Dow and the s p 500 putting in a new record highs, but the nasdaq the laggard today. So far not another record high. Everyone has been talking about the string of records. Can this be the longest bull market ever . Goldman sachs is saying the evaluation is stretched to levels not seen since 1900, and pain. This may end in they also talk about the idea that a 6040 portfolio, typically in a retirement portfolio, 60 stocks, 40 bonds, a very balanced portfolio. There turning 12. 86 vs. 7. 1 since 1985, and 4. 8 over the last century. Certainly the returns matching these record highs are seeing. The question is when and how might it end. Fed chair janet yellen will be testifying shortly. We had a reaction to her preprepared remarks. The 10year yield, up six basis points. The incredible that the fed is likely on the path for continued gradual rate hikes. We have the other havens selling off, including the yen, gold, trading lower, supporting the riskon tone we are seeing to some degree. Of course, take a look at bitcoin, a love 11,000, remarkable that run for bitcoin, mark. Mark biggest increase since october 26, highest since november. Third day running ive been showing it up. World equity markets, showing you how europe is caring. Ftse lower today. Gengeneral he was one of eral hue is one of a green nature. Getting onto what is happening in london, this is sterling. We are up today. Highest since september 28. Rising against all 10 of our g10 peers. The u. K. And eu negotiators reaching this outline deal on the divorce bill that britain will pay when it leaves the bloc. This does clear the potential hurdle in talks. There is a big deadline on monday on that one. The median forecast for the end of 2018 for sterling. Barclays, 146 call. That is why sterling is moving. This is another great chance. Some equity strategists are betting that a rally on stocks sensitive to the economy is nearing the end. Deutsche bank morgan stanley, recommending underweight recommendations on european cyclical stocks, including this sector. The calls come as a gauge tracking the shares enjoys over its defensive counterpart, as you can see here, holds to the biggest investment in 6. 5 years, a result of stronger growth and executions of stimulus from the u. S. Administration. Vonnie . Vonnie we are waiting for fed chair Janet Yellens testimony before the joint Economic Committee. You see the opening statements. We will have senator Martin Heinrich speaking for a moment before janet yellen. Lets bring in Michael Mckee, economics and policy correspondent, and the chief correspondent for bloomberg economics. Accident like the significance immediately of it not to downplay the significance of nearly newly of this testimony, but theres nothing nostalgic after four years of janet yellen behael this is scheduled to her last testimony on capitol hill, and you wonder like Baseball Players doing a retirement tour, whether they will give her a launcher or car is a farewell gift. She has been remarkably stupid what she has said, all through this year, that the fed is on a gradual pace for raising rates and the testimony suggests she will say the same thing today. Very little news, very little composure. Interesting to see when they get to the q a when she gets back to what they had done. Yesterday at the confirmation hearings for jerome powell, there was a lot of asking about regulation and the prices. We might get more about the economy and inflation and those kinds of indicators. Call it a swansong, valedictory address, whatever it is. I dont think they will grill her too intensely on the issues that will be thrown to jay powell, if he is confirmed as the next fed chair. The point that mike made earlier today on television, it will boil down to how much you can get janet yellen to say about the proposed tax plans. They will grill her on the notion of the deficits expanding quite significantly if the tax plan is passed from if she is buying into the notion of tax cuts paying for themselves with faster Economic Growth and all of these types of issues. I think maybe she will be a bit of a light blanket on those a bit of a what blanket on those notions. Hek to use your expression, got questions about the question of economic tax cuts being debated by congress. Will he, took, be a wet blanket on this issue . I think he will with full judgment, and he is in a dicier position because he has this term ahead of him. As officials often do, they leave the scoring and analysis to other entities. That said, with janet yellen on her way out, she may feel and opine on these matters, and they that may not be a Welcome Development as the republicans are trying to form a coalition to get this through both houses of congress. Vonnie she has been extorted never professional throughout her tenure. She is still the chair. Will she be freer to speak today . Michael in syria she is freer to speak. She has over 10 in theory, she is free of tuesday. She has over her tenure, as ben bernanke did, complained as the economy was growing out of recession that there were not fiscal policies to stimulate growth. And that congress has not done enough to deal with the budget deficits. The feds worry is that they crowd out private borrowing and Interest Rates are higher than they otherwise would be. Jay powell did suggest that that is a possibility if the tax bill passes as written. She might want to make that point, go on record to say dont much, because too interestrate will be higher than they otherwise would be. Is any what you will see questions in that regard probably coming from democrats who want her to ratify their belief that it is a bad tax bill, because they suspect republicans know what she would say. Vonnie michael, can i ask you about this tax bill . The trigger is becoming the issue of the day. What would a trigger due to the economy . We dont know at what point it would kick in or what it would mean for economic roads or michael there is a lot we dont know about how they would make this work. Basically what they are saying is that if after a certain amount of time the tax bill does not generate extra revenue from higher taxes and stronger growth, taxes would go up. Willard economic theory tell you what is going to happen when you get into a recession is that tax revenues will go down, and yet you will be raising taxes from which is exactly the wrong thing to do. Just about 100 of the economics profession will be against this idea. Finery procyclical notion, during boom times, not good at doing vonnie with a have a way to stave it off if it became necessary under the rules . We are going to get this dynamic scoring maybe today emma later on today. What will it tell us . Will we see the benefits of Economic Growth . I dont know if they have time to put in the Circuit Breakers or revenue triggers into the scoring, but that will be absolutely critical in terms of understanding where the deficit is heading under the scenario, and also if this is ultimately going to be a pro cyclical plan, which is a big problem when you are exacerbated the deflationary impacts and the annomic downdrafts during economic recession. The key point for janet yellen is this notion that it is not just the fed that will raise Interest Rates to squelch the economic benefit of the tax plan, but also from mr. Market may do it, if, as mike alludes, a white or deficit means higher Interest Rates elsewhere in the economy. Vonnie speaking of chair yellen, she is about to give her testimony now, so i thanks at the moment to Michael Mckee and carl riccadonna. Lets listen to fed chair janet yellen before the joint Economic Committee of congress. As chair of the Economic Policy committee of the organization for economic operation and development. She is also Professor Emeritus at the university of california at berkeley. She earned her phd in economics from Yale University and has been granted an honorary doctorate from Brown University and honorary doctorate in humane letters from bard college. Chair yellen, welcome. You are recognized. Thank you. Tiberi,llen chairman Ranking Member heinrich, members of the committee, i appreciate the opportunity to testify before you today. I will discuss the current and monetaryook policy. The u. S. Economy has strengthened further this year, smoothing through the volatility caused by the recent hurricanes. Job gains averaged about 170,000 per month from january through october. The somewhat slower pace than last year, but still above the range that we estimate will be consistent with absorbing new entrants to the labor force in coming years. With the job gains this year, 17 million more americans are employed now then 8 years ago. Meanwhile, the Unemployment Rate , which stood at 4. 1 in october, has fallen. 6 Percentage Points since the turn of the year, and is nearly six Percentage Points below its peak in 2010. In addition, the Labor Force Participation rate has changed a which in recent years, is another indication of improving conditions in the labor market, given the downward pressure on the dissipation rate associated with an aging population. However, despite these labor market gains, wage growth has remained relatively modest. Unemployment rates for African Americans and hispanics, which tend to be more sensitive to Overall Economic conditions than those for whites, have moved down on a net over the past year, and are now near levels last seen before the recession. That said, it remains the case for Unemployment Rates these minority groups are noticeably higher than for the nation overall. Meanwhile, Economic Growth appears to have stepped up from its subdued phase earlier in the year. After having risen at an annual rate of. 25 in the first quarter, u. S. Inflationadjusted Gross Domestic Product is currently estimated to have increased at a 3 pace in the second and Third Quarters, despite the disruptions the Economic Activity in the Third Quarter caused by recent hurricanes. Moreover, the economic expansion is increasingly broadbased, across sectors as well as across much of the global economy. I expect that with actual adjustments gradual adjustments in Monetary Policy, the economy will continue to expand and the job market will strengthen somewhat further, supporting faster growth in wages and incomes. Over asset valuations are high byte historical standards from overall vulnerabilities in the Financial Sector appear moderate. The Banking System is well capitalized, and broad measures to leverage and credit growth remain contained. Even with the step up in growth of Economic Activity and the stronger labor market, inflation has continued to run below the 2 rate. The federal open Market Committee judges most consistent with our congressional mandate to foster both maximum employment and price stability. Increases in gasoline prices in the aftermath of the hurricanes temporarily push up measures of overall Consumer Price inflation. Inflation for items other than food and energy has remained surprisingly subdued. The total price index for personal consumption expenditures increased 1. 6 over 12 months ending in september, while the core price index, which excludes energy and food prices, rose just 1. 