Transcripts For CSPAN Federal Reserve Chair Powell Testifies On Monetary Policy 20240713

Jerome powell was on capitol hill to update lawmakers on the economy and Monetary Policy. He spoke about the Economic Impact of the coronavirus, Cyber Threats in the Banking Sector and his influence in the Global Economy among other topics. This services hearing is three hours. I now recognize myself for four minutes to give an Opening Statement. Id like to welcome back chairman powell. As i discussed earlier, and at our last hearing with you, i remain very concerned about the president s efforts to interfere with the feds interMonetary Policy. A recent news story noted that trump has tweeted over 100 times about your nomination. Many of those tweets appear to be attempting to exercise pressure on the fed. Chairman powell, you and the fed board of governors must not be swayed by these aggressive tactics. Fedsolding the independence, you should also be mindful of public perception. Of course, trump continues to claim credit for Economic Growth that was put in motion by the policies of president obama, Congressional Democrats and the Federal Reserve. His irresponsible trade war and the gop tax scam have blown up the national debt, slowed our Economic Growth and harmed hard working american families. Trump continues to squander this inherited economy. Let me note that i am, however, disappointed in the feds efforts to deregulate megabanks, most recently by proposing the further rollback of the voelker rule. The doddfrank act made our Financial System safer, but it depends on agencies like the fed to potentially use the tools available to monitor and mitigate threats to our economy. The committee is carefully monitoring the developments in the repo market and the feds response. The fed should not arbitrarily reduce liquidity requirements in response to the repo market, disruption, as some on wall street have asked for. Instead the fed should make appropriate adjustments to promote a well functioning repo market while ensuring we have Strong Capital rules that cant be gamed through window dressing. A practice where banks alter their Balance Sheet to appear less risky and reduce their capital levels. In addition, the riskiness of various Financial Assets is increasing as Climate Change poses a more serious risk to our economy. The fed and other regulators should utilize Financial Stability tools under doddfrank such as incorporating climate related losses into supervisory stress tests of big banks to address this growing risk. I would also like to discuss recent developments involving the Community Reinvestment act. That is c. R. A. We have had a series of hearings on this issue, and i am very concerned about occ comptroller auditing, harmful proposals to turn c. R. A. Into the Community Disinvestment act and allow banks to escape their obligation to make responsible investments in the communities where they are chartered. I urge the fed to take a careful, deliberate approach to any changes to the implementation of the c. R. A. And to not join comptroller auditings misguide efforts. Governor braydens statement, and ill quote, its more important to get reforms done right than to do them quickly. Quote, unquote. It is absolutely correct. The occ and fdic should heed that advice as well and extend the Public Comment period as Community Banks, state regulators, community and civil Rights Groups as well as Committee Democrats have called for so that all stake holders have an opportunity to voice their concerns. I encourage the fed to keep a watchful eye on facebooks efforts to launch a crypto currency and digital wallet, which as we discussed at our last hearing, could compete with our own u. S. Dollar in light of the many risks facebook plans to create i and other democrats , have called on facebook to halt their plans until congress can examine the issues associated with the big tech i look forward to your testimony recognize thew Ranking Member of the committee. Mr. Mchenry. Chairman powell for appearing before us again. Under the Trump Administration, we have the best economy we have in decades. The numbers are irrefutable. The Unemployment Rate is essentially its lowest level in a half a century. This prosperity is being shared by all americans. The prime age labor force has reached 2. 2 million people. And not surprisingly, Consumer Confidence has increased dramatically since the month before the president s election. Every member of congress should celebrate these remarkable comes which has resulted which have resulted from Republican Leadership on probe growth policies like tax reform. But, our Economic Prosperity also depends on the Federal Reserve having a good policy. Chairman powell, i raise the concern that we have regulatory policy that is impinging on your capacity to make proper Monetary Policy and that is why i think it is important that you have a regulatory review of the limitations those regulations can put on your broader Monetary Policy decisions. That includes Systemic Risk concerns i have raised as well as the open Market Operations, especially the open Market Operations and the repo market. I thank you for your prompt response but i am not sure there has been a satisfactory answer to what caused the market spike in the first place. I have also voiced my concerns with the transition from the libor reference rate. I am still later, concerned consumers will be impacted by the transition. We stop have contracts written to the libor reference rate and given the recent volatility in the repo markets, i am concerned about the volatility in the consumer loans. At previous hearings, i have spoken about the Cyber Threats d on our Financial Institutions in china in particular. Yesterdays news about the wakeupdata breach is a call to every single policymaker that we need to take the threat of china and the Chinese Communist regime quite seriously. If we are not taking them seriously, have no fear. They are taking us seriously and now they also have our data. Of thislover of fax question of chinese policy is significant. Not just for Cyber Security but what we are seeing with the coronavirus and the destabilizing of facts it has on Global Health. I know you are not a Global Health expert but you can give us some sense of your techniques in response to these economic changes that are being driven out of the coronavirus challenge in china and the spillover effects it has to its neighbors like the supply chain in china. Neatly in may not fit the feds risk assessment. Cyber risks also do not fit neatly though the risks are real. Even though our data is limited coming out of china and we should reflect appropriately upon what we know and how we respond as an American Government and to the western world in response to these cyber and health risks. And the spillover effect it has on our economy. Again, thank you for being here and thank you for your openness. And for your approach to be in the language of the people then rather the language of the phds. Now recognize the chair on the subcommittee of national security, international development, and Monetary Policy, mr. Cleaver. Thank you, madam chair. I appreciate very much your willingness to travel around the country to do 14 of those and the onessions you did in kansas city at the fed building. I think it is a real opportunity for most people to sit down in a room and discuss economics with the chairman. Thank you very much. , people were sitting around the table with you and giving you a picture of in trying toes make it in the economy. People were more concerned about inflation. They believe it is like toothpaste. Once it gets out, it is hard to get back in. We are concerned about but also appreciative of your work and i look forward to getting more into this as we proceed with the hearing. Thank you, madam chair. I now recognize the subcommittee Ranking Member for one minute. You, madam chair and thank you chairman powell for being here to field our questions and provide your insights. I want to take a moment to thank the comments of the Ranking Member. I have read governor brainards very comprehensive views on the topic. Occs also discussed the point of view. As a former community banker, it is my view that we should ultimately have one approach to the cra. I have had 40 years of dealing with inconsistency in delivery of regulatory proposals. Ultimately, i believe it would be productive for us to have one approach to the regulation and modernize it for the Digital World that we live in today. I look forward to your presentation today and i yield back. I want to welcome to the committee our distinguished witness, jerome powell. Chairman of the Federal Reserve system. He has served since 2012 and as its chair since 2017. Esther powell has testified before the committee and i believe he does not need any further introduction. Without objection, your written testimony will be made part of the record. You are now recognized to present your oral testimony. You,man powell thank chairwoman waters and other members of the committee. I am pleased to present the semiannual Monetary Policy report. My colleagues and i strongly support the goals of maximum employment and price stability at congress has set for Monetary Policy. Congress has given us a degree of independence to pursue these goals. With itependence brings an obligation to explain clearly how we pursue our goals. Today, i will review the current Economic Situation before turning to Monetary Policy. The economic expansion is well into its 11th year and it is the longest on record. Over the second half of last year, economic and pretty increased at a moderate pace and the labor market strengthened further. With the global headwinds that had intensified last summer. Inflation has been low and stable but has run below the percent objective. 