Transcripts For CSPAN Outgoing Federal Reserve Chair Yellen Before Joint Economic Committee 20171203

This is just under two hours. Welcome, everyone, to the hearing, and we will discuss the prospects for our economy. The Federal Reserve is one of the most important institutions in the country and, indeed, the world. Chair yellen served as president of San Francisco fed, then as vice chair, then as chair of the Federal Reserve board. Our distinguished service at the fed encompassed the most tumultuous time in the United States financial and economic systems since the great depression. Many books have already been written about the events of this time, and many more will certainly be written from different points of view. And with varying assessments. One thing is certain the Financial System and the economy have stabilized. We are no longer debating how to reconstitute them, but rather how they might work even better. This hearing will review the development the crisis and special sense doctor yellin director yellen became the chair of the fed in terms of the dual mandate of maximum employment and price stability. By the Standard Measure of unemployment, which is 4. 1 last week, and by the Standard Measure of inflation, which most recently stood at 1. 6 , both the first and second goals have been achieved. Although the standard metrics of unemployment and inflation are very good, all is not well in our economy. Economic growth has been slow to the point that some economists have advised that we should try to lower our expectations for future growth by about onethird from the average postwar growth rate. Wage growth has been surprisingly low, as has been in Business Investments. Labor force has remained low and economiceasures of dynamism, such as new business formations, are way down from previous before the previous recession. Various explanations have been offered, including an aging population and decreased International Competitiveness of u. S. Businesses that are impaired by taxes and regulation. That money and banking also seem to have a role. Commercial banks, rather than issuing more loans, are holding extraordinary large amounts of reserves of the fed, and the fed has invested trillions of dollars in mortgagebacked securities and treasuries. So we have a condition of which businesses are investing less, workers are staying on the sidelines, and banks are lending less than they could. In short, the economy is not realizing its full potential. The joint Economic Committee is devoted to holding several hearings this year to determine what Economic Growth has been slow and is interested in chair yellens views. Taxes and regulation of major reasons for the reluctance of the businesses to invest and hire more workers in the United States, which is why the current effort in Congress Reform the tax system is so very important. Both the house and the Senate Versions of tax reform make critical improvements in particular, reducing the Corporate Tax rate to bring it more in line with those of other countries that we compete with. We are very interested to know the fed, how the fed proceeds such tax realignment, and whether its policymaking will assume it increases the economys productive potential. In closing, let me express my deepest appreciation for chair yellens service to the nation in one of the most consequential positions for the economy and americans welfare. Chair yellen, thank you so much. I will now you to the Ranking Member heinrich for his statement. Rep. Heinrich thank you, chairman, and chair yellen, i want to begin by thanking you for your extraordinary public service. Your leadership at the Federal Reserve has played a key role in helping the economy recover from the financial crisis. The nation owes you a debt of gratitude for your careful stewardship of Monetary Policy. Last year, when you appeared before this committee, i asked you about how we can get the economy to work for more americans. Unfortunately the Economic Situation is probably, is probably even more polarized today. Economic growth, jobs, startups, all are increasingly concentrated by zip codes. And while weve made Real Progress since the recession, some parts of the country are still being left behind. Too many rural areas, too many tribal areas are struggling to get back to where they were a decade ago before the recession. I represent a state with an Unemployment Rate well above where it was when the recession began back in december 2007. That sure doesnt seem to me like were fully recovered from this recession. I know that the federal open Market Committee has not yet made a decision on an Interest Rate hike next month, but if analysts are correct, the fed is expected to raise Interest Rates , which would be the third rate hike this year. With many communities across new mexico and the country still struggling, im concerned that we may be putting the brakes on too soon. Wage growth remains weak while health care, college, and childcare are less affordable for working families. And this reality should inform both monetary and fiscal policy. We need targeted fiscal actions to grow the economy and help these areas that have been left behind. But thats not what some of my colleagues are delivering in the current tax proposals. The republican tax bill moving through the senate adds 13 million to the ranks of the uninsured to pay for tax breaks for the wealthy and special interests. To hand out tax breaks to the wealthiest among us, republicans are not only taking Health Insurance away from millions of americans, but theyre wasting an opportunity to invest in our people and our communities. Theres a lot that we could be doing instead. Congress should congress should be focusing on important goals instead of just focusing on the economy and driving up wages for working families. For the cost of the current tax proposals, we could literally provide all children with Early Learning opportunities, plus offer students free tuition at Community Colleges and public universities, ensure Broadband Access for every american, rebuild our infrastructure, and take bold actions to fight the opioid epidemic. But were not going to be able to make those kinds of investments is republicans insist on adding another 1. 5 trillion to the debt for tax giveaways to the wealthy. Chair yellen, as you conclude your term, its an appropriate time to highlight the vital role an independent place in the column. This congress, as was the case in the last congress, is considering several republican proposals to limit the feds ability to independently conduct Monetary Policy. These bills seek to change the way the fed carries out Monetary Policy, even going so far as requiring the central bank to swap its current mortgagebacked securities for treasury bills. There are proposals to limit the Central Banks flexibility in responding to financial emergencies. This idea is especially hard to understand from my point of view in light of the Critical Role that the fed played in responding to the financial crisis and preventing another great depression. Im concerned about these attempts to undermine the Federal Reserves independence, and i suspect you may be as well. Id like to close on a point about the challenges of crafting Monetary Policy in todays political environment. Fiscal and monetary policies work best when they are aligned, but its difficult to know with any certainty where republicans in congress are ultimately heading with fiscal policy. Pledged tothey have reduce the deficit, but their tax package explodes to the the deficit. The disconnect between words and actions is also visible on infrastructure. President trump has talked about the need to invest in infrastructure, but as we wait for Real Infrastructure proposal from the administration, republicans are proposing to eliminate key infrastructure funding sources, like private activity bonds. They said they would deliver middleclass tax cuts, but in 2027, nearly 24 million americans earning less than 100,000 a year would face a tax increase under the current House Republican tax plan. And in the senate bill, half of all households will see tax increase when it is fully implemented. The chasm between words and policy must make the are really challenging job of conducting Monetary Policy that much more difficult. Chair yellen, again thank you for your service to our country, and i look forward to hearing your testimony today. Rep. Tiberi thank you. Thank you, senator. Rather than to the republican response, i will just introduce the chair. It is with great pleasure for me to introduce doctor janet yellen, chair of the board of governors for the Federal Reserve system. She has long sprints at the Federal Reserve, including four years as vice chair of the board of governors and features as a president , chief executive officer of the Federal Reserve bank of San Francisco. Chair yellen previously served as chair of the council of economic advisers under president clinton and is chair of the Economic Policy committee of the organization for Economic Cooperation and development. She is also Professor Emeritus at the university of california at berkeley. Chair yellen earned her phd in economics from Yale University and has been granted an honorary doctor of law degree from brown university, and underwrite a doctorate humanity letters from the college. Chair yellen, welcome. You are recognized. Members of the committee, i appreciate the opportunity to testify before you today. I will discuss the current Economic Outlook and Monetary Policy. The u. S. Economy has strengthened further this year. Smoothing through the volatility caused by it recent hurricanes. Job gains average about 170 thousand per month from january through october. A somewhat slower pace than last year but above the range we estimate will be consistent with absorbing new entrance to the labor force in coming years. With the job gains this year, 17 million more americans are employed now than eight years ago. Meanwhile, the Unemployment Rate, which stood at 4. 