3 over the same period. About a half percentage point lower than the year earlier. In my view, the recent lower readings on inflation likely. Eflect transitory factors as these transitory factors say, i anticipate that inflation will stabilize around 2 over the mediumterm. However, it is also possible that this years low inflation could reflect something more persistent. Indeed, inflation has been below the committees 2 objective for most of the past five years. I this backdrop, the fomc has indicated that it intends to carefully monitor actual and expected progress toward our inflation goal. Although the economy and the quitearket are generally strong, real gdp growth has been disappointingly slow during this expansion relative to earlier decades. One key reason for the slowdown has been a retirement of the older members of the baby boom generation, and hence, the Slower Growth of the labor force. Another key reason has been the unusually sluggish pace of productivity growth in recent years. Ingenerate a sustained boost Economic Growth without causing inflation that is too high, we will need to address those underlying causes. In this regard, the Congress Might consider policies that encourage Business Investment and capital formation, improve improve the nations instructor, raise the quality of our educational system, and support innovation and the adoption of new technologies. I will now turn to the implications of recent Economic Development and the outlook for Monetary Policy. With ongoing strengthening in labor Market Conditions and an outlook for inflation to return to 2 over the next couple of years, the fomc has continued to gradually reduce policy accommodation. The committee raised the target range for the federal funds rate by a quarter percentage point at both our march and june meetings, with the range is standing at 1. 25 . In october, the committee began its Balance SheetNormalization Program in which will gradually unpredictably reduce gradually and predictably reduce our securities holdings. The committee set limits on the pace of balanceshe reduction. Those limits should guard against outside moves in Interest Rates and other potential market strains. Indeed, there has been little if any market effect associated with the balancesheet run off to date. Need tot foresee a alter the Balance Sheet program, but we would be prepared to assume reinvestment if the material deterioration in the Economic Outlook were to warrant a sizable reduction in the federal funds rate. Changes to the target range for the federal funds rate will continue to be the primary means of adjusting the stance of Monetary Policy. At our meeting earlier this month, we decided to maintain the existing target range for the federalfunds rate. We continue to expect the gradual increases in the federalfunds rate will be appropriate to sustain healthy labor markets and stabilize inflation around the fomcs 2 objective. That expectation is based on the view that the current level of the federalfunds rate remained somewhat below the neutral level. That is the rate that is neither expansionary nor contractionary, and it keeps the economy operating on an even keel. The neutral rate currently appears to be quite low by historical standards, implying that the federal funds rate would not have to rise much further to the two initial policy stance. If the neutral level rises somewhat over time, as most fomc participants expect, additional gradual rate hikes would be appropriate over the next few years to sustain the economic. Xpansion of course, policy is not on a preset course. The appropriate path for the federal funds rate will depend on the Economic Outlook as informed by incoming data. The committee has noted that it will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. More generally, in determining the timing and size of future Interest Rate adjustments, the committee will take into account a wide range of information, including measures of labor Market Conditions, indicators of inflation pressures, and Inflation Expectations and readings on financial and international development. Thank you. I would be pleased to answer questions. Thank you so much, chair yellen. The Congressional Budget Office has noted that the United States treasury is on track to lose Corporate Tax revenue over the next decade because of our high Corporate Tax rate and worldwide system are Encouraging Companies moveift income and even headquarters overseas. Could a lower Corporate Tax rate in a more Competitive International treatment of our u. S. Companies reverse this trend by making america a march active place to invest in . A more attractive place to invest in . Chair yellen so i think this is an important question for congress to consider and to review all of the analysis that has been done on this topic. I would say there is widespread concern that the current structure of the Corporate Tax system does have the effects that you have indicated. But looking at the likely impact of particular proposals that may be under consideration is something that we havent done carefully at the Federal Reserve, and i would leave it to members of congress and the administration to judge what the likely consequences would be. Ok, thank you. One other question. Major criticism in some quarters of a doddfrank is that the Regulatory Burden it has placed on small banks in particular. There is a legislative initiative that would raise the 500 billion to 250 billion regulatory threshold for heightened oversight by the Federal Reserve. Do you agree that overly burdensome radiations has hindered particularly small bank lending to the effect of contributing to the slowness of the economic recovery that we have both talked about . Agreeyellen well, i do that Community Banks face substantial burdens, Regulatory Burdens, and it is very appropriate for the fed and other banking regulators to look for ways to reduce the compliance burdens that they face. We are very we meet with Many Community bankers and are very aware of concerns about this. We are focused on trying to thatr our