200,000 pereraged month in the second half of last year and an additional 225,000 jobs were added in january. The pace of job gains has remained above that needed to provide jobs to new workers entering the job for us. Was 3. 6 loyment rate last month and has been near halfcentury lows for more than a year. Job openings remain plentiful. Employers are increasingly willing to hire workers with fewer skills and train them and as a result, the benefits of a strong labor market have become more widely shared. Those that work in low and middle Income Opportunities best communities are finding more opportunities. Across all racial and ethnic groups and levels of education. Wages have been rising. Rose at a moderate rate over the second half of last year. Growth in Consumer Spending moderated following earlier strong increases but the fundamental supporting Household Spending remains solid. Residential investment turned up in the second half. Business investment and exports slowed. Factors weighed on activities at the factories of the nation whos out but declined whose output declined. The february Monetary Policy report discussed the recent weakness in manufacturing. Some of the uncertainty around trade has diminished recently. We are closely monitoring the emergence of the coronavirus concerns inlead to china spilling over to the rest of the Global Economy. Inflation ramp below inflation ran below the fmoc objective. Based on the price index for personal consumption expenditures was 1. 6 . Core inflation excluding volatile food and Energy Prices was also 1. 6 percent. Over the next few months, we expect inflation to get closer to 2 as unusual low ratings from 2019 drop out of the 12 month calculation. The nation faces an important longer run challenges. Labor force participation by individuals in their prime working years is at its highest rate in more than a decade lower than remains most advanced economies and there are troubling labor market disparities across regions of the country. Addition, although it is encouraging that productivity growth, the main engine for raising wages and Living Standards has moved up recently. Finding ways to boost labor force anticipation and productivity growth would benefit americans and should remain a national priority. I will turn now to Monetary Policy. Over the second half of 2019, the fmoc shifted to a more accommodative stance of Monetary Policy to cushion the economy from weaker Global Growth and to return a faster rate of inflation. We lowered the federal funds target range at our july, september, and october meetings putting the current target range at 1. 5 . Meetings, withnt some uncertainties around trade diminishing and some signs that Global Growth may be stabilizing, the rate was left unchanged. The current stance of Monetary Policy will support continued Economic Growth, a strong labor market, and inflation returning to the 2 objective. As long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary will like the remain appropriate. Policies are not on a preset course. Taking a longer view, there has been a decline over the past quarter century in the level of Interest Rates consistent with stable prices. This low Interest Rate environment they limit the ability of Central Banks to reduce policy Interest Rates on a to support the economy during a downturn. With this concern in mind, we have been conducting a review of our Monetary Policy strategy, tools, and munication practices. Public engagement is at the heart of this practice. Through our fed listen events, we have been hearing from representatives. The february monitoring policy report shares some of what we have learned. The insights we have gained from these events have informed our framework discussions. We will share our conclusions when we finish the review likely around the middle of this year. The current low Interest Rate environment also means it would be important for fiscal policy to help support the economy if it weekends. To assist in stabilizing the economy during a downturn. A more sustainable federal budget could also support the growth over the long term. Finally, i will briefly review our planned technical operations to Monetary Policy. The february Monetary Policy report provides details of our operations to date. In october, the fmoc announced a plan to provide treasury bills. These actions have been successful in providing an ample reserve. As our bill purchases continue to build reserves towards levels to maintain ample conditions, we intend to gradually transition away from repo policies. And we also intend to slow our purchases to a pace that will allow our Balance Sheet to grow in line with demands. All of these technical measures support the implementation of Monetary Policy. Toy are not intended represent a change in the stance of Monetary Policy. We stand ready to adjust the details of our technical operations as conditions warrant. Thank you. I look forward to a further discussion. Thank you. An issue of proposed rulemaking. The Federal Reserve did not join this proposal. Member boarded voted against the proposal describing it as a deeply misconceived proposal that would fundamentally undermine and we can the community. Aken theeea community. And brainard said given the reports, they are likely to set expectations for a few decades, it is more important to get the reforms done right than to do them quickly. That requires giving stakeholders sufficient time and analysis to provide meaningful feedback. Chairman powell, governor brainard also suggested in a speech last month that the Federal Reserve created a evaluations6000 looking at how various cre investments support though and moderate income communities. Has the fed used this database to evaluate how Bank Activities would be ss under the fdics proposal . Powell if i understood your question, it would be whether we would use our database to evaluate their proposal . Maybe i can provide some context of that is appropriate. If i may. Which is just that we do a great that this is a good time to changinga in light of technology and demographics and we agree on the goals we have put a lot of work into this and we have tried hard to get on the same page though we were not able to do that. Does the fed intend to do this assessment . Do thisntend to assessment that i referenced regarding the database to bankate inc. Activities activities and how they would be ssessed . A we want to be sure that what comes out of this is a proposal that, from us, will leave all major participants in cre cra better off. We think it is important that each change we make is grounded in data. That was important to help us develop our proposal. Given the magnitude of reform, do you think the comment verio do be extended to allow the public to weigh in . The is a decision for what do you think . Role to comment on their proposal. We have our own work we would be happy to share but it is really up to them to make that decision. Are you completing your assessment . Look untiltinuing to you come to a final decision . Dont you think the public should have an opportunity to have more time to do so . They will when the time comes but for the time being, we are looking forward to reading the comments on the proposal and i think we will all learn quite a lot from those comments and we will be able to incorporate that thinking. There may be substantial changes to the proposal coming out of the comments. Our view is that we want something that will lead that will leave everyone better off and will have broad support. That is what we are working on. The democrats on this committee urge regulators to provide a Public Comment period instead of the 60 days that fdic has provided. Community banks and groups have called on these agencies to extend the Comment Period even though you said it is not your place to comment on whether or not there should be extended, i wish you would think about this and i wish you would, as you are doing the assessment and as you have said it is important for the public to be able to comment, review what you are thinking and if you change your mind, let us know. About commenting on whether or not we should extend the Comment Period. You do not have to respond to that. Thank you very much. Northntleman from carolina is recognized for five