1 in october has fallen 6 10th Percentage Points since it turn of the year and is nearly 6 points below its peek in 2010. In additioni the Labor Force Participation rate has changed a little in recent years, which is another indication of improving conditions of the labor market, given the downward pressure on the Participation 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 net over the past year and are now near levels last seen before the recession. That said it remains the case that Unemployment Rates for these minority groups are noticeably higher than for the nation overall. Meanwhile, Economic Growth appears to have stepped up from its subdued pace early in the year. After having risen at an annual rate of just 1 4 in the First Quarter, u. S. Inflation agisted Gross Domestic Product is currently estimated to have increased at a 3 pace in both the second and Third Quarters. Desite the disruptions to Economic Activity in the Third Quarter caused by recent hurricanes. Moreover the economic expansion is increasingly broad based. Across sectors as well as across much of the global economy. I expect that with gradual adjustments in the stamps of Monetary Policy, the economy will continue to expand and the job market will strengthen somewhat further. Supporting faster growth in wages and incomes. Although asset valuations are high by historical standards, overall vulnerabilities in the Financial Sector appear moderate as the Banking System is well capitalized and broad measures remain contained. Even with the step up in growth of Economic Activity and it stronger labor market, inflation is continued to run below it 2 rate that federal open Market Committee judges most consistent with our congressional mandite foster both maximum employment and price stability. Increases in gasoline prices in the aftermath of the hurricanes temporarily pushed up measures of overall Consumer Price inflation but inflation for items other than food and energy has remained surprisingly subdued. The total price index for personal consumption expenditures increased 1. 6 over the 12months ending in september. While the core price index which excludes energy in food prices rose just 1. 3 over the same period. About half a persejt point slower than a year earlier. In my view it recent views might reflect transitory factors. As these transitory factors fade, i anticipate inflation will stabilize around 2 over the median term. However t is also possible this years low inflation could reflect something more persistent. Indeed 23flation has been below it 2 objective for most of the past five years. Against this back drop the fomc has indicated that it if tends to carefully monitor actual and expected progress towards our inflashz goal. Although the economy and the jobs market are generally quite strong, real gdp growth has been disappointingly stloe during this expansion relative to earlier decades. One key reason for this slow down has been the retirement of the older members of the baby boom generation enhance the Slower Growth of the labor force. Another key reason has been the unusually sluggish pace of productivity growth in recent years. To generate a sustained boost in 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 capitol formation, improve the nations infrastructure, raise the quality of our educational system and support innovation and the adoption of new technologies. I will now turn to the implications and the outlook of Monetary Policy. With ongoing strengthening and labor Market Conditions and an out look for inflation to return to 2 over the next couple of years, the fomc as gradually increased accommodation. They raised the target range for the federal funds rate by 1 4 Percentage Rate at both our march and june meetings with the range standing at 1 to 1 and a quarter percent and in october they began the Balance Sheet Normalization Program which will gradually and predictably reduce our securitys holdings. The committee set limit on the pace of Balance Sheet reduction. Those limitsicide guard against outside moves in Interest Rates and other potential market strains. Indeed there as been little, if any market effect associated with the Balance Sheet run off to date. We do not foresee a need to alter the Balance Sheet program but as we said in june, we would be ready to resume investments if a material deteariation were to warrant a sizeable reduction in the federal funds rate. Changes to the target range for the federal funds rate will continue to be the committees primary means of adjusting the stamps of Monetary Policy. At our meeting earlier this month we decided to maintain the existing target range for it federal funds rate. We continue to expect the gradual increases to the federal funds rate will be aproep ret to sustain a a healthy labor market and around the 2 objective. That expectation is based on the view that the current level of the federal funds rate remains somewhat below its neutral level. That is the rate neither expansionary or contractionary and keeps the economy operating on an even keel. The neutral rate currently apeer ooze be quite low by historical standards, implying the federal funds rate would not have to rise much firther to get to a neutral policy stance. If the neutral level rises somewhat over time, as most fomc participants expect, additional gradual rate hikes would likely be appropriate over the next few years to sustain it economic expansion. Of course policies not on a preset course. The appropriate path will depend on the Economic Outlook as informed by incoming data. The committee is noted that it will carefully monitor actual and expected inflation developments relative to its semetric inflation goal. More generally in determining the timing and size of future Interest Rate agistments, the committee will take into account a wide range of information including measures of labor Market Conditions, indicators of inflation pressures and inflashz expectations and readings on financial and international developments. Thank you. I would be pleased to answer your questions. The Congressional Budget Office has noted the treasury is on track to lose Corporate Tax revenue because of our high Corporate Tax rate and world wide system are if hencouraging companies to shift income and even head quarter overseas. Could a more Competitive International treatment of our u. S. Companies reverse this trend by making america a more attractive place to invest in . So, i think this is an important question for congress to consider and to review all of the analysis thats 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 youve 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 the congress and the administration to judge what the likely consequences would be. Okay. Thank you. One other question. Major criticism in some quarters of daud frank has been the Regulatory Burden it has placed on small banks in particular. Theres a legislative initiative that would raise it to 50 billion. The regulatory thresh hold for heightened oversight by the Federal Reserve. Do you gree its particularly hindered small bank lending to maybe the slowness of the economic recovery we boith talked about . Well, i do agree it Community Banks face substantial burdens, Regulatory Burdens and its very aproep ret for the fed and other banking regulators to look for ways to reduce the compliance burdens that they face. We are very i know. We meet with very community bankers. We are really focussed on trying to taylor our supervision so that we find ways to reduce Regulatory Burdens. Weebl rr put into effect a number of changes that reduce reporting requirements and recently have a simplified capitol proposal that we think should be address some of the concerns. But we have long been on record as favoring some increase in the 10 and 50 billion asset thresh holds that are incorporated if to dodd frank, in particular we think that the vulker rule andc things that should not apply to smaller, less complex banks and we do think an increase in those thresh holds would assist us in appropriately tayloring our regulations. We do think its important that the fed retain authority to imposed enhance prudential standards on banking firms, particularly in the 200 to 250 billion total 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 approach. And do think its appropriate for that to apply to banks, lets say over the 100 billion thresh hold. Thank you. I want to turn it over to Ranking Member hinrich for five minutes. Thank you, chairman. Chair yellen, the Unemployment Rate in october was 4. 1 , the lowest since late 2000 but that rate, that average rate does not capture the health of the labor market in many areas in this country. You talked a little about that in terms of demographics. Theres a broad expectation that the fed could ratz Interest Rates. What could change between now and the upcoming fed meeting that could change your way one way or another. And talk a little bit about how you take into account those geographical and or demographic disparities with had making the Monetary Policy decisions. So i think its a very desirable development that the Unemployment Rate is fallen to a level thats about it lowest weve seen since the early 2000s. And i do think that this is the development that has brought gains and improvements to almost all groups in the labor market. That said, there are huge disparities in how different groups are fairing in the labor market. Both in terms of Unemployment Rates where, for example, African Americans, traditionally and still have Unemployment Rates that are almost twice those of whites. But also across groups with different degrees of education and in different parts of the country. And i think its helpful in alleviating are 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 of differing groups depends not only on Employment Opportunities and Unemployment Rates but also on wages. And we have a multidecade trend of increasing disparities in income and in wages with the premium wage premium being earned by those with more education that has continued to increase over time and weve seen a long trend of disappearance of middle income jobs that could be either automated or out sourced. So there remains a great deal of pain in the labor market. In spite of the fact that i think weve seen general improvements spilling over to all groups. You asked me about our upcoming meeting and our Monetary Policy decisions. So we are very focussed. 