supervision so we find ways to reduce Regulatory Burdens. We put into effect a number of changes that reduce reporting requirements, and recently have a simple five capital proposal simplified capital proposal that we think should address some of the concerns. But we have long been on record theavoring some increase in 10 billion dollars and 50 billion asset threshold that are ,ncorporated into doddfrank and in particular we think that the volcker rule and incentive compensation are things that should not apply to smaller, less complex banks. And we do think an increase in those thresholds would assist us in appropriately tailoring our regulations. Important thatis the fed retain authority to enhance prudential standards on banking firms, 100 billionin the to 250 billion asset range both for safety and soundness and Financial Stability concerns, and in particular, stress testing we think is a particularly important component of our safety and soundness of the safety and soundness approach, and think it is appropriate for that to apply to banks for the 100 billion threshold. Rep. Tiberi thank you. I will turn it over to Ranking Member heinrich for five minutes. Senator heinrich thank you, chairman. Chair yellen, the Unemployment Rate in october was 4. 1 , the lowest since late 2000. , that average rate, does not capture the health of the labor market in many areas of this country. You talked a little bit about that in terms of demographics as well. There was a broad expectation that the fed could raise Interest Rates at the december meeting, and im certainly not asking you to tip your hand with regard to that, but what could change between now and the upcoming fed meeting that could affect your thinking on that one way or the other . And then, if you would, talk a little bit about how you take into account those geographical and or demographic disparities in the Labor Market Health when making the Monetary Policy decisions . Chair yellen so i think it is a very desirable development that the on of limit rate that the Unemployment Rate has fallen to a level that is about the lowest we have seen since the early 2000s. And i do think that this is a development that has brought gains an improvements to almost all groups in the labor market. That said, there are huge in how different groups are faring in the labor market, both in terms of Unemployment Rates and where, for example, African Americans traditionally and still have Unemployment Rates that are whites,wice those of but also across different groups with different degrees of education, and in different parts of the country. And i do think a generally strong labor market is helpful in alleviating all of those disparities, but we dont have a targeted set of tools that would enable us to address disturbing differentials across groups. More generally, labor Market Experience a different groups depends not only on Employment Opportunities and Unemployment Rates, but also on wages. We have a multidecade trend of increasing disparities in income ,nd in wages was of the premium the wage premium being earned by those with more education that has continued to increase over time. And we have seen a long trend of disappearance of middleincome jobs that could be either. Utomated or outsourced so there remains a great deal of pain in the labor market, in spite of the fact that i think we have seen general improvements spilling over to all groups. You asked me about our upcoming meeting and our Monetary Policy decisions, so we are very focused. We have a dual mandate. We care about price stability, and we also care about employment and achieving our maximum employment mandate. At the present time, even though the on of limit rate is below levels that most of my colleagues even though the Unemployment Rate is below levels that most of my colleagues see as in the longer run, inflation is running below our objective. And so our Monetary Policy has been designed to be accommodative and to allow the labor market to become tighter. We think that has actually helpful not only in its own right in bringing benefits to groups that are having a tough time in the labor market, and there i do see encouraging signs, for example, that in a very tight labor market where so many firms are having a tough time hiring workers, they are beginning to focus more on training, theyre looking for ways to bring onboard and help bring into their workforce who in a looser labor market they would put into the reject pile. So i think all of that is good, and we are not seeing undue Inflationary Pressure in the labor markets. Our policy remains accommodative. But we do think it is important to gradually move our policy rate toward what i will call a neutral level, which would be consistent with sustainably strong labor Market Conditions. And we want to do this gradually, because if we allow the economy to overheat, we could be faced with a situation where we might have to rapidly raise rates, and for the economy into a recession. And we dont want to cause a boombust set of conditions in the economy. I would love to see a sustainably strong labor market. Isthink if inflation depressed on a temporary basis, as i believe, but we are carefully monitoring, we think that a gradual path toward a neutral status is appropriate. Senator heinrich while we have been able to drive down on employment in recent years, one of the things we have not seen in that tightening labor market has been over pressure on wages. Upward pressure on wages for upward pressure on wages. Do you have an idea why that might be different than previous recoveries, and what policies would be important in a try to address that . Chair yellen so it is true, we have seen come i a modest upward pressure on wages. The