minutes. A when someone else has negative comment about the Federal Reserve, that is bad but when i has a policy maker have a negative comment, it is good. It is all about the i of the holder when it comes to the eye of the beholder when it comes to this. Your construct of law, you are given independent operations and you have a set term of office. Of the fed fore Monetary Policy is appropriate and longstanding. In the last 100 years has had some private criticism and we found out at some point about that criticism either through press reports at the time or later or some s work about the president. Here on the hill, we can make negative comments about the fed and attack the president for having negative comments about the fed. All of this stuff is rich politics. But as get down to the essence of it. You are the biggest regulator. I have concerns i want to address that are of a regulatory nature that i think him pinch on Monetary Policy. The repo market for instance. These operations are temporary in nature. Is that still true . Yes. Our expectation is that we will continue our bill purchases at least through at least into the Second Quarter and continue operations into april. We are building up a level of reserves to a point where we dont have to be involved in open Market Operations on an ongoing basis and that will take that period of time. As the reserves rise, the need for repo will decline and we will reach that level of ample reserves and from that point or word, the Balance Sheet will grow at trend demand for liabilities. Are you doing a review on for Capital Requirements Financial Institutions that should be participating in the repo market . We have reviewed supervisory and regulatory practices that may be affecting the flow of liquidity. Our main focus is the federal funds market and our ability to transmit our policy decisions smoothly into the money markets. What happened in Early September was that there was unusual tightness and volatility and we attribute that to the fact that what appeared to be ample levels of liquidity did not flow where they might have. Things ng two raising the underlying level of liquidity to a level higher than we thought we needed. And that process will take until the middle of the year. And part of that is a supervisory assessment as well as well. This in my Opening Statement about china. Publiclyhave spoken about your assessment, youre thinking as you see what is happening with chinas response to the coronavirus. We wish them well. We have high hopes that they will be able to tackle this crisis, this Public Health crisis they are facing. But walk me through your thinking in assessing the situation in china now in terms of the economics and the potential spillover affect. Start by quickly saying that we find the u. S. Economy in a very good place, performing well. We see signs of Global Growth bottoming out and reduced trade policy uncertainty. All of this happened in the context of a good, strong u. S. Economy. Picture comes the coronavirus. The question is how do we think about that . We first absorb the human tragedy which is terrible to watch but the question for us is what will the effects be on the u. S. Economy . Behink we know there will affects on china through some part of the first part of the year and chinas close neighbors and trading partners in europe and asia. And there will likely be some affects on the United States but i think it is too early to say. We have to resist the temptation to speculate on this. We will be asking if these will be persistent affects . The question of length of time and whether or not this is a temporary disruption. Yes. The gentlewoman from new york is recognized. Thank you, chairwoman. Chairman powell, i would like to waters question on cra. What aspects to the proposed changes do you find the most troubling . Again, what i would like to do if i may is not so much, directly on the other proposal but talk about how we are looking at this. And i will mention the areas in which we have differences. I hear you and respect that but i would like to ask you if the fed is unable to reach an , on the joint rule, do you expect the fed to reach its own proposal . Our focus has been on trying to get on the same page. We have not been able to do that. Now, our focus is on learning from the process. Are you meeting regularly with the occ and the fdic on this issue . We did for a long time. We are not currently meeting. Do you agree with governor brainards comment that it is more important to get it right than to do it quickly . Yes, that has been our approach. As you know, we have been concerned about banks growing reliance on cloudbased Service Providers for their data storage needs. Does the fed have all of the access of authority it needs or are there any contractual or legal limitations restricting the feds ability to obtain the thatheld by third parties it needs to properly understand and manage this growing reliance . I think we do have the Legal Authority that we need to. We are able to look into third party Service Providers and we are doing that more and more because of the prominence and size of these growing and the growing importance of these cloud Service Providers. Thank you. I yield back. Missourintlewoman from , ms. Wagner is recognized for five minutes. I think the chairwoman. We are all very interested because it just happened on january 29. The repo spike. I know the Ranking Member mentioned it and you are in the middle of your review. But i have a more specific question. Could this repo market turmoil be systematic of deeper difficulties for the Financial System . It really does not appear to be at all. Since we took the measures we took in Early September, repo markets and money markets have been functioning smoothly. They have not returned to volatility. We have not had any return to that. It is clear that the measures we took directly addressed the problem. You know when the medicine is working, you can really see and it seems to be working well. We had a confluence of things happening at that time. The quarterly federal taxes were due along with the treasury 78 billion. S of was that a function of this fluke . We knew that. What we had done is we asked banks to tell us what their lowest comfortable level of it stillwere suggested that there was plenty of reserves in the system. And then this happened. That makes us think. We knew about those. Those are on the horizon. And you are doing a review. I hope you will not find anything symptomatic. Turning the page. , idecember of last year asked the vicechairman for an update on the status of the surcharge and the plans for finalizing the capital buffer proposal which i understand well require a reproposal with a Comment Period. N january, vicechairman the vicechairman talked about bringing more transparency to the framework. Last week, the fed released the stress test scenarios. There has been, no progress or update on the status of the stress capital buffer apart from continued assertions by you and the vice chair that aspects of the proposal will be incorporated in cars. 20 c given acknowledgment by principals at the fed about the importance of transparency, i am concerned about the lack of transparency in this process. When can we expect progress on this proposal it has been in process since april of 2018. We do intend that the core of the buffer will be incorporated into the framework in time for the 2020 stress test. We are on track to do that. You do feel on track to do that then . Yes. Yes. Are a potential risk. Malwareecently seen attacks undermine government structure and according to Research Last month by economists at the new york fed, the simulated cyber attack on couldne major u. S. Bank have spillover affects impacting 38 of the wholesale payment network. What can the u. S. Do better, chairman powell, in order to flowitize these constant of cyber risks and strengthen the resilience of our Financial Sector . We have to keep doing what we are doing which is to make this a top if not the top supervisory priority not just for the banks but for the fed and institutions across the american landscape. We have very high expectations, particularly of the largest banks on their ability to send off Cyber Attacks. We are constantly meeting inside the government to make sure that our system is resilient and redundant and strong against Cyber Attacks. But there is never a feeling that you have gotten to a place of comfort on that. We have to keep working. It is staying in the minute. Learning what the new attacks are. Basic housekeeping. That is all very much in train and we will does have to keep at it for a long time. My time has expired. Thank you for being here. The gentleman from california who is also the chair for the subcommittee of Investor Protection and entrepreneurship and Capital Markets. Responses to what the Ranking Member had to say. The stock market is way up. 1 es are up a bit more than in real terms after inflation. Wages at the bottom have risen. States where we raised the minimum wage. And when we have a democratic majority in both houses, we will raise the minimum wage nationwide and deal effectively with those dates that have not seen such an expansion of wages at the bottom. Old, butown, not quite i spent many decades in this room and i have seen your ,redecessors, predecessors predecessors and every time they come in and the republicans for expansionary area Monetary Policy both traditional and newfangled, and now we have a new president and all of a sudden they are pushing on the other side. All i will say is that i have consistently, from the days of mr. Greenspan, in pushing for somewhat lower Interest Rate and an expansionary policy particularly quantitative easing. 