help us get on the same page here, in your opinion, how would you define the leverage lens? Yeah, you're right, there are lots of different ways to think about it, you know? B or you could also say you could have an amount of leverage, typically they'll have leverage of maybe six times EBIT cash flow. Probably not investment grade. Do you think there is a difference in leveraged lending in the banking sector and in the non-bank sector? Yes, I mean, I think before the crisis there were. Past-due loans must be held by longer-term holders outside the banking system and that is accelerated, so far fewer are betting on boring the books of banks they know with deposit insurance and the safety net in place. from to collateralized loan obligations or exchange-traded funds or mutual funds or pension funds or hedge funds, that's where those loans go now, so it's more like it's become a distribution business rather than a traditional lending business where the banks would make a loan themselves. put it on the balance sheet which is not where it's really happening you have a bank doing an origination function on behalf of a sophisticated investor who has stable funds we hope and in heavens case but that's something we need to maintain monitoring thank you chair thank you the 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 return to the topic of climate change for a moment. Extreme weather events have had a huge impact on the Midwest and working-class communities like it. in my Chicago district and they often bear the brunt during such disruptions climate change is also a risk to the financial sector jim cramer host of Mad Money and CNBC in a discussion last week said major institutional investors want nothing to do with do with fossil fuels because of climate change concerns to hedge against the impacts of climate change the Bank of England has decided to stress test the UK capital banks, excuse me the biggest banks and the insurance companies against risks associated with climate change, and the Federal Reserve follows suit and develops weather-related stress. tests, so we're monitoring what the Bank of England is doing and by the way, those are stress tests which are not like our stress tests in the sense that they would have direct effects on the ability of banks to distribute, doing distributions and things like that, they're really trying to do an evaluation and so we'll be watching carefully that we haven't made a decision to proceed. something like that, dammit, encouraged looking to the future, incorporating climate change into economic forecasts will become more important.

Weather disasters like Hurricane Maria in Puerto Rico or the wildfires that ripped through California last year are currently labeled as a transient risk by the Federal Reserve, but we know that extreme weather events will become more frequent and severe and the likely result will be a corresponding increase. of economic losses and physical risks, the brunt of which will be felt by communities of color and working-class communities, therefore, Chairman, when the Fed develops its economic forecasts, at what point should climate change change? from being considered a transitory factor to a structural factor you know our forecasts both the individual indi that the FOMC folks and I write in the staff forecast or they're not for this kind of much longer term, they're really really the important thing is the next year or the next two years the next three years and weather changes just operate on a longer cycle than that, of course, as you suggest, as severe weather becomes more common and that's related to climate change, you'll see those things that you know go into the forecast period and they certainly go into our oversight practices as well as our economic forecast in a recent speech at the federal conference in San Francisco and the economics of climate change fueled a governor Lael Brainard was quoted as saying by more actively participate in climate-related research and practice, the Federal Reserve can be more effective in support 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 financial risks from climate change? So I think it behooves us to investigate and understand the implications. of climate change for our supervisory functions and our functions in the care of financial stability and that is what we are doing. I think it's too soon for that, but the public will expect us to do it and then to 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 that's fine thank you Big Bank Mergers and Market Concentration Three months ago, the Federal Reserve approved a merger between BB and T and Central's that created the sixth largest bank in the US with over $450 billion in total assets and own research of the Federal Reserve suggests that the failure of a single 250 billion dollar bank would be far worse for the economy than the failure of five separate fifty billion dollar banks, plus former FDIC Chairman Mr.

Gruenberg has warned that the FDIC could not liquidate a bank the size of the combined BB&T SunTrust without imposing significant losses and the deposit insurance fund and potentially destabilizing the financial system. Or in this fall. Can the Federal Reserve justify its conclusion that citing this transaction would not seem like an outcome that would result in significantly higher 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 very transparent we had a number of public public hearings on it and i looked at all the legal factors and essentially there are two two banks coming together to form a regional bank that is similar to or smaller than many of the other regional banks and it doesn't seem to me to have any implications significant for financial stability not at all thank you thank you jeremy now give in madam german german the gentleman from tennessee mr.