employment cost index, which is a broad measure of compensation. Pressures have moved up a little overhalf a percent or so the last three or four years. But wage increases our modest. Modest. Increases are one lesson i take from that were moral i draw is that the label labor market and economy are not significantly overheated, in spite of the fact that we have a low Unemployment Rate. Over belong long to mediumterm, the pace of real or inflationadjusted wage growth hinges on productivity growth. Firms only able and willing to pay wage gains that are matched by productivity. For reasons that are not well understood, productivity growth has really been dismally slow in recent years. And i do think i cant tell you exactly what the reasons are for that. It may partly reflect slow technological innovation, at least as it spills over into producing measured output that is part of gdp. Lesse also seeing signs of dynamism. The process of Creative Destruction of new firms from innovative firms, expanding at the expense of those that are less innovative, that process seems to explode, and i think that some productivity growth is associated with that. But if you ask what remedies there can be to this, and i think to really see a faster average pace of real wage growth , we need faster productivity, i would point you toward investments. Investments in people, investments in physical capital and the private sector, Infrastructure Investments can be helpful, and policies that facilitate innovation. And of course, the education and Human Capital of the workforce. Those are the classes of policies that could have a favorable effect on these adverse trends. Senator heinrich thank you. Vice chairman lee, you are recognized. Senator lee thank you, mr. Chairman. Thank you, chair yellen, for being here. I want to thank you for your service over the years. Ive enjoyed the opportunity to appear with you during the at the chart Economic Committee during your service as chair of the board of governors. Chair yellen thank you. Make policy here in congress and there are a lot of people who make policy. It is forwardlooking and it requires us to look at the future and anticipate events and set rules that will govern the behavior of our members of our society. I assume you would agree with me if i said it is important when you are making policy from time to time to look back and review what you have done and figure out whether it succeeded or failed. Chair yellen absolutely. Senator lee so retrospective reviews of policy can be a good thing. Does the fed look back and review its Monetary Policy choices from time to time . Chair yellen our Monetary Policy choices . Yes, of course we do. Senator lee in doing that, it looks like and tries to look at policy decisions it has made an figure out whether the data support those decisions. If the Federal Reserve already does that, how would a congressionally mandated transparent review of those policy choices be a bad thing . Why wouldnt that be a good thing to have congressionally mandated transparent review of the feds Monetary Policy choices . , we need to well be accountable to Congress Come and i completely agree that an independent central bank in a Democratic Society needs to explain itself to the public and to congress, and appearances before congress where you ask questions about our policy how they work out is 100 appropriate. Nevertheless, i do think that it is very important that the Federal Reserve, like most other central banks, be a loud to make independent policy decisions that are shielded from shortterm political pressure. So you didnt mention any ofcific legislation or ways accountability, but i have long expressed concern about, for example, audit the fed legislation, or more recently, the choice act, because those acts would essentially bring shortterm political pressure onto the fed that could affect our Monetary Policy decisions by policyng realtime gao reviews of recent decisions that would secondguess the decisions made by the fed and call into question the legitimacy and credibility. Senator lee i understand that that is your position. Im at the same time, while we are talking about independence, the fact that these reviews are undertaken in the first place suggests to me that making them subject to a transparent review process would allow the public to have input. I understand it is the desire, it is the impulse of any policymaker anywhere to insulate him or herself from public review, but we do live in a republic, in a republic where the people are the sovereigns, where ultimately the government is accountable to the people. And you at the fed exercises significant amount of government ing authority, and that is why i think these things are appropriate. My time is short. I want to get to a couple other issues quickly. The joint Tax Committee analysis of the tax plan pending before congress is expected to assume an aggressive response by the Federal Reserve. One that would effectively assume Monetary Policy what hinder some of the growth that could otherwise be anticipated from this tax reform policy. Now, you emphasized in your testimony today that you expect a gradual adjustment in Monetary Policy. I would think that a gradual adjustment from the fed would look very different, and certainly describe very that an aggressive Monetary Policy. Do you agree those are 2 Different Things . Chair yellen so what i would say is that we are very focused on our congressionally mandated objectives of employment and price stability, 2 inflation. We will try to adjust policy to achieve those goals in light of changes in the environment, whether they could be due to fiscal policy or importantly, many other things that affect the outlook. I would say, look, we welcome