55 billion dollars 55 billion to the treasury last year. I know that is not your purpose but think of the kids that will get an education because we could fund aid to local education. Think of the medical research and the lives that will be saved because we were able to fund medical research. I do not think that should be regarded as an irrelevancy or an embarrassment. Finally, as to the jobs growth we have seen recently, i need to point out that jobs grew much faster in the last three years of the Obama Administration that the first three years of the Trump Administration. It is as if trump inherited an airplane. Automaticwas on an pilot going in the right direction and he has not managed to completely screw it up. We have an issue that i think ought to be completely bipartisan and that is libor. It will hit us in a couple of years. Chairman powell, should congress simply give the fed the right to prescribe backup rates when the dead instruments do not do so . Adopt we explicitly and what can we do to solve the problem 12 months in advance . Libor, our process is ongoing and we are committed to having the banks ready next year to switch away from libor in case that data is not published. They need to know legally what to switch over to and we want to avoid multimillion dollar lawsuits when someone says it should be this and not that. If we need a federal law change, we will let you know. You have less then two years. Have you figured out if you need a federal law change . I dont think we think we need a federal law change. Two years is too short a time. Out there slight risk of litigation and uncertainty with regard to legacy libor. That is one of the things we can do to help the economy. I hope you would act within a month to let us know what you propose rather than wait until next year. Another area we have talked about before is the Wire Transfer system. We have seen 150 million lost to scams and those scams are riced arose chiefly because when you wire money to a number, there is no payee identified. The british have switched to another system. The International Standards organization has prescribed. Hanges to identify the payee i know you have raised issues of state law. I have analyzed that but i cannot see what would prevent the fed from prescribing what the wire system would be. And it looks like i will have to ask you to get back promptly for the record on that question. The witness is requested to provide an answer in writing to that question. During yourpowell, testimony before the joint Economic Committee last year, you were asked about the steps the Federal Reserve is taking to assess the impacts of Climate Change on our system. In your testimony, you distinguished between the stress test that the bank of england does and what the u. S. Stress testing regime does which is impact and inform Capital Requirements for capital distributions. My understanding is that the bank of england is conducting research and asking financial and dictations to think through their portfolios to see how they will be impacted. They are not currently integrating those requirements. Could you outlined what the fed is doing in terms of research and engagement for the climat e risk . Change is an important issue that congress has assigned to other agencies though it does play into our publicsrding the reasonable expectation that we make institutions risk free. We are in the early days of understanding what all that means. Work is being done around the world at Central Banks to try to figure that out. You talked about the bank of englands stress test. Those are not intended to inform current Capital Requirements that more to determine what might be the effects on banks. Green the planning to Financial System . We have attended their meetings. When you join an organization like that, you are not signing up for everything that everyone there leaves you can benefit believes you can benefit from. I was encouraged by the sub the vice chairs comments. Cansory observations you tell is what the timeline is that you see on those proposals to improve supervision . The timeline is hard to say. What the vice chair did was point to the tension that exists between fundamental expectations of due process, transparency, and fairness around what the government does and should be associated with but also with supervision which by its nature is private and somewhat discretionary. Confidential. He pointed out that tension and the need to shed more light on that and the need to ask whether there are places where supervision needs to incorporate more of that due process thinking. I think that is a healthy thing to think about and something we are working on. In light of the coronavirus, i cannot help but think about as a young man i spent a lot of time around my grandparents and great aunts and uncles. They were born just before and just after the turnofthecentury. They experienced the pan devitt the pandemic of 1918 and 1919. I bring that up because of their description of that virus at that time in that society it literally brought everything to ace top for weeks in rural west turn western oklahoma. From what was called the spanish flu but it brought society to a stop. Worldwide andses the critical impact on china, could you describe how china and the neighboring countries are responding to the Economic Impact of coronavirus in general . Respondingthey are now to the outbreak and containing it. The Chinese Government is taking strong measures. Ininesses are closing down the affected areas. In terms of the economy, the peoples bank of china has done a number of things to support economic a committee and i think you can expect the Chinese Government to do lots of things to support Economic Activity and they have said they are open to determine the a fax. I think you will see governments acting in asia and particularly in china, to offset those. The gentleman from new york who is also the chair for the subcommittee on Consumer Protection and financial in the two nations is recognized for five minutes. Welcome, mr. Chairman. Let me speak initially on asymmetrical growth. At lengthn discussed in my community and others that 40 of americans do not have adequate savings for a 400 emergency. And similarly, one in five americans skip essential health care or fail to pay import and monthly bills due to the lack of funds. Finally, a large share of the population is also under banked or unbanked. On the about that a lot subcommittee i chair. My first question to you then is why havent circumstances improved for low and moderate income americans more rapidly in the past few years given the socalled state of the economy . The pattern was at the more people it was who had just left the labor force. What we have seen in the last 23 years has been wages moving up the most at the bottom of the wage scale. During this very long expansion, we have seen significant affects in low and moderate income communities. It is great to see. We have been hearing a lot about that. It is very positive. More to your point though, waiting for the ninth, 10th, and a 11th year expansion is not a strategy. We see them now because the labor market is strong. Really, we need other programs to address the longer run needs of those communities. Also, during this period of of us have been arguing and we are moving towards a 15 per hour minimum wage for individuals on the bottom. Does that have something to do with helping them also . And states have adopted a 15 or higher minimum wage. We do me first say that not take a position on the minimum wage. I understand. Research on what is driving there is aggests role for the minimum wage increases. Those states have seen a noticeably higher increase but really it is much broader than that and the bigger factor just is low unemployment and a strong labor market and high job creation. That is the main driver. The other concern i have because it also seems as though unemployment goes low but still when you look at black unemployment, it remains double that of white unemployment. Is hard to say if this is a down cycle or an up cycle. Is there any sign on how we close those gaps . Economy, buta good the gap remains the same. Andhere are persistent gaps they are troubling. It is really up to other governments, state and local and the federal government and frankly business is also to do what they cant to close those gaps. We have