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 Unemployment Rate is below levels that most of my colleagues see as sustainable in the longer run, inflation is running below our objective. And so our Monetary Policy has been designed to be accommodative and to allow it labor market to become tighter. We think that is actually helpful, not only in its own right in bringing benefits to groups that there having a tough time in the laker market and there i do see encouraging signs, for example that in the very tight labor market where so many firms are having a tough time hiring workers, theyre beginning to focus more on training, theyre looking for ways to bring on board and help bring into their work force individuals who in a looser labor market they would just put into a reject pile. I think all of thats good and were not seeing undue Inflationary Pressure in the labor market. So our pall aets remains accommodative. But we think its important to gradually move our policy rate towards what ill 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 ekaconomy to over hea we could be faced with a situation where we might have to rapidly raise rates and through throw the economy into a recession and we dont want to cause a boom bust set of conditions in the economy. I would love to see a sustainably strong labor market and we think if inflation is depressed on a temporary basis as i believe but were carefully monitoring, we think that a gradual path towards a neutral stance is appropriate. While weve been able to drive down unemployment in recent years. One of the things we havent seen in that tightening labor market has been upward pressure on wages. Do you have an opinion on why that might be different today than previous recoveries and what policies would be important in trying to address that . So, it is true we have seen i would just say maybe modest upward pressure on wages. For example the employment cost index which is a broad measure of compensation has moved up a little bit and perhaps half a percent or so over the last three or four years but wage increases are modest. One less on i take from that or moral i draw is that the labor market and the economy are not significantly over heated in spite of the fact that we have a very low Unemployment Rate. But importantly over it long to medium term, the inflation adjusted wage growth hinges on productivity growth. That firms really only able and willing to pay wage gains that there matched by productivity and for reasons that there not well understood productivity growth has really been dismally slow in recent years. I cant tell you exactly what the reasons are for that. It may partly reflect slow technological innovation, as least into producing measured outlook. Were also seeing signs of less dine mmp. The process of Creative Destruction of new firms n ovative firms. That process seems to have slowed and i think some product growth is associate would that. But if you ask for what remedies can there had be for this . And i think to really see a faster, average pace of real wage growth, we need faster productivity. I would point you towards investments. Investments in people, investment in fiscal capitol in the private sector. Infrastructure investments can be helpful. And policies that facilitate innovation and of course the education and human capitol of the work force. Those are the classes of policies that could have a favorable effect on thesed averse trends. Thank you. Vice chairman lee, youre recognized. Thank you very much, mr. Chairman. Thank you, chair yellen for being here. I want to thank you for your service over the years. Ive if the joyed the opportunity to visit with you as youve appeared before the joint Economic Committee before your service as chair of the board of governors. Thank you. We make policy here in congress. In washington there are a lot of people who make policy. Its forward looking. It requires us to look to the future, anticipate events and set rules that will governor the behavior of members of our society. I suppose you would agree that from time time its rr important to look back on what has succeeded. Absolutely. Retrospective views can be a good thing. Does the fed look back and review its Monetary Policy choices from time to time . Yes, of course we do. And so in doing that, it looks back and tries to look at policy decisions it has made and 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 . Well, we need to be accountable to congress and i completely agree that an independent central bank and a Democratic Society needs to explain itself. To the public and to congress and appearances before congress where you ask questions about our policy choices and why, how they worked out is 100 appropriate. Nevertheless, i do think that it is very important that the Federal Reserve, like most other Central Banks be allowed to make independent policy decisions that are shielded from shortterm political pressure. So you didnt mention any specific legislation or ways of accountability but ive long expressed concern about, for example, the fed legislation or more recently the choice can act. Because those acts would essentially bring shortf term political pressure on to the fed that could effect our Monetary Policy decisions by mandating realtime gao policy reviews of recent decisions. That would second guess the decisions made by the fed and call into question their legitimacy and credibility. I understand that is your position. And at the same time while were 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 just allow the public to have input. I understand its the desire, the impulse of any policy maker anywhere to insulate him or herself from public review but we do live in a republic, a republic where the people are the sovereigns. Where ultimately the government is accountable to the people. And you, at the fed, exercise a significant amount of government policy making authority. And thats why i think these things are appropriate. I want to get to a cup oflg other issues. The joint tax committees analysis of the tax plan is expected to assume an aggressive response by the Federal Reserve. One that would effectively assume Monetary Policy would hinder some of the growth that could otherwise be anticipated from this tax policy. You said you expect a gradual adjustment to Monetary Policy. I would think a gradual adjustment from the fed would look very different and is described differently than a Monetary Policy. Do you agree those are two Different Things . What i would say is were very focussed on our congressionally mandated objectives of employment and price stability or 2 inflation and will try to adjust policy to achieve those goals in light of changes in the environment, whether they could be do to fiscal policy or importantly many other things that effect it outlook. I would say look, we welcome strong growth. The fed is not trying to stifle growth. Were worried about trends that could push inflation above our 2 objective. As i said its been extremely disappointing to the fed as it has been, im sure, to all of you and to the public that weve achieved as much improvement as we have in the labor market in the context of growth thats been running only slightly under 2 . And if that pace of growth consistent with a labor market thats creating jobs for new entrance, if that is rising, we will be delighted to support that and to acomdate it. So we dont have some cap on growth that were trying to achieve. But in the context of an aeconomy close to full employment, it would be growth to have sustained higher growth would require that changes boost productivity growth or growth in the labor force. Understood. Understood. Last year i asked you about how the feds approach to stress testing might damage the due process and property interests of investers. Not just big investors but also investors in the form of school teachers, firefighters. Those who invest in any way in any amount. Due process and Property Rights are undermined anytime you have a rule of law ever changing. Anytime you have a rule of law that it cant be understood as constant from one day to the next. It is so unclear, so opaque or so subject to constant metamorphos metamorphosis. One cant rely on what the law demands. What can you tell me about what the fed as done since we last spoke to make sure it due process right of individuals, of investers are protected . So stress testing is very important component of our supervision. And is led to more rigorous, forward looking asesments of capitaled a kwaes 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 it need to understand a it and weve done many things including putting out for comment proposals concerning the design of our scenarios. Weve put out a great deal of information about qualitatively what is in the models that we use. Weve given feedback to firms on their models and comments on their submission so they understand the shortcomings we see in their approaches and were currently working on a Transparency Initiative that would seek to provide more grannialer, more detailed information that would help banking organizations understand the ways in which specific characteristics of loan portfolios would effect our evaluation of stress losses. So i would agree we would strongly resist publishing the actual models for whole set of reasons but providing more information so banks understand how were engaging this evaluation is aproep ret and important. My times expired. Thank you very much, chair yellen. Thank you. Youre recognized. Thank you, fmr. Chairman. And charl yellen, thank you for your incomparable service to our country. I think many of us will miss you very much. Thank you. Thank you. You gave us on avtlj ploerag macrostatistics that show a slightly stable to mostly positive picture. But i wonder when to you think its time to start thinking differently about