strong growth. The fed is not trying to stifle growth. Trends thated about could push inflation above our 2 objective. As i said, it has been extremely disappointing to the fed, as it has been come im sure, to all of you and to the public, that we have achieved as much improvement as we have in the labor market in the context of growth that has been running only slightly under 2 . And if that pace of growth a labor market that is creating jobs for new entrants, if that rises, we will be delighted to support that, and to accommodate it. On growthave some cap we are trying to achieve. But in the context of an economy that is close to full employment, it would be growth to have sustained higher growth would require changes boost productivity growth or growth in the labor force. Senator lee understood, understood. Last year i ask you about how the feds approach to stress testing my damage to do property interest of investors. Not as big investors not just big investors, but investors in the form of school teachers, firefighters, those who invest in any way in any amount. Process in Property Rights are undermined any time you have a rule of law that is everchanging. Anytime you have a rule of law that cant be understood as constant from one day to the next, that is so unclear, so ok, so subject toe, constant metamorphosis, one cannot rely on what it demands. What can you tell me about what the fed has done since we last spoke to make sure that the Due Process Rights of individual investors are protected . Chair yellen stress testing is a very important component of our supervision and has led to more rigorous, forwardlooking assessments of capital adequacy at large banks and particularly those that are systemic. So this really is a key component of supervision. But i would agree with you that the firms that are subjected to that, ando understand we have done many things, including putting out for concerning thels design of our scenarios. We have put out a great deal of information about qualitatively what is in the models that we use. We have given feedback to firms on their models, and comments on their submissions, so they understand the shortcomings we see in their approaches. And we are currently working on a Transparency Initiative that would seek to provide more granular, more detailed information that would help banking organizations understand the ways in which specific characteristics of the loan portfolios would affect our evaluation of stress losses. I would agree we would strongly resist publishing the actual models for a full set of reasons, but providing more information so that banks understand how we are engaging this evaluation is appropriate and important. Senator lee my time has expired. Thank you very much, chair yellen. Thank you, mr. Jeff. Rep. Tiberi thank you. Representative delaney recognized for five minutes. chair yellen, thank you for your service to our country. We will miss you very much. Chair yellen thank you. the macroy statistics you open up your presentation with, which described a fairly stable and positive picture in many ways. But i wonder when you think it is time for us to start thinking little differently about the data that we look at, because i saw some data recently where they disaggregated what has happened to the will to portfolios of the population 2 portfolios of the publishing, the top 40 and 60 . When you look at that data, you see a different picture. People in the top 40 , their incomes on average are up about 40 since 1980 and the bottom 60 , they are flat. The top 40 on average used to be worth six times more than the bottom 60 . Now they are worth 10 times more than the bottom 60 . The top 40 used to spend twice as much on education for their children than the bottom 60 . Now they spent four times as much on education for the children. Their Retirement Savings of the top 40 on a relative basis, compared to what they will need for retirement, have actually improved since 1980. And the store is very bad for the people in the bottom 60 . Life expectancies from 1980 for both of these groups were actually extending. And after the first time in quite some time and now for the first time in quite some time we see life expectancies for people in the bottom 60 going down. Im wondering, what do you think we as policymakers, you in your position at the Federal Reserve and we as policymakers on the hill, have to start thinking differently about decisions we make based on the disparities that are starting to grow in our country . Etc. m not talking top 1 , im talking large disaggregation pools. Because it seems to me that the bottom 60 is particularly vulnerable to 2 macro trends going on, one rapid change in the future based on automation and innovation, they are much more likely to have adjusted disruptive, and further, they relied much more on important Government Programs that are likely to come under continued stress. When you make decisions about what to do with Monetary Policy, how much have you started, or has the fed started to disaggregate some of this data and make the decisions differently . Chair yellen well, you described in your question a set of a very disturbing longterm trends that the fed is very focused on, and in fact, some of oneinformation that enables to document these trends is produced by the Federal Reserve and our surveys of Consumer Finances and our surveys of household and economic decisionmaking. And of course, there has been over decades a trend towards rising inequality of both income and wealth in the United States that is not recent, it is something that has been going on for many decades rep. Delaney right, what does it cause you to change decisions you would have otherwise made based on what is happening for the average