an Interest Rate will and we can support the goals you have given us. We see positive effects from that but in the longer run, it needs broader policies of education and other things that would help with that issue. Thank you. Chairwoman waters asked some questions about cra. The framework that was put rainard by governor brin not too long ago is that the same framework of the Federal Reserve board . Some are saying it is just her opinion. Maybe you can clear that up. We actually have not taken a proposal to the board yet but no, that represents the thinking that i asked her to lead effort for us. She has been the head of that committee for some time. I am comfortable with the thinking in that speech and i support that set of ideas and approaches but it is not at a place where we can say it is a the fed. Forom the gentleman from florida is recognized. Thank you. Mr. Chairman, the world is experiencing dramatic growth in the space economy. Aty are marveling actually the expansion of civilian space launches. I represent the Kennedy Space center and we are really excited about all of that. Put theestimates current level of global space economy at well over 400 billion a year. With a growth rate of 8 from 2019. O in december, the bureau of creationannounced the with special emphasis on the growing commercial space segment. This effort will use impact input from industry experts. That theover the years atlanta fed has applied its expertise to a report on the economy of the space district. First question can you work with me to ensure the Federal Reserve joins this multi Agency Effort with an eye to avoid financial bottlenecks . First i am hearing about it but i am happy to assure you that we will take a close look at it and if it is something that would be productive, we will take part. We have developed a policy of Federal Reserve independence. I would not expect a member of congress or other officer of government to insert himself or herself into a decision by the ,ederal reserve chair or board the open Market Committee or the fed policy. Congress does not direct daytoday Monetary Policy and it also does not direct generals on battlefields nor should we. Runser, the gao routinely the gao is restricted from conducting policy on the Federal Reserve. The Defense Industry is surely as sensitive as the Monetary Policy. I would like your thoughts on that. Gao does not do policy audits on the fed with one exception and that is our specific Monetary Policy function. Congress chose long ago to create one step of distance away from the gao in order to underline our independence. I think that was a wise move and changing that would be seen by im as a as a demesne new lessening of our independence. To oversight and transparency runs through this committee and the Senate Banking committee as well. That is what i would tell you about the gao. What do you think makes the fed more immune to review then the defense . Everything we do on payments and financial regulation, every single thing we do is subject to gao audit. Policy audits. We are audited. Our Business Model is about as simple as that of a very Small Company and we are constantly audited. What this exemption does is prevent the gao from coming in and assessing individual Monetary Policy decisions which to carve out of the law. I think it was an appropriate thing to do. And it would be unwise to take a step back from that. I do not see any harm. The former chairpersons of the fed have indicated they simply did not want to be secondguessed in their decisions and the public does not have a right to know. Logical quite frankly illogical quite frankly. We are very transparent. We publish minutes. We are not hiding anything. But exemption is overdue. Missouri,tleman from mr. Clay is recognized for five minutes. Thank you, madam chair and thank you chairman powell for being here today. For most of the constituents in my Congressional District, they are not focused on the dow maintaining the 30,000 level but simply trying to make ends meet. In fact, the st. Louis fed in an essay as part of this demographics of wealth series examined the connection between race or ethnicity and wealth accumulation. Quarter century. It was the result of an analysis of Data Collected between 1989 and 2013. Due to Federal Reserve survey of Consumer Finances, more than 40,000 heads of households were interviewed over those years. Median hispanic and black wealth levels are about 90 lower than the medium white wealth level yet Median Income levels of hispanics and blacks are only 40 lower. Gaplarge racial wealth could be due to hispanics and blacks investing in low return assets like housing as well as to borrow at higher Interest Rates. Hispanics and blacks could also feel less of a need to save for societys oldause age safety net programs will replace a larger share of the normal incomes they earned during their working years. Could you comment on why many communities continue to lag and how the fed via its Monetary Policy might seek to address some of the underlying fact ors that have led to gross inequality . Well, what we can do is what we have been doing which is to take seriously your order to us to seek maximum employment and that is what we are doing. I think we have learned we have just learned because we have been watching what is happening because unemployment can be lower than many expected without raising inflationary or other concerns. That is what we can do and we will continue to do. I think that is showing up in communities everywhere. Other governmental and other tools are necessary to address longer run problems. Addressas how do we the pay inequity . How do we impress upon Corporate America that it does this country no good to have a eightsed and persistent pay inequality . Look at thehen you disparity between the races and. He pay in a ready inequity i would say i think it is important that those issues should be addressed. It is not for the fed to prescribe the measures to address that. We need to stay in our lane. Stay with what you have given us to do. Will thether subject, Federal Reserve release its own proposal on the Community One that takes into account the needs of low and moderate income communities . We have not made a decision on that yet. We are focused on the process of the other agencies proposal and the comments. I suspect there will be changes to the proposal coming out of the comments. We have not made a decision about our own proposal. Mr. Clay well, traditional Monetary Policy works through a single economywide variable, single Interest Rate or perhaps the money supply of growth or credit. Cd policy aims at directing credit in specific forms towards specific groups of borrowers. Credit policy consists of a Central Bank Operations targeting specific segments of the private debt and securities market. From monetary theory to one that involves the use of more tools in order to enhance borrowing segments of society . I think that has historically not been a function of the fed and Central Banks generally. As you pointed out, one tool which is an industry policy, when you are talking about affecting different sectors of the Business Community or the population, that really should be another agency for congress itself and fiscal policy the witness requested to continue. I yield back. The gentleman from missouri is recognized for five minutes. Thank you, madam chair and welcome chairman powell. Always good to see you sir. Im sure you saw the speech or heard the speech by chairman quarles on the need to reform banking supervision. One area needs clarity on supervision regime is the role of guidance, push regulators to clarify the use of guidance in 2018 with the interagency statement on guidance, it urged an additional step doing rulemaking of the role of guidance. The Trump Administration actions out of the office of management and budget, my question is do you believe we need an official role making out of the fed on the role of guidance . We have not made a decision on that, like the other agencies who are evaluating the omb memo, as you know guidance is not enforceable, we do understand guidance is not a rule. He was here recently and made the comment that he intended to look at all the guidance and separate out what he believe need to be under rule and the recipe clarified as a guidance and i think thats a great approach but the question is doing to submit a role to be able to do that in the future . You look in a tragedy that. That something were looking at and looking at our guidance in asking of some is more like a rolrule. He also discussed how they have a framework under the proceedings act, theres no real framework for that and it was conducted without appropriate oversight, and that does not have the specific guardrails in fact gao says it was nonremaking purdue you believe we need to change and what should we do to the firms under this regime . I would agree it is appropriate that we draw brighter minds around that and as he mentioned in his speech recently thats a path that we are on. Very good. Something