the data that we look at . Because i saw some data recently where they dising a ruigated what has happened to two portfolios of the population, the top 40 and the bottom 60 and they track this since 1980. And when you look at that data you see a very different picture. Their incomes on average are up about 40 since 1980 and bottom 60 theyre flat. Top 40 on average used to be worth six times more than the bottom 60 . Now theyre 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 spend four times as much on education for their children. The Retirement Savings of the top 40 on a relative basis compared to what theyll need for retirement have actually improved since 1980 and the story is very bad for the people of the bottom 60 . Life expectancy for both of these groups were extending and now for the first time in quite some time were seeing life expectancies for people in the bottom 60 going down. Im wondering when do you think we, as policy makers. You in your position at the Federal Reserve and us on the hill have to actually start thinking differently about decisions we make based on the despairties starting to grow in our country . And im not talking top 1 , etc. Im talking large disagrogation pools because it seems to me the bottom 60 is particularly vulnerable to two macrotrends, one based on automation and innovation. Theyre more likely to have their jobs disrupted and they rely much more on Government Programs likely to come under continued stress. So when you make decisions what to do with Monetary Policy, how much have you started or has the feddisaggregate some of this data . You describe in your question a set of very disturbing longterm trends that fed is very focussed on and in fact some of the information that enables one to document these trends is produced by the Federal Reserve and our surveys of Consumer Finances and our surveys of household and economic decision making. And of course there has been, over decades, a trend towards rising inequality of both income and wealth in the United States that its not recent. It is something that has been going on for many decades. Right. But does it cause you to change decisions you would have otherwise made based on whats happening for it average performance of the economy . Do you see what i mean . To the extent the shifts in Income Distribution do effect the pace of the overall spending in the economy. For example, if high income households spend less of extra income they earn, then lower income households that shift in Income Distribution can make a difference to overall spending. And it is something we would take account of. Because i would think hearing your average statistics that the position to actually continue towards a more normal rate environment makes sense but when you look that aggregated statistics, i would be scared of how vulnerable the bottom 60 is to any shock in the economy. And in your judgment, when we think about fiscal policy, tax policy decisions, spending policy decisions, how much should we really have a laserlike focus on programs, whether they be investing in infrastructure, human capital, creating incentives to allocate capital to parts of the country that have been left behind. How high of a priority should that be for us in making decisions based on the statistics for us unfortunately we dont have tools that enable us to target particular groups. So our own focus is we take these trends and study them, we really only have a blunt tool that cant dress this. But congress and the administration, you have a much wider set of tools and obviously its up to you to formulate appropriate priority. Would you consider it urgent for us to address these trends . Im very disturbed and have spoken out for 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, were suffering from slow productivity growth and here too, i think its quite important in making fiscal policy and other decisions that the focus be on how can that be improved . And that does point to investment in people, infrastructure, private capitol, technology, education. So these are squarely i think in congresss court and i do think theyre urgent to address. Thank you again, chair yellen. Youre recognized for five minutes. And look this may be one of those auspicious days. I dont know if this is probably your last time to come do this. Its also our chairmans probably last one. Im going to miss him because hes one of the few people who tolerate me. So i appreciate. Last thing in this sort of love fest. Its 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 weve had had more unusual datatype questions. Im still a bit of a advocate of one day more, more of the models beco becoming public. But i live on some of the atlanta feds data. Their gdp now, and they allow you to look at parts of the formula. I believe that that openness that you began with has come a long ways. Thank you. It would be wonderful day to be able to log in and do certain stresses. For those of news the policy making, what would happen if labor force did this, what would happen if Interest Rates did this . And sort of understand whats in the back end of some of the data. So congressman, the model that we use at the fed for Economic Analysis of Overall Economic trends, we refer to it as furbus, Federal Reserve board model. Its in the public domain. Its sitting on our website. And people anybody who wants to perform what if exercise, what if Monetary Policy were different or if the labor force grew faster or slower, you know, we have tried to provide access to thats tool to the public. Its gotten so much better. I live on the atlanta feds app. I know thats a snapshot of current time. And snapshot is not a trend. But its been very helpful in removing some of the mystery. Now to run through a dozen questions as quickly as i can. And you actually touched on this. I had the experience of flying back to phoenix about a week ago. And i was looking at something that was a few years old, and then the current unemployment, and was looking at the tables of Labor Force Participation and what was being predicted a few years ago what would happen and what we see happening right now. It with was talking about the demographic trend, Labor Force Participation is going to continue to fall. But yet we see some really interesting thing in the last three quarters. Folks that were being predicted not to be moving into labor force are moving into the labor force. We just saw some recalculations of numbers of Social Security disability. And all of the sudden the longevity of the trust fund jumped substantially because it turns out a number of folks on Social Security disability moved back into the labor force. So there is something in our models that and i know its at the margin, but were already seeing some of the data that this substantial Economic Opportunity thats in the labor Job Opportunities is actually starting to pull people we thought were falling out of Labor Force Participation. If you had an interest in that, where would you go to find more information in such a thing . This sort of goes back to senator lees question of the ability to back test and sort of figure out where weve also made mistakes in some of our models. I mean, fed researchers have done very detailed modeling of Labor Force Participation trends, and thats published research in places like brookings papers and referee journals. And my staff could provide you references on that. As i mentioned in my opening statement, what weve seen over the last three years is aggregate Labor Force Participation has been essentially flat. The trend is downward and a flat Labor Force Participation with a downward underlying demographic trend means just what you said. Was contrary to what people were predicting just four years ago. You know, i think a strong labor market does attract people back in. And people who might have left and retired are being incented to remain in the labor force. We know that more recent cohorts of retirees, although when people reach retirement age, their Labor Force Participation fall falls significantly. Younger retirees are working more than older retirees. And thats a trend. Thats a really interesting trend of how many of our seniors are staying in the labor force. More than they more than they used. To. And i know im going over time oh, he just left. I was going to compliment. I fear often we fuss at the fed, but you only have so many tools. And a lot of the tools are actually sitting here with us. And where some of us may both absolutely agree and disagree idealogically, there was some interesting thing in the call them the cross tabs in the data of trade school type jobs. A lineman, to use a previous conversation, and seeing salary movements in there. But yet we often turn around and reinforce a University Education model. And it turns out it may be our own misallocation of design and resources that are actually causing many of these problems out there that we have to rethink what were doing policy wise. And with that, yield back, mr. Chairman. Thank you. Good comments. Representative maloney, youre recognized. Thank you, mr. Chairman. I just 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. Thank you so much. And thank you, too, for your record as fed chair. I think your record speaks for itself. The Unemployment Rate has fallen to 4. 1 , the lowest in 17 years. Inflation has been steady. Gdp growth is now a robust 3 . The fed also ended the quantitative easing program, has begun the process of shrinking the 4. 