performance of the economy . Do you see what i mean . Chair yellen well, to the effect that the shifts in Income Distribution to affect the pace of overall spending in the economy for example, if high income households spend less of extra income they earn, that lower income households that shift in Income Distribution can make a difference to overall spending, and it is something we would take account of. Rep. Delaney because i would think, hearing your average statistics, the position to actually continue towards our normal rate environment makes sense, but when you look at this disaggregated i would at least be very scared of how vulnerable this bottom 60 is to any kind of shock in the economy. Moving on to what we should be doing, in your judgment, when we think about fiscal policy, tax policy decisions, spending policy decisions, how much should we have a laserlike focus on programs, whether they be investing in infrastructure, investing in Human Capital, creating incentives and the tax code for people to allocate capital in parts of the country that have been left behind economically how high a priority should that be for us in making our decisions based on the statistics you are looking chair yellen for us, unfortunately, we dont have tools that enable us to target particular groups. Our focus is where we take these trends and study them, we really unt tool thatl cant address this. But congress and the administration, you have a much wider set of tools, and obviously, it is up to you to formulate appropriate priorities rep. Delaney would you be a purging for us to address these trends encouraging for us to address these trends . Chair yellen well, im very disturbed and ive spoken out many years about the disturbing trend towards rising inequality. And the equity of the tax code is something that i think should importantly be taken into account, and as i said earlier, we are suffering from slow productivity growth. And here, too, i think it is quite important that in making fiscal policy and other onisions, that the focus be how can that be improved, and that does point to investment in people, infrastructure, also private capital, technology, education. So these are squarely, i think, rt, and i do cou think they are urgent to address. Rep. Delaney thank you again, chair yellen. Rep. Tiberi you are recognized for five minutes. Thank you, mr. Chairman. This may be one of these auspicious days. I dont know if it is part of your last time. It is also our chairmans, i believe, last one. I will miss mr. Tiberi because he is one of the few people to tolerate me, so i appreciate it. Last thing in this sort of lovefest, it is an opportunity to Say Something publicly that i said to the chairwoman privately. Your team around you, particularly your senior team, has always been very kind to my staff and myself, particularly when we have had more unusual datatype questions. Im still a bit of an advocate of wanting more of the models becoming public, but a lot of that is already beginning. Like, i did on some of the atlanta fed data i live on some of the atlanta fed data, the gdp, they allow you to look at parts of the formula. I believe the openness you began with has come a long ways. Chair yellen thank you. Rep. Schweikert it would be wonderful to log in for people in policymaking, what would happen if labor force did this and understand what is in the back end of some of the data. Chair yellen so, congressman, the model that we use at the fed for Economic Analysis of Overall Economic trends, we refer to it as Federal Reserve board us. This model is in the public domain. It is sitting on our website. Performody who wants to a whatif exercise what if Monetary Policy were different, or if the labor force grew faster or slower we have tried to provide access to that tool rep. Schweikert and it has gotten so much better. I live on the atlanta feds app. I know that is a snapshot of current time, and snapshot is not a trend, but it is very helpful in removing some of the mysteries. Now to run it through a dozen questions as quickly as i can. And you actually touched on this. Having the expense of a flying back to phoenix about a week ago, i was looking at something that was a few years old, and in the current unemployment, it was looking at the tables of Labor Force Participation, and what was predicted a few euros ago of what would happen, and what we see happening right now. It was talking about the , labor forcerend participation is going to continue to fall. And yet we see interesting things the last three quarters of folks that were being predicted not to be moving into the labor force are moving into the labor force. We just saw some recalculation of numbers of Social Security disability. And all of a sudden, the longevity of the trust fund jumped substantially because it turns out and number of folks on Social Security disability moved back into the labor force. There is something in our models i know it is at the margin, but we are seeing some of the data that the substantial Economic Opportunity that is in the labor Job Opportunities is actually starting to pull people we thought were falling out of Labor Force Participation. If you had and it just in that, where would you go to find more information if you had an interest in that, where would you go to find more information on that sort of thing . This goes to senator lees question about back tests. , i mean, saidso researchers have done very detailed modeling of Labor Force Participation trends, and that is published research in places like brookings papers and refereed journals, and my staff could provide you references on that. As i mentioned in my opening statement, what we have seen over the last three years is aggregate Labor Force