that is concerning to me is we have a lot of aches that are in the lending space, nonbanks in general were roughly 250 billion in 2016, this next year they anticipate it to triple to 750 billion, in 2019 nonbanks originated 85 of all loans, 53 sold to freddie. And 60 sold the framing may and nonbank mortgages make up the portfolio. In a most recent report nonbank Mortgage Originators were Systemic Risk. Remember that, can you explain that, would you like to talk about that a little bit, do you have any concerns. As you mentioned, we have looked at that and i believe it was part of the recent annual report, these are very important channels through which mortgages are originated and in the case of a downturn the banks have high capital and lots of regulation in liquidity and perhaps in a place prebut these institutions are operating sometimes underfunding themselves with credit lines which might not be available. There is risk there and were in the process of assessing that in determining what to do about it. To have a timetable . When you might come out with a statement which you say you will or will not do and what a wavy. I can come back its something that the treasury has a lead on. Very good paid one thing that concerns me in regards to home lending is a stack of forms you have to go through. We had a gentleman who represented a credit union at the time but the stack was as tall and i asked him honey pages and he said we dont measure by the page remeasure by the pound. And this is how off the charts we have gotten when you have a stack of papers as talk to do a home loan. I talked to the cpp and hopefully will engage you in a way to reduce that down to where its manageable to where there is protections to the consumer and enough information that allow the bank and the regulators to see but this has got to change, this cannot continue to grow. This is crazy give an opinion on that. To the extent it is not legally mandated. A lot of it is legally mandated by the state law. We do try to make assessment about what is necessary and what is not. It is a big challenge i would agree. For the record i did not ask a question [laughter] thank you. The gentleman yields back. The gentleman from georgia is organized for five minutes. Welcome chairman powell. Good to have you. The alternative Reference Rate Committee is pursuing in new york legislation to address legacy contracts in new york state with the fed support federal action in that regard . Spook actually its some numbers, the committee itself is not seeking legislation but some have approached the new york legislator. In terms of the need, we have not reached a point where we think it is going to be necessary paid we have plans to do that, if we do believe the federal legislation is necessary, we will come tell you and we understand that is on something you can do in 24 hours, we know the time for that is sin. Lets move over to Great Britain for a moment. The uk regulators have been very direct with their Financial Institutions only recently established a goal for their institutions to seek lending by the Third Quarter of 2020. So why has the fed not been so direct and you have plans to set clear goals and guidelines for your regulated institutions . Yes, we will do that at some point, you may have seen that they said they will not accept the mortgages after some point of this year, that thing will begin to happen now well in advance of the deadline which is the end of 2021. Chairman powell, you are fed board recently finalizes the rule on tearing the hopes of providing work clear and well defined risk indicators to determine the regulatory requirements that are placed on firms based on the size and risk. But the board has never disclosed nor provided clear and quantitative criteria under which firms are placed under a supervisory regime that is called large institutions, Supervision Committee and even your vice chairman mr. Corals recently gave a speech where he said that he would like to align the portfolio with the tailoring category and make the designation transparent. And you even recently indicated that you agreed on the need for broader lines. Could you outline what changes they are considering to make in this supervisory framework . We are just in the process of working on specifics. But i would agree we should provide more clarity around what is the firm and that will be the category. Thank you. You are a great man, good man, good friend, i respect you tremendously but chairman powell, the fed is the axle of our Financial System. You are the most powerful regulator and i want you to stand back up to mr. Auditing on this business of him coming with this rulemaking change to the Community Reinvestment act. Let him know that you not only have a mandate for inflation for Monetary Policy, you have a dual mandate, employment, jobs and heres the other thing, you need to remind him that this piece of legislation, this law, the Community Reinvestment act is precious to the nation but is precious to africanamericans or than anybody. Because when the Civil Rights Act that dealt with the big issue facing africanamericans, Financial Stability and the two anchors for that is a home, owning a house and having a job. And this bill was the bill that outlined redlining that kept africanamericans out. He needs to back off of that, you need to insert your power in this and let him know we are serious and to back off the rule change. The gentleman from ohio is recognized for five minutes. Thank you, madam chair i appreciate you holding this hearing. Good morning mr. Terman how are you doing today . Great thanks. Thanks for being here, i want to do yes, sir no questions. Youd cover them in your testimony but just to remind everybody the labor petition is 83. 1 which is increased in the last three years is that correct. I think that is prime age adults. Has increased or decreased. I do believe you have. And wage growth has outpaced inflation for workers in the last three years. It is currently. Yesterday. And wage growth has actually gone out by about 3 in the last two quarters in an annualized rate is that correct. Over the last few years if you look at a range of majors you would see wages moving up 3 . And we have record low Unemployment Rate for africanamericans and hispanics is that correct. That is correct. So the fundamentals of the economy in good shape. I would and i did. Thank you for that testimony. Your colleague stated recently that economic expansion does not go with old age, the economy is strong, do think many businesses and investors are trying to talk themselves into recession . I dont think so and i certainly hope not, there is no reason why the expansion cannot continue. Theres nothing about this that is unstable or unsustainable. I think the fundamentals are strong but i think people are worried and i hope they dont talk themselves into a recession. Given two thirds of all indignant Capital Formation occurs in the Capital Market, im curious to hear what the Federal Reserve is doing to coordinate and Exchange Commission in the cftc as potential regulators for the Capital Markets to make sure that his coronation on the Capital Markets. The sec really has primary Regulatory Authority for those markets and we have supervisor Regulatory Authority over the bank, where we overlap is Financial Market utility where we regulate some and the fcc regulates him in the cftc regulates some and we collaborate on all that, we collaborate closely on that. I would urge you to increase the collaboration because the lines between security is banking and Capital Market are more than ever before and i would ask you and vice chairman corals to redouble the efforts for the coronation because i hear from some of the firms that feel like it is not coordinated. If you could redouble the efforts i think that would pay dividends to the american investor in the american economy. A couple other quick questions. What do you think the most significant risk to the Financial System today . I have distant bracing i think the Financial System is strong and materially strengthen since the financial crisis, particularly the bank, high capital, liquidity, keep them on their toes and they have a real Resolution Plan none of that was in place before, it is generally in a good place. The thing that the we worry about a lot is Cyber Attacks. I think we have a great game plan for traditional issues like bad loans and things at that. Cyber attacks is the frontier where you worry and we work very hard on that and all the agencies do, we all work together, the institutions themselves were card but that is a major focus. Thank you an interesting note, you are in line with the ceos of the biggest institutions, i asked them the same question and the consensus although not complete an agreement was that Cyber Attacks were the issue. I think Congress Needs to focus on that and our regulators need to focus on that. Two quick things because im running out of time. I know youre focused on the transition and people have asked that question, i hope you will pay particular quote attention to the impact on Small Businesses in the Community Banks as we make the transition. They are vulnerable with the repo market. I hope you will continue to focus on the origins of the problem, some are regulatory and some are marketbased and i know youre focused on and we have private discussions but i would like to see that solved in a way the you dont have to provide Federal Reserve capital at the end of every quarter and end of every year. If you can stay focused on those things i am out of time. Thank you, mr. Chairman. The gentleman from texas, mrp oversight and investigation is recognized for five minutes. Thank you, madam chair. Thank you for appearing today mr. Powell. Mr. Powell this is an observation not a criticism. You indicated that the fundamentals are strong however, you also indicated that the last conference you were a bit surprised that wages have failed to move out despite being well into an expanding economy. Sustained levels of historically low unemployment, increased labor force participation, fundamentals are strong. Strong yet nearly half, 42. 