4 trillion Balance Sheet, and has started to gradually raise Interest Rates as the economy improves. So in short, i would say your tenure has been an unqualified success by every metric. You have been one of the most successful fed chairs in history. Thank you. So i just want to publicly thank you for your service, everything that you have done and say that i and many of news this nation will miss you. Thank you so much. I appreciate that. I want to ask you about regulation. I think that the fed has generally done a good job under your leadership in writing regulations that have strengthened the safety and soundness 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 know, the Senate Chairman crapo has introduced Bipartisan Legislation on regulatory relief, a major package for banks. Some people want to go further than this and really roll back dodd frank. So i have two questions. First, do you think it is a good idea to roll back dodd frank in this post crisis regulatory time . And 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 . Well, let me start with the first question about rolling back dodd frank. I think that dodd frank provided an excellent road map 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 ten years, there have been stresses of all sorts that have hit the u. S. Financial system, sometimes emanating from abroad, and its 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, that we would have the tools to be able to deal with it, without its imposing such costs on the economy. 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 its appropriate to tailor regulations to the systemic footprint of a financial institution. And so tailoring is an important principle. And weve long indicated we would be supportive of raising some of the thresholds incorporated into dodd frank, in particular, the 10 billion and 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 proposed, i havent had a chance to study every detail of it. But i would say it generally enhances those principles and is in a direction we think would be good in enabling us to appropriately tailor our supervision. Thank you. And 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. And i know that youre having ongoing discussions about capital standards at the international level. Are you considering lowering the International Capital standards at all in these discussions . You know, weve had a global agreement to raise capital standards basel 3. And whats under discussion now are some details about particularly contentious issue is the use of internal models as opposed to standardized Capital Requirements. And the foreign firms, particularly european firms, some of whom rely on internal models testing and analysis suggests that they may hold too little capital relative to what we think would be appropriate based on what u. S. Banks have in standardized models. So we have ongoing discussions of this issue and i think are coming closer to reaching agreement on this final issue which would enable us to finalize basel 3. So this is really not a question about changing standards for u. S. Banks. Its more about the standards that we would want to see applied to foreign banks. But weve imposed we chose to impose standards on u. S. Banks, particularly systematically important banks that exceed the global minimums that were agreed in basel. Those are expected to be and intended to be minimum requirements in individual countries that see a need and benefit from having Higher Standards are fully expected to adopt Higher Standards. And in some cases, particularly with the largest and most systematically important u. S. Based banking organizations, weve done that in imposing Higher Standards and think its appropriate and warranted by the safety and soundness benefits for our Financial System. Thank you. Gentle ladies, time has expired. Thank you, mr. Chairman. And let me think you for your service to the country and taking the time to engage with us as policymakers. You mentioned earlier about the importance of having more robust growth and dynamism that is needed in the economy in terms of investments and capital advancements in people, employees at different companies, and certainly some of the tax policies that were engaged in and talking about right now. Will and can and should lead to that i think more robust growth than igi think a lot of people would anticipate. I want to dive a little more into some of the conversation we had earlier. You mentioned wage growth has been relatively modest. And youve got this phillips curve issue, right . Which the fed looks at certainly in terms of the tight market. That should lead to more competition for workers. Then youre going have higher wages. And some of those higher wages would get passed on down to higher prices for consumers, right . So inflation would rise. But the data doesnt really support that its been sort of this mystery. Im just curious from your perspective, as you look right now at whether the socalled phillips curve that depicts this inversion relationship between unemployment and inflation no longer being valid. What are your thoughts around that . So it is still a framework that i personally find useful. I think the relationship between unemployment and inflation has become more attenuated over time. And so the impact of changing employment on inflation has diminished. And i think thats well documented in many, many studies. So i dont want to overstate just how strong that linkage. But the overall framework incorporates an understanding that there are other very important factors that affect inflation. And when you look at the u. S. Inflation history over the last five years or since the financial crisis, movements in oil prices and also movements in the dollar that have translated into significant changes in the pace of inflation of imported goods, those things have had very substantial effects on overall u. S. Inflation. So if we look back, say, over the last three, four years, five years, i dont think its a mystery why inflation has been so low. First we had a lot of slack in the labor market. Then we had periods when we had Falling Oil Prices that really pulled inflation down starting in mid 2014, the dollar appreciated substantially that held import prices down. It really wasnt a mystery. And we want inflation to be close to our 2 objective as possible. But of course there is going to be variation, and these things produce variation. What is surprising is this year. This year with a 4 Unemployment Rate, were in the vicinity of full employment. Oil prices have been roughly stable, and the dollar, if anything this year, has depreciated somewhat, pushing up import prices. So why is inflation fallen this year and been so low . Thats puzzling. And ive opined on the fact that there may be a number of transitory or id oe idiosyncr explain that. Its one were keeping an eye on and want to look carefully at. Generally a framework that incorporates the labor markets, slack in the labor market along with these other factors does provide a pretty good understanding of inflation in the u. S. And would you say some of the tax reform proposals that have been talked about and it could be the corporate side for large employers, but also for small employers that are aimed at increasing productivity even with a low Unemployment Rate right now would be helpful or essential in terms of making sure that those individuals in that age 25 to 54 range that have in their prime working years where you have a higher Labor Force Participation rate, for instance, would that higher productivity help change and enter those people into the labor market again . Well, i think investment spending by private companies, those matter to how well equipped members of the labor force are to produce and stronger investment could raise productivity. And if productivity growth goes up, that can serve to boost wages. But the linkages between tax policy and investment spending are ones that economists dont agree on. And its important i think for congress to be trying to evaluate what you think the likely impact would be. But stronger investment i think would have those favorable impacts. Thank you. Thank you. Representative beyer, youre recognized for five minutes. Thank you, mr. Chairman, very much. I want to add my thanks for your firm hand, your deeply grounded wisdom. Thank you. Your nonpartisan leadership. Youve fulfilled the dual mission of the fed. Low unemployment, stable low inflation very, very well. So were really going to miss you. Thank you, congressman. I really appreciate that. You had candidate trump talk about abandoning nafta, and now the Trump Administration is working on prioritizing modernizing nafta with mr. Lightheiser. Yet we see the higher perception of nafta rift is making mexican goods and services more competitive. Do you agree that stable trade treaties are still the best way to solve trade imbalances . So without commenting on the details of nafta or any particular trade treaty, i generally think that at least overall the United States has benefitted from more open Global Trading environment. Weve gotten the benefit of a broader range of goods and Services Available to consumers at better prices, lower input costs for firms, and the ability to export to a broader range of markets. But there are adverse impacts of such developments on particular groups in the labor force. And its important for congress to keep in mind the need to address dislocations that may come from trade. But generally, i think its been beneficial. And from mexicos point of view, the studies that have been done suggest u. S. I think enjoyed some benefits at least overall from nafta. Mexico i believe enjoyed significant benefits. And as you have said, there has been downward pressure on the peso because of with the discussions that are taking place. Thank you. The Washington Post there is lots of discussion about how many Dynamic Growth will occur from the tax cut packages that are out there. The Editorial Board if the revenue increase trargs missed that taxes should be restored or automatically raised. Is this the best way of ensuring fiscal responsibility . I will say my understanding is the idea of triggers is motivated by a concern that some have over the picture we have of debt sustainability now and into the future. And i would simply say that i am very worried about the sustainability of the u. S. Debt trajectory. Our current debt to gdp ratio of about 75 is not frightening, but its also not low. But when you look at, for example, cbos longterm budget projections, its the type of thing that should keep people awake at night. And it shows a picture in which as our population ages, expenditures on medicare, medicaid and Social Security grow