Participation has been essentially flat. , and and is downward flat Labor Force Participation with the downward underlying demographic trend means just what you said rep. Schweikert it is contrary to what people were predicting just four years ago. I think ien well, strongly for market doesnt attract people back in, and people who might have left and enteded are being inc to remain in the labor force. More recent cohorts of retirees come all the when people reach retirement age, the Labor Force Participation falls retireesntly younger are working more than older retirees rep. Schweikert that is a really interesting trend of how many of our seniors are staying in the labor force. Chair yellen more than they used to. Rep. Schweikert i know im going over time, but i was going to complement i fear often we fuss at the fed, but you only have so many tools, and a lot of the tools are sitting here with us. Where some of us may absolutely agree and disagree ideologically , there was some interesting things in the crosstabs in the data of trade schooltype jobs, alignment and when to use a previous conversation, and seeing souring movements there. And yet we often turn around and reinforce the University Education model. May be our own misallocation of design and resources that are causing many of these problems out there that we have to rethink what we are doing policywise. With that, i feel back from mr. Chairman. Rep. Tiberi thank you. Good comments. Representative maloney. I want to start out by thanking chair yellen for your extraordinary service. As the very first woman to lead the Federal Reserve, you broke a major barrier, and we are so very proud of you. Chair yellen thank you so much. Ey and thank you for your record as fed chair. Your record speaks for itself. The Unemployment Rate is the lowest in 17 years. Inflation has been steady. Gdp growth is a robust 3 . The fed also ended the Quantitative Easing Program that as begun the process of changing the 4. 4 trillion dollars Balance Sheet and it started to gradually raise Interest Rates as the economy improves. In short, i would say your tenure has been a qualified success by every metric an unqualified success by every metric. You have been one of the most successful fed chairs in history. Chair yellen thank you. Rep. Maloney i want to publicly thank you for your service and say that i and this nation will miss you. Chair yellen thank you so much. I appreciate that. Rep. Maloney i want to ask you about regulation. I think the fed has done a good job under your leadership in writing regulations that have strengthened the safety and sounds of our financial institutions. But there have been discussions in congress right now about tailoring these regulations that were put in place after the financial crisis, and as you apow, the Senate Chairman cr has introduced Bipartisan Legislation on regulatory relief , a major package for banks. Some people want to go further than this and really roll back doddfrank. So i have two questions. First, do you think it is a good idea to roll back doddfrank in this postcrisis regulatory time . Secondly, what do you think of chairman crapos regulatory relief package . Do you think it goes too far, or do you think it strikes the right balance . Chair yellen well, let me start with the first question of rolling back doddfrank. I think doddfrank provided in roadmap to a series of provided an excellent roadmap to a series of changes that have led to a far safer and sounder Banking System, and one that has been able over the last 10 years , there have been stresses of all sorts that hit the u. S. Financial system, sometimes emanating from a broad and it has proven resilient and able to support good growth and a strong labor market. And core reforms include more and Higher Quality capital, more liquidity, stress testing, which i think is very important, and resolution planning. So if a systemic firm were to fail, we would have the tools to be able to deal with it without its imposing such cost on the economy. And i would not want to see those things rolled back. I think it would be very dangerous to do so. That said, i do believe it is appropriate to tailor regulations to the systemic footprint of a financial institution. And so tailoring is an important principle. We have long indicated that we would be supportive of raising thresholds incorporated into doddfrank, in 10 billion, 250 billion thresholds, and that would give us more ability to tailor to the systemic footprint of particular firms, particularly important to us is having the continued ability to impose enhanced prudential standards on a firm that might fall under a new threshold, if we thought it was justified by safety and soundness or Financial Stability concerns. So the legislation that has been proposed, i havent had a chance to study every detail of it, but i would say it generally incorporates those principles, and is a move in a direction that we think would be good in enabling us to appropriately tailor our supervision. Rep. Maloney thank you. Also, the u. S. Banking system is the strongest in the world, but we now have International Standards that have raised the Capital Requirements for all banks. I know that you are having ongoing discussions about capital standards at the international level. Are you considering lowering the International Capital standards at all in these chair yellen we have had a global agreement to raise capital standards. Are is under discussion now some details about particularly contentious issue is the use of internal models, as opposed to standardized Capital Requirements. Foreign firms, particularly european firms, some of whom rely on internal models, testing and analysis suggests that they may hold too little cata