4 of working americans in 2019 made less than 15 an hour, fundamentals are strong, the people in my Congressional District are more concerned about the supermarket prices than the stock market, when they go to the star supermarket there concerned about Procter Gamble products of the stock market price of Procter Gamble itself. It Means Nothing to them, its what they have to pay for products in the supermarket. This brings me too my question. Has there been a study to give us some sense of what 15 a dollar hour wage will do for the economy a study of what 15 an hour wait will do for the economy. Have they done such a study . That is not something we would do. Let me address the fma. Dont mean to be rude and crude, but let me just call to your attention a study that i found interesting. The disclosure project. The project based on thousands of the disclosures the market capitalization are exposed to trillion dollars in risk. Someone could argue that that is probably not something you ought to do although i understand Climate Change is something that is important to the fed because it would have an impact, a global impact. But i think you can take a closer look you the alternate authority on price stability on wages lets have a study to determine what impact 15 an hour minimum wage would have on the economy of wage disclosure project if you will. Give me some thoughts. Can you help us please. Theres a great deal of research that has been done on minimum wages and i dont know her particular one but there has to be some research on what a federal 15dollar wage increase. I agree i read a few but they dont come from the fed. They dont come from the entity that has a dual mandate. Price stability. , unemployment or employment. It would mean something to working people if we could get such a study, notwithstanding what others have done. These are observations not criticism. This would be meaningful to working people, by the way i think 15 an hour is not enough as a minimum wage. I think it ought to be at least 20 now. But ill still settle for 15 if we can get that. But can we work with you and discuss the possibility of a wage project. All go back and talk to her labor people who know this issue well and many have published on the issues so let me come back. I will thank you for, i have 46 seconds and i will applaud you for. [applause] a personal applause. Madam chair, i will yield back the balance of my time. Thank you very much. If the gentleman is requesting to have a rating for the record on this question to the chairman. Yes madam chair. The witness has requested to provide an answer in the record. I. The gentleman from kentucky is recognized for five minutes. Thank you madame chairwoman, welcome back to our committee. In general what would you say is the Lifetime Associated with a major change in fiscal policy . It content to be long as you know. With Monetary Policy we can go into a room and change Interest Rates and obviously fiscal policy tends to take a lot of work and time. Let me ask the question, fiscal policy has changed profoundly in the past three years, tax cut the Regulation Energy sector pullback from dodd frank, the individual mandate, new trade deals, or any of these policy changes impacting current Economic Conditions . Im sure they are but we dont try to assess that, thats not what we do when we look at the economy but yes it would be affecting. You noted u. S. Economy is exceptionally strong since the 2016 election, 7 million jobs have been traded and unemployment is at a 50 year low, more americans are employed more today than ever before wage growth highest in income workers have been seeing the hous passey increase grade 15 since 2016 election. Just over the weekend the headline of the wall street journal which im sure you follow the reporting, a tight u. S. Labor market is drawing americans off the sidelines at a record rate. Despite this after last weeks date of the union, Speaker Pelosi said it was appalling to hear the president try to take credit for an economy he inherited. I will not ask you to weigh in or arbitrate domestic political dispute but when the f1c conducts Monetary Policy given what you said about the lag time of fiscal policy, is it fair to say that this president s policies are impacting todays Economic Conditions . At a high level of course there. Let me followup on her question about the surcharge. In your response to our letter, you maintained your aim to have the key components of the stress capital finalized in time for the 2020c car, can you describe what the key components are in a more precise timeline given the fed announced the 2020c car. I think the timeline, we do believe and intend and will put into effect the core of the stress capital for the cycle. That is coming right up. I prefer to leave the details, there still being worked out but itll happen in a timely way for the 2020 cycle. Let me get a little more to go. Those activation of the buffer of suitable replacement for the dividend addon in light of the stability report from november which stated the vulnerability had not significantly change . We have not made a decision on that. We have not made a decision on the. Thank you for that. We were looking forward to that decision. The Business Roundtable as you probably remember announced it was redefining a corporate purpose to elevate stakeholders ahead of shareholders a large Investment Firm announced its intent to dives divest fossil ey for clients to a subset of sectors for the environmental social government box. I am concerned that firms which arbitrarily limit Investment Offerings based on social and political pressure may choke off capital to perfectly legal productive and profitable sectors of our economy. They need to fund for the futures. As a leading voice on the Financial Stability oversight council, will you commit to raising this issue with your colleagues and urged them to examine the extent to which a misallocation of resources away from shareholders to serve under related political errands might stifle Capital Formation, compromise investment return and undermine Financial Stability . I dont know that i totally understand your concern but ill be happy to discuss. The concern is that shareholders are not a prime concern of corporate boards and directors. If stakeholders who have no ownership in the company are the focus of a corporation, then i would submit theres a tremendous risk of misallocation of resources away from shareholder returns. I would like them to take a look at that. The gentleman yields back. I will bring that to the authorities. The woman from ohio is also the chair with the subcommittee on diversity in conclusion is recognized for five minutes. Thank you to the chair in the Ranking Member and thank you chairman paul for being here today. Let me also acknowledge the advocates bringing teachers for being here today. Thank you for coming to my office yesterday. Ensuring what i thought was valuable information with my team. I appreciate you sitting through the hearing. Chairman powell in the latest edition of the Federal Reserve, Consumer Finances that was published in 2017 and gave the breakout between white, black, hispanic related to the network. Weve heard the statistics, i think my colleague talked about it and im sure some others out there will going to those details. What is very interesting to me is the data seems great for those who are researching the issue, is there any way your office can break it down by region or city because when we go back home, this is the number one thing that im hearing, people are coming into my office when she gets her healthcare and jobs in education, there thing is, we look at the wealth gap that is getting wider, not coming in and while were talking about Unemployment Rates being better many people have to work two and three jobs to try to survive, someone talked about the minimum wage and certainly as we advocate for higher number it is not enough, in my district you would have to make somewhere between 18. 