more rapidly than tax revenues. And the debt to gdp ratio moves up. This should be a very significant concern. So exactly what is the right way to address this i think is a matter for you to decide. My understanding is the trigger discussion is motivated by that. And i just say its right to be focused on that problem. And i would urge you to remain focused on it. And youre absolutely right. Thats what stimulates the trigger discussion. Mr. Paulsen talked about the phillips curve and you talked about low oil prices, the movement in the dollar. Transitory idiosyncrasy factors. Others have suggested that technological innovation, the impulse of integrating china and all these other low cost countries in our Global Trading system, does it 19 the fomc 2 target is going to be hard to hit for the foreseeable future . Well we are forecasting that inflation will move up over the next year or so back to 2 . I think thats a reasonable forecast, although i believe there is uncertainly about it, which is why weve indicated were closely monitoring these trends. But its important as the trends are that you described, they are important trends. And i would point out that our estimates of the sustainable level of the Unemployment Rate have declined very substantially. And the factors that you discuss that have arguably exposed firms more heavily to global competition, constraining prices and restrained Bargaining Power of labor. Rather than necessarily showing up as chronic low inflation, these things can instead mean the labor market can operate on a sustainable basis at lower Unemployment Rates than we might have thought of in the past in the 60s or 70s or 80s. Currently, my colleagues estimate the sustainable level of the Unemployment Rate in the u. S. At just over 4. 5 . That contrasts with a 6 or higher we used to think. And i think the trends you mentioned have been influential in meaning, yes, in other words, yes, its true. It takes a tighter labor market or lower unemployment to give us 2 inflation. So i dont mean to minimize their importance, but i think it should be achievable for us. And we do have a low Unemployment Rate. Thank you very much. The chair yields. Thank you. Representative is recognized for five minutes. Thank you, chairman teaberry and thank you for your service to our country. Thank you. I have a question as it related to the commercial mortgage market. Were all aware in 20082009 when we had the financial crisis as it related to the Housing Mortgage market. As we look at the growth of amazon and other online retailers across the country, really changing the Business Model as it relates to retailers, and we continue to see traditional brick and Mortar Stores and malls and others being really obliterated across the country, jcpenneys, macys, sears roebuck, and large malls. And a lot of mediumsized markets, there continues to be Vacant Commercial Properties and these type of brick and mortars become more an more unproductive. And as we look at the commercial mortgage market, i wonder if you could comment on whether there is a possibility as these unproductive properties continue this trend of causing a financial crisis like we saw in 2008. And these markets going bad. So i think youre raising an important question. And these ma. So i think youre raising an important question. And these ma. So i think youre raising an important question. And these m bad. So i think youre raising an important question. I dont have detailed information at my fingertips on these trends. I think delinquency rates generally remain pretty low in commercial real estate. There are Legacy Properties incorporated in cmbs that have much higher delinquency rates. But were focused on underwriting standards at banks, at maintaining strong underwriting standards to protect the Banking System against possible weaknesses that could result in especially commercial real estate. Were seeing overall in commercial real estate that valuations are very high. And weve highlighted elevated asset prices, commercial real estate generally is an area also where we do see elevated prices or low cap rates. So we are focused on soundness of underwriting standards in the safety and soundness of Banks Associated with it. But in detail just how this trend is going to play out, id have to id like to get back to you on that. And as you sit here today, do you have any fears or concerns . Well, these are obviously significant trends that are affecting retail what they will mean for banks is something id like to id like to look at more closely and get back to you. Okay, thank you. Another topic, i wanted to talk just generally about the makeup of the Federal Reserve. For the last decade, the Federal Reserve has had at least one vacancy in the board of directors and should mr. Powell become the next chair after your resignation, the Federal Reserve board will only have three out of seven positions filled. I understand that the president must nominate and the senate must approve each of those appointee, and that both parties are culprits in the gridlock there can you give us examples of how the Federal Reserve does not function optimally or efficiently without a full board of governors . Well, i do think its important that the number of governors serving on the board increase. And ideally it would be at fullstrength at seven. Certainly my colleagues and i would welcome additional appointments to the board. In fact i dont think there has been any significant amount of time, perhaps not ever that the board has operated with three, only three members. That is very rare and difficult situation. But let me say it does not stop the Federal Reserve from carrying out its mandated activities. And while our deliberations benefit from having more individuals with a range of view, sand of course extra pairs of hands to help manage the various operational and oversight responsibilities that we have, the fed is able to carry out its key work, even with a diminished board. Lastly, do you have recommendations on reform as it relates to this topic . To reform as it relates to the Federal Reserve in general . Reform measures to help with this problem of having only three or limited members on the board. Well, you know, i think its part of the trend of slow er appointments and more vacancies. I think its really it creates a problem for it to take so long for to it have individuals nominated and confirmed. This is something i think its important for the Senate Senate to look at. The administration, there have been many reports, including one i participated in myself some years ago by the National Academy of sciences about vacancies, and the difficulty of making appointments to agencies. I do believe its a significant concern, but i dont have suggestions for you on how to improve that. I agree with you on that. Thank you. Representative adams, youre recognized for five minutes. Thank you, mr. Chairman. And let me add my words of thanks along with my colleagues. And certainly i want to associate myself with congresswoman who made the comments about the accomplishments you have made as a woman. And hopefully we can find some women as smart as you to fill some of those seats. But thank you very much for your service. Thank you. In my home state of North Carolina, the Unemployment Rate in the First Quarter of 2017 was 4. 4. 2 , for African Americans 7. 5 and hispanics 5. 3. This is not a recent or onetime occurrence. The Economic Policy institute looked at the change in Unemployment Rates between 2007 and 2017. Their Analysis Shows that the white Unemployment Rate in North Carolina is now below what it was before the recession. And while the Unemployment Rate for African Americans and hispanics is actually higher than it was before the recession. So do you believe that the Federal Reserve should ever consider its full employment mandate achieved when there is significant disparity between the white Unemployment Rate and the black Unemployment Rate . So i find the disparities which are long have been there for many years between African American, white and hispanic and white Unemployment Rates to be very disturbing. And to reflect broader problems that minorities and a less skilled individuals are also having in the labor market. And theyre very worrisome and damaging trends. But i would i would say that for most of the most of these groups, Unemployment Rates and other measures of labor market functioning are back to levels that we had precrisis. So i believe its the case that since the bureau of labor statistics started collecting information on African American Unemployment Rates, that it almost never declined below 7 . These rates bounce around a lot. In september, the African American Unemployment Rate did decline to 7 . In the most recent reading in october, it moved up about a half a percent. But it is generally at a low level. So unfortunately, African American and other minority Unemployment Rates and labor Market Experience are highly cyclic. So when the Great Recession hit and unemployment nationally skyrocketed, the worst experience, the largest increase in unemployment and the greatest toll tame for African American, hispanic, and other minority workers. As the labor market strengthened, actually the African American Unemployment Rate has decline in order strongly than that for whites. And the disparity news which are longstanding African American Unemployment Rates basically double those of whites were back to Something Like that again. Thank you very much. The United States makes up about 5 of the worlds population. 21 of the worlds prisoners, and in 2014, African Americans cute 2. 3 million, or 34 of the total 6. 