Custer is recognized for five minutes thank you madam chair and thank you sir. president to appear today. I heard your statements in your opening remarks about the corona virus and certainly in regards to some of the questions you had today, I noticed this morning in a report that Axios listed they quoted from the global port tracker and said that traffic on US ports decline in February by nearly 13% and in March by 9-10 percent year-over-year, now assuming those numbers are true and correct for what, if any, impact that would have on the industry retail and what impact it would have on the broader economy, so I think there's a lot of uncertainty around 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 to be consistent? with that report that there would be some effects, the question will really be what the size and scope of them will be and will they also be persistent or will it be something that just happens and u Ultimately, the fundamental question for us is whether it does not represent a material change in the outlook, is it something that we need to react to with monetary policy, that's really the question for us, as it's too early to say that we'll be monitoring. like everyone else they'll do it very carefully and that's where we're on that same line and I'm also from Axios they got it out of a Bank of America security report they surveyed they said they surveyed 3,000 companies on the global supply chain and that's a lot companies all over the world are considering relocating it they called it in the report a tectonic shift in quotes and global supply looking at other areas south asia india also north america my question to you firstly i don't know if you are familiar with the with the study this study of Bank of America securities a report or it's not those numbers or those anecdotal statements is consistent with something the Federal Reserve is Since I'm not familiar with that report and therefore can't comment on He would say there are a number of channels through which this could have an effect, the first of which is just tourism, actually, the second is that our The capacity to export China is less because you know that there will be less there, so exports could decrease.

You mentioned actually supply chains, so a lot of American companies buy intermediate goods as part of creating their final product, so we don't have real supply chain issues. evidence on that yet and I would say that the last channel is really the financial markets, the financial markets themselves can be a channel for the transmission ofrisk aversion behavior that can affect economic behavior, so we'll look at all of that. too soon to say if what it will amount to we will just have to wait and see if there is no way to have confidence in anyone's assessment and there are a variety of assessments based on based on what you just said i think i know your answer, but anyway i will ask you the report and i mentioned a number of reasons, one of them is the tariffs between our country and China and the impact it has had on China and its subsidiary companies. but also automation and increased automation sounds consistent with relocating these supply chains well that's yes aside from the virus questions there has clearly been a lot of activity by US companies to move to other jurisdictions like Vietnam in particular get mentioned a lot.

I saw a report last week that several other countries have had American companies move their production activities out of China to other places and that has certainly happened, including the United States, yes thank you or relocate. to the United States I guess in that same vein I represent part of Memphis and West Tennessee in Memphis just outside of my district was an annou Amazon's announcement two or three weeks ago that they are locating a new facility there there will be a thousand jobs, and by the way, you've had questions about minimum wage, they'll start their wages at at least $15 an hour plus benefits. but you talked about these new jobs in combination with automation automation in terms of packaging and shipping you've talked about your concerns about automation and the effect it will have on unemployment in the future can you see the two coexisting versus like with this?

The Amazon plant for the last two and a half centuries, we have seen technology advance and there has been a concern that it will replace human labor and that has happened, but what has happened is that it has made human labor more productive. in overtime, 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 however, the p The process over time has led to an increase in the income of the gentleman from Florida, mr.

Lawson is recognized for five minutes thank you madam chair and mr. Chairman, welcome to the committee and I'd like you to explain for the last almost three hours, two hours in maybe 45 minutes, when I was speaking and the members-only committee was talking in terms of how well the economy is doing, you know ? how do we have more job opportunities in the economy when you start talking the dow went up 125 points why are you talking it went down can you help tell me why something like this is happening who is listening you know speech this morning in front of the financial services committee that will call the dow to go down is because of the interest rate cuts how do you explain that i really can i'm not really following the market as i sit here answering your questions ok i know the president tweeted something similar that when you started the dow went up and then went down.

Did you react to that? It doesn't really mean much to you. I'm sorry. to that other one the pre between also about how the Dow went down and the interest rate cut, did you react to that? Something just happened that went down, you know we're colleagues and I are completely focused on using our tools to support the American people. the achievement of our goals and that's really all we focus on ok explain to me from a staff report they stated that as of July of last year four for three different times the interest rate was lowered by a fourth percent Do you know how you made a decision that stimulated the economy when you did all that through October?