8 million correctional populations. What do you think is the impact of mass incarceration on unemployment Racial Disparities . Well, i think it has a very important and negative effect. And there have been many discussions about ways to potentially address that. But clearly, its something that employers will be less willing to hire individuals who have criminal records. And this is a serious problem and concern. I will say this is anecdotal as opposed to systematic. But as the labor market has tightened, and so many firms now, almost all firms we talked to report theyre having difficulty finding workers, i do hear more reports of individuals who may have a criminal record who are succeeding in finding jobs and being integrated back into the labor force. But it is clearly a very significant issue. Thank you very much. And you actually answered the other question i was going to ask if your response about the labor force and getting back into it. So thank you very much. Thank you. Senator peters, youre recognized for five minutes. Thank you, mr. Chairman. And once again, thank you for your service. Appreciate your leadership on this committee. And wish you well in all of your future endeavors. And chair yellen, ill add my accolades to everybody else on the committee. We appreciate your tenure as chair. You have preside over the fed during some very challenging times and have always been a very steady hand. And we appreciate that steady hand. And look forward to following you in your future endeavors as well, which im sure will be an equally significant answer. Thank you so much. I appreciate that. So chair yellen, in response to some previous questions, you mentioned and id like you to maybe elaborate little bit, that the linkage between tax policy and investment is under some dispute among economists. That there is disagreement as to whether or not a tax cut would definitely lead to a level of investment. That because the data is inconclusionive . Tell me a little bit more about this debate and why we cant necessarily think there is that strong linkage. So im not im not an expert in this topic. Let me say that at the outset. And its not one that were attempting ourselves to independently evaluate. But there is literature on this. I think empirically, the linkages are not clear. So its difficult based on empirical information to draw strong conclusions. Theoretically, tax changes that lower the cost of capital or to in principle incent greater investment. And there is some greater pass through win to wages. But i would say empirically generally impacts of the costs of capital can on investment spending are very hard to detect also in economic data. And while most economists think there is some linkage, it isnt Strong Enough for pronounced enough to come across in a clear way in the economic data. And then, of course, the entire set of tax changes that are under consideration matter. So i think this is a complicated question. Well, it is complicated. And its because it depends on the Investment Decisions that are made by people who receive these tax breaks. Yes. Those are human beings. So my experience has always been its probably best just to listen to folks as to what they would do if they get a large tax break. In fact, i think it was interesting that today in bloomberg, there is an article. Trumps tax promises undercut by ceo plans to reward investors. So ceos are telling us something very different than what were hearing from the administration. In fact, theyre telling us that for most part, if they get this tax break, theyre going to do Share Buybacks there is probably going to be significant Share Buybacks. Robert broadway, chief executive of amgen that Earnings Call that he is actively returning capital. He is going to continue to do that in terms of buybacks. Executives from cocacola, pfizer, mr. Cramer said, quote, well be able to get much more aggressive on Share Buyback after a tax cut. At a november 14 speech to the wall street journal, ceo counsel by gary cohn, the moderator asked Business Leaders in the audience to show hands if they had plans to reinvest the tax proceeds. Few people responded. I think a couple hands went up. Another provision according to this article that would impose an even lower tax rate on companies stockpiled overseas earnings, giving them incentive to return trillions of dollars in offshore tax to the u. S. , that money is unlikely to spur hiring because companies are already well capitalized and can bring on as many employees as they need according to john shin, who is a Foreign Exchange strategist at bank of America Merrill lynch. In fact, i think he is quoted as saying companies are sitting on a large amount of cash. Theyre not financially constrained. Shin, who conducted a survey of more than 300 companies asking their plans for a tax overhaul. And said theyre all basically focused on their shareholders and engaging in buybacks. So as the fed looks at this, and theyre saying there is not a linkage between the tax cuts in investment. In fact ceos are saying theyre going to do Share Buybacks. As the fed is looking at that and your policies, are Share Buybacks generally, are they going to increase wages . Well, i dont think Share Buybacks would increase wages. The usual linkage would be investment in capital and equipment would if they occur order to the extent that they occur would help raise the productivity of the labor force. And in boosting their productivity, would likely end up raising wages. But the linkage occurs through Capital Spending and not through Share Buybacks. Yeah, Share Buybacks dont do anything. In fact, Share Buybacks will increase the stock price. Thats really the main reason for that. So if you have stock options, youre going do really well. If youre a significant shareholder, youre going to do really well. But the person on the floor of the shop making the products, theyre not going to see much of anything unless they own some shares in their mutual funds perhaps, which would be great. But its disproportionally at the very top. So an efficient way of growing an economy is not to be engaged in Share Buybacks. And i would argue just your thoughts. Well talked about the fact that there is less dynamism in the economy as well. And there is certainly a number of economists believe that part of that lack of dynamism is the result of an increasing concentration of capital in fewer and fewer firms. That is true. That is accurate. Because of that concentration, were seeing fewer firms, less dynamism, less business formation. Also, that can slow growth. When you have that kind of concentration, growth is constrained. If youre company and you want to increase your share price, probably the best thing to do is do a Share Buyback. And boy, if you get a tax windfall, thats going to be great. And how is that going to impact your policy . The gentlemans time is expired but chair may finish the question. So we will understand there is uncertainty what the impact of policy will be. You know, as it unfolds, and we see what those consequences are, you know, well try to evaluate it as it occurs. But there is tremendous uncertainty, as i said, based on existing literature. Right. Thank you so much, maam. Thank you, senator. Senator cruise, youre recognized for five minutes. Thank you, mr. Chairman. Chair yellen, welcome. Thank you for your service. Thank you for your testimony today. Thank you, senator. You noted in your testimony that inflation has continued to run below the 2 rate that the fomc considers the most consistent with maintaining maximum employment and price stability. And youve expressed some uncertainties as to why this is the case. One factor that your testimony didnt discuss is that our Labor Force Participation rate remains at its lowest rate since 1968 at 62. 8 . How does the historically low Labor Force Participation rate impact your assessment of the employment picture that the country is facing right now . Of the employment picture . Yeah. So its complicated question because there are good reasons why Labor Force Participation in the aggregate is declining in the United States. And its a trend we expect to continue because it mainly reflects the aging of the u. S. Population and the fact that individuals, once they reach their retirement years, participate much less in the labor force than before those years. So even though more recent cohorts of retirees are working more than their parents did, overall, the Labor Force Participation rate drops when the population ages. So this is a continuing trend. Its not going to go away. However i might, though, what about discouraged workers and workers who drop out of the labor force at working age who are not seniors but simply giving up on hopes of finding meaningful employment . Well, if you look at prime age workers, their Labor Force Participation rates have come up as the economy has expanded. Theyre not quite back to the levels we saw prerecession. But what you do have in the United States is for prime aged workers, especially men, chronic long lasting multidecades decline in Labor Force Participation. And my own assessment would be so thats not about retirement. Thats about working age individuals who are not participating in the labor force. I think that reflects longer term trends that are adverse that are affecting particularly low skilled americans in the workforce, the disappearance of middle income jobs, pressures on wages at the lower end, the Opioid Crisis which partly reflects that labor market decision stress, but also contributes to individuals staying out of the labor market and being not able or willing to work. So i think we do have adverse trends affecting Labor Force Participation. I mean, you asked me how does it impact my view of employment. Well, when i see for the last three years u. S. Labor force Participation Rate has been essentially stable, i see that as a good trend showing improvement in the labor market because stability is occurring in the face of what is a declining underlying trend. So it does suggest with a stronger labor market, weve got individuals who are being drawn back in by greater Job Opportunities and more help wanted signs that theyre seeing. I agree with you the trend, particularly towards working age adults dropping out of labor forces is troublesome. And we need serious Economic Policy to address and hopefully change that trajectory. One of the factors that i think is important for doing so is a robust Small Business sector. And an ongoing concern is Credit Availability for Small Business. When Congress Passed dodd frank, one of the major bases for dodd frank was stopping the phenomenon known as too big to fail. The banks are all big normal. Weve seen an aggravation of capital. The giant banks have gotten bigger and bigger and bigger under dodd frank, and weve seen small financial institution, Community Financial institutions going out of business at a record rate. How would you assess the effectiveness of dodd frank, in particular on impacting small and Community Banks . And how is that impacting Credit Availability in turn for Small Businesses . So as you point out correctly, Community Banks are gradually diminishing in numbers. Its been a very tough environment them. And we do recognize that Regulatory Burden is something that theyre suffering from. And its something were very focused on trying to address and reduce. So i think that for us is and should be a very important priority. I mean, there are other things that are making it tough to be a community bank, including the fact that were in a low Interest Rate environment with a pretty flat yield curve. And thats impacted net interest margins and earnings. So thats thats a completely separate factor. But in terms of Small Business lending, the landscape has changed a lot. Perhaps Community Banks are providing less than they used to. Large banks are providing more online lenders and new fintech firms are coming in and filling part of the void, and devising new ways to lend quickly to Small Businesses in ways that are perhaps less costly than traditional banks. But our surveys suggest there are some particularly small and minority firms that do feel they dont have adequate access to credit. Surveys of small firms like the National Federation of independent business that is somewhat larger but still small firms suggest that most firms feel they have adequate access to credit. They dont feel theyre in an environment where their credit needs arent being satisfied. So as a general matter, i think credit is available. I think banks are looking to extend, to extend credit when they when we ask them regular questions, they tell us they dont see much demand on the part of Small Businesses for credit. Its sometimes hard to disentangle demand whats driving something, whether its demand or supply. But there is evidence that there is weak demand. And its not simply a matter of weak supply due to regulations. Thank you, gentlemen. The gentlemans time is expired. Thank you. Last but not least, senator klobuchar is recognized for five minutes. Well, thank you very much. Thank you, mr. Chairman. Thank you senator heimrich and threw chair yellen. I sent out a tweet about how youve been a strong, steady trusted presence. Youve done very good work and its very popular. When someone retires, its a good moment. But mostly i want to thank you coming in as vice chair and chair at difficult times in our country. Thank you. And certainly in my state, ive seen your steady hand. And what weve seen with the Unemployment Rate in our state is at 3. 3 . And while i see issues with the costs of things, i see issues with our dead, other things that we have to tackle in the congress, i do want the thank you for fa steady hand. I appreciate that. It has made a difference. One of the things ive talked about in the past, i dont think its been talked about too much here is the infrastructure issue. And im so disappointed as we look at this tax bill that were seeing both in the house and now in the senate in that it adds in the senates case over 1. 5 trillion in debt. But we didnt put any money into infrastructure. Which if were going to start messing around like that, i would think we would want to really put in an injection of funding into our infrastructure. Could you talk about how improving u. S. Infrastructure, including our broad band can benefit our economy . Well, i do think its one of the factors that impacts productivity. And when i think about what we can do to improve Living Standards and raise productivity, i think about all sorts of investment. So private investment in Capital Equipment is important. That affects many workers. You and i talk about the deappreciation tax, how important that was during the downturn, the deappreciation on it. Rite. But infrastructure is important. And then i would also add to that focus on investment in people and human capital, which is especially in light of rising inequality is a form of investment too that deserves emphasis. Right. And that has been a major focus of mine. Some because our state has such a low Unemployment Rate, especially in our rural areas. Susan collins and i introduce a bill to expand apprenticeships program. And i think there is much more work we could do. Could you talk than issue. Weve got students that sometimes arent graduating from high school, or are graduating from even college with degrees and then they cant find jobs. Yet we have hundreds of thousands of these jobs that are in welding and trade and these things and how we get at that. There clearly is we have a tight labor market. Almost every firm that you talk to discusses the challenges of finding qualified workers. And there is a degree of mismatch that the qualifications that people have. Sometimes college graduates, but often High School Graduates cant qualify for the jobs. So i think training, apprenticeships, other countries like germany seem to do a better job of matching people with jobs training than we do. Ive made a practice of my own when i travel around the country. Im interested in what sort of programs work. There are a lot of efforts by Community Colleges and nonprofits, sometimes partnering up with firms to try to address that skill cap. And what i would say is ive seen many programs i think are very promising in six months or a year, giving people the training and credentials they need, maybe for a manufacturing job that requires technical skills. Doesnt require a college education. And what im particularly gratified by is that in a tight labor market like we have now, firms are really interested in these programs. And they really want to participate, because they really need workers. And when they care about it and they dont have a lot of applications in the hopper, theyre willing to invest in it too. And partner with the Community College or the nonprofits and guarantee that somebody coming they participate in these training programs. And theyll guarantee that when someone comes out successfully of the program, theyre going to at least be sure theyre going to get a chance at a job at that firm. And this is occurring. You know, this is an area that obviously congress can consider investments. But this is private sector. Exactly. I think its making it easier with everything from tax credits or if it is also just pilot programs, best practices, those kinds of things. I was just at Summit Academy in minneapolis which is focused on minority students, 700 a year are getting these credentials. And they directly go into the jobs when they graduate because the Companies Like thor construction, one of the biggest minority owned Construction Companies that just worked on our stadium that is going to host to super bowl, not that im doing hawking up here on stage, mr. Chairman, in february. But it was just really i think these things have to be encouraged. Right. Because otherwise were going lose work if we dont have these. I completely agree. And i think it really is these programs are deserving of emphasis and can be very successful. Were trying through our own work, our Community Development programs that exist in the reserve banks to understand whats best practice in this area and to disseminate information about approaches that work. Thank you very much. Thank you. And we look forward to seeing you in your new capacity, whatever it is. Thank you so much. Appreciate it, senator. Thank you. And i echo the comments of your tenure and your service to our country. And this being your last hearing, its been an honor and privilege to get to hear you. And like you, this is my last hearing at the joint Economic Committee as the chairman. And i want to thank Ranking Member heinrich and senator lee and all the members of this committee for making my term a successful one. I also want to particularly thank the hardworking staff of the joint Economic Committee, and in particular i want to thank whitney daft who helped lead the committee who is sitting to my back for the historical knowledge, i want to thank Colleen Healy for helping us kind of get through all the challenges at the beginning of this process. Its really been an honor and a privilege to chair this hearing. I look forward to watching it in the future as a private citizen. And, again, thank you, chair, for your distinguished service. Should members wish to submit questions for the record, the hearing record will be open for five business days. With that, we are adjourned. Thank you so much. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Appreciate it. Next, live, your calls and comments on washington journal. The newsmakers with adam smith. After that, the house hearing on Global Security threats. Tonight, on cspans q a, Hoover Institutions senior fellow john on the u. S. Federal Entitlement Program. The Entitlement Program stems from a basic human desire to help someone who is in need of assistance. It is just common we all have it in as. For politicians, it is easier because you use someone elses money but they still have the same basic desire that you and i do. They also have the desire to be reelected. Once that entitlement is put in place, then the game has changed. Interest groups form around protect inc. That entitlement, pressing for more assistance. Money starts flowing through politicians who protect those benefits and the game changes. And it is that desire. John cogan on u. S. Federal Entitlement Program, tonight, on q a on cspan. Daryl campbell, executive director of the Arms Control Association talks about north Koreas Nuclear capability. Then, the chair of the American Conservative Union discusses President Trump and the republican agenda. Later, Washington Post columnist Richard Cohen talks about his documentary