A fairly percentage cut in the interest rate. Yeah we were really looking at some things when we did that and yeah the intention was definitely part of supporting the economy was to offset the effects of global factors there I would say just slowing down slowing down in growth and the global economy just kept going and it went on and we felt the need to offset that and also to take some insurance against the effect it might have on US trade policy. The uncertainty was weighing on the US economy. We tried to offset any potential effect and take some safe there and the third reason was we wanted to do what we could to hedge against a longer inflation shortfall from our 2% symmetric targets so we have supported growth to support the return of inflation so those were the reasons why we did those three things and that is the thought that we had and that we announced well now there could be the electricity to come it would be a correlation between the growing student debt crisis and the downturn in the real estate market that we talked about a lot in the last few months as you know a lot of student loan bars are not able to get homes because of the high ratio between debt and income, could there be a sign that there is a dire need to address the growing student debt crisis first, so would you say growing student debt is true?

Only one concern has been rising rapidly and now it is big. There's more and more evidence showing that students who can't pay that debt who can't pay that debt have a hard time living a normal financial life and buying houses and things like that. I haven't seen any. evidence that would suggest that it is a major factor currently driving the housing industry I would say that the housing industry is really in activity in housing has been moving here over the course of the last seven eight months as the rate effect lower and generally good job market and things like that are popping up in the morehouse building and more and also home sales my time is about to expire i have a lot of students in my district and the 5th congressional district and a lot of them are coming out of school one of the things they are worried about is the housing problem, you know, entering the job market, you know how they can best share an american dream like their parents without getting any help. m your parents and so with that lady chair I give up thank you the chair would like to remind members that we have a forced stop at 1:00 p.m. today the lady from massachusetts will be the last member to ask questions today with the gentleman from indiana mr.

Hollandsworth is recognized for five minutes, I appreciate the time and both privately and publicly I have been extremely appreciative of the work you and your colleagues have done to not only calibrate conditions to match the current economy, but also the framework for which you make a lot of your decisions and how you present them in public I can really appreciate and I know that a cornerstone of what you've been trying to do with the Fed is to bring even more transparency to the Fed and part of the decision making and The press conferences you've had have added a lot of transparency to it, so it's hard for me to understand some of the challenges in the search and the stress capital buffers and some of the more vague language or the inability to pin down the timeline. for the changes in that expectation of changes so that especially when 2020 see car has already started I know that Miss Wagner also asked about this I had asked laur They're about this in December I think I sent a letter to you and cora It's signed by everyone on this side of the aisle in financial services, just trying to get an idea of ​​what are the changes that are going to be made, what is the timeline for those who would do these stress tests to get the changes who are trying to make decisions with trillion dollar balance sheets billion dollar balance sheets trying to make their plans this moment is now upon us and i feel like we are still being very vague about what's coming up and when we can expect even whatever that is is plummeting when we might expect it to come before us so I was wondering if you could elaborate on that or give some reasons why you and your colleagues have been a bit more hesitant to answer i can't get any more clarity than there is so i'll just say again hopefully the mattress core d e stress capital is incorporated into the stress test this year yes and we will do it in a way that is timely for the car C ok in our previous us conversations i think we had kind of had a general agreement don't let me exaggerate that if that's wrong that some of the aspects of this need to be calibrated right we put a lot of this in place after dodd-frank we felt like we were doing the right thing to do so maybe we had unintended effects maybe the intended effects weren't not as good as we thought they would be or perhaps this was not the area we needed to focus on and I think we had agreed that some of this requires a significant amount of calibration going forward and hopefully there will be further review and calibration of these tests to reflect the current conditions or, alternatively, what we have learned since the crisis about what works and what doesn't work and what can be It's going to be adding to significant reserves at many of these institutions, so my strong opinion is that at Capitol, the capital levels, particularly at the larger institutions, are just right and there's no need to raise or lower them, and if you tell us , I should reflect that just out of curiosity, tell me when you say about the correct buttress that with the data they help me understand what you are looking at to say that this means about the correct and correct capital levels are much higher and the quality of our capital is much higher, well that is undoubtedly true, but I think we can all agree that during the crisis or before the crisis, the correct levels of capital were not adequate to say that they are higher, it is not definite in terms of whether they're too high, right?

They are still too short. Are they the right type? What do you use to indicate that this is the correct level of capital? Well, we angst for one. You look at the stress test and you know you throw in a scenario that is equivalent to or maybe even a bit stronger than what happened during the global financial crisis and they'll see whether these institutions have the wherewithal to remain reasonably well capitalized and well enough capitalized to continue to have the confidence of the markets, that's really the question that I have to be above certainty. lows and they do yes but not by a giant margin it doesn't suggest caps are too high yes it suggests it's about right and stress tests are probably a great test for that yes so I think I might see how it could be concerning for institutions that feel like they're stuck in a bit of circular logic we devise these stress tests and then if they lower the bar on the stress test then we think that's right that's exactly right without going back and changing Some of the underlying factors that go into stress testing, you can always say that it's correct, you can always say, as long as they go down the bar, that it's correct, no matter what bar they want to go back to. and just look under the hood and say god, are these assumptions still correct?

The way we've done these stresses is the right way to do it right, so maybe in a relative sense, yeah, it's higher, the capital is higher than what the stress tests have. indicated but in an absolute sense we're not asking the question if this test is the right thing to do and we're doing this test correctly and it includes all the correct variables and I think that's what they're looking for is just f more clarification on when we can expect that comprehensive review that the Fed has talked about for so long. banks are doing that all the time all we do with stress testing is, you know, transparent public to comment on things like that, maybe not ex ante, but people can look back, it's not that we haven't adjusted this, trust us lady from massachusetts mr.

Presley acknowledges himself for five minutes, thank you, Madam Speaker, and I also want to thank the activists in the room who have been organizing for more responsive eating. I know a tenants rights organizer brought up to me that activism will be a full time job and we thank you for taking it on and I think the president for testifying before the committee today as well as with fed now the decisions you make impact people who work every day your decisions impact how many jobs we have who has what jobs how much they are being paid and who is hurt the 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 however the federal approach has never successfully secured enough good paying 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 thatincluded the right to a useful and financially rewarding job Judge 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 a job to all people who want to work 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 and I affirm especially the fact that dr. King and Coretta met in Boston. I represent Boston and I don't think she gets enough oxygen for the role she played in the movement so after dr. The assassination of King Coretta Scott King took up the mantle by pushing the Federal Reserve to adopt a full employment mandate and he actually was behind President Carter when he signed the Humphrey-Hawkins Act into law and that's why he's here today, for the sake of time. if you will allow me an answer as succinct as possible yes or no mr.

President given the lingering inflation concerns do you think the Federal Reserve can achieve full employment and by full employment I mean anyone who wants to work and can work will have a job available to them first thanks for that story no I knew that, um that's our goal, that's what we're working to do 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. a federal job guarantees success where the Fed doesn't have yes or no that's hard to answer you mean I don't know I'm guaranteed a job that's the story I was providing but anyone who wants to work and you're able to make it work, then, Chairman Powell, by all indications, the US economy has been producing well below potential for eight of the last ten years and for most of the preceding decade, Is it true that most of that period has seen unemployment well above target? while we hardly ever see infl The Fed started raising rates in 2016 even though inflation was still below target and when rates go up, unemployment tends to.

Did the Fed consider how to raise rates? disproportionately impact those who were already struggling to secure employment like communities of color who were previously incarcerated our immigrant neighbors so I would say unemployment has continued to decline significantly 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 jobs. I think our consideration was really that the right thing to do was to get monetary policy back to a place where it reflected an economy that had pretty much recovered to the benefit of all people, including low and middle income people, including myself, many people are still recovering, but in the interest of time, since there have been no signs of overheating in the economy since then and you are now cutting rates, is it possible that you started cutting 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 inflation, so given that into account, knowing what you know, would you have continued to support? raising interest rates when the Fed did. I supported it at the time and looking back at 2020. I think you have to judge those decisions based on what we knew at the time, what more Americans have jobs today if the Fed hadn't raised interest rates rates in the past. three years I don't know where the 50 year minimum is I would say that's a fair question thank you thank you I would like to thank Chairman Powell for his testimony today no objections all members have five legislators Five days within which Submit additional written questions for the President's witnesses, which will be transmitted to the President for response.

I asked him to reply as soon as he can with no objections. All members will have five legislative days within which to file. strange materials to the president for the inclusion of him in the registry thank you all and this audience rises