70 20 to have a livable life. Can this information be localized to a region or to a city to help us as members of congress when we go back home . The second thing is, i introduced a bill closing the racial wealth gap which requires the Federal Reserve to further break down the data. This is something i did not realize until studying the Federal Reserve and listening to the individuals like here today, they have some really good ideas so my second question, could you tell me if you were entertained having your folks looking at wage as a major because often times when you have a fulltime job i have a wage, can we be creative and looking at the data based on what some of the things i am hearing from the group they came in. Im sure they met with your folks and you know some of their issues. , can we entertain looking at some of the things that they think we should look at when we calculate or prevent all the good news that is not the good news for many of the individuals sitting here or in my death. I think youre making the data people happy of the board of governors. , they love to cut the data different ways and we do learn every time we do that. I dont actually know the precise answer to your question and whether we can do it regionally but we would be happy to look into that for you. What about the individuals ideas about looking at wages in your calculation . I think we can do that. Your folks would be willing to work with them to a starting point of discussing . Because now were marrying the people with the power, what a good when when that would be for all of us as were talking about all of our lives and especially those have to work a little harder than some of the rest of us. , the next thing will your agency work with my office. Im so excited about this deal and if i understand it, part of the reason for asking for the data is the Federal Reserve actually collects the data the sets of policies that then get married with allocation that come back. I want to make sure im on the right path when i go back home and say i have a bill asking the Federal Reserve to collect data that can help us in the end. Is that in the ballpark . We should get the experts to talk to you in your staff and tell you what you do and how we do it and that might be useful. I dont know that we need legislation at all but we certainly have excellent sources of data and we do cut them different ways. When we tried to followup with you on that. The gentleman from colorado is working eyes for five minutes. Thank you monitor and chairman powell thank you for taking time to be here. I wanted to follow up on the cra. We had a fair amount of conversation on that and just wanted to have the clarity that the fed has been involved with the process, the occ and fdic, is that correct. From the very beginning. I want to get clarity, were you comfortable not only with the governor making a speech but the content of her speech regards to the cra . What extent has the fed done. I know youre talking about doing the analysis, but to be able to work on cra modernization . From the very beginning we said yes, that sounds like a great idea, its a good time to update cra. Lets make it more transparent, objective and effective with the beneficiaries. So we went around the country, 29 events where we talked to different groups of people and their experience of cra and it turned out in a particular direction, we had a bunch of ideas and its unfortunate, we were not able to get on the same page or agree completely with their approach and they were able to agree with ours. But we continue to push and continue to learn and i would agree with mr. Hills earlier, ideally you would have one set of standards. I would agree with that as well. I think that is something we have a lot of stride for an well encouraged reading your comments and statement that people who live and work in lower communities are fighting opportunities, wages are rising for lower paying jobs. Thats an area i have a lot of concern, my state of colorado i represent the rural areas and we often time have two economies were the roo resort areas are dg well in rural areas continue to struggle, were starting to see some of the movement and were looking at the cra reinvestment and talking about the community bank. I really would encourage you to look at those proposals, i believe they do reach further in to Rural America and you talked about policy, have you done in assessment and the opportunity zones including the tax cut jobs act, we are seeing benefits in investment coming into rural areas in my district, those are some of the policies we need to be looking at. I am not aware of any research but we probably have truthfully in the system i would imagine when we did research on that and be happy to share. Fannie mae and freddie. Took steps talking about so for, to be accepting soferbased mortgages and i noticed other agencies havent taken a step separately, is there any uniform effort at the high level to be able to cornet the adoption of sofer . There is very much so and we are doing that, were court needing with the other agencies in the participants as well. You will see more of that youll see more instances in which it will no longer work or be usable in a particular context. That is what fannie and freddie did this week or announced this week. To follow up on his question i think it is really a problem in the sense that theres no guarantee the rate will be published after the end of 2021 but theres a question of having it because it sensitive rate in addition to sofer, itll be the main substitute for libor but we are working with regional and the larger banks of the idea of having a credit sensitive rate, that something ongoing. We have had some conversation about the coronavirus, the impact on the economy, the president signed into law the usmca, do you see that as creating a runway for further economic expansion in the u. S. , Job Opportunities and wage growth . I would say this that we are signing in the enactment of implementation of usmca will be a positive in the sense it removes uncertainty around trade policy and that has been the issue over the last year or so, not knowing what the rules of the game are going to be in getting those settled is certainly a positive thing. Thank you my time has expired. The gentleman from illinois mr. Foster is recognized for five minutes. Chairman powell, i would like to thank you for facilitating our reading with representative hill and i on Digital Currency. We really enjoyed that as well as the meeting with the staff its great to see how plugged in they were with the issue. In a speech the governor highlighted the role of Central Bank Digital currency ensuring they stay at the center of each nation Financial System. Do agree with the characterization in particular do you think establishing the digital dollar would ensure it continues to serve as a core of the u. S. And world Financial System . To take the first part, i think having a single government currency at the heart of the Financial System is something that has served well and its a very basic thing that has not been in question and i think before we move away from that we should understand what we are doing. I think preserving the centrality of a widely accepted currency that is accepted and trusted is enormously important. I think whether a Digital Currency moves us is an open question, as you know every Major Central Bank is currently taking a deep look and we feel like thats the obligation pretechnology has made this possible the private sector is doing it, is very much in common and other Central Banks to understand the cost and benefits of tradeoff associated with the possible Digital Currency. I want to characterize your state of progress compared to other countries. The Swedish Central Bank developing, the chinese, the reason there was so much concern about the labor project, they would immediately have scale if they rolled out the project. Another entity and physician is the Chinese Government to rollout the scale using already established payment by cell phone system. They would immediately have the scale comparable to facebook if they rolled that out. So how would you characterize the ability to respond to this potential competitive threat. We are working hard on it and a lot of efforts going on. We have not had the problem that many mentioned, a lot of the Northern European economies have moved away from cash to a remarkable degree. It is not happened in the u. S. Economy even though seemed like it mustve happened with her kids not using cash free much. Nonetheless the amount of cash the u. S. Economy continues to grow. If you look at the curb of adoption of payment by cell phone start slowly and then it just happens. It seems like the transition can happen in a couple of years and you have to be able to respond, thats a driving factor and we have to be in a position where we can respond by really not a digital dollar and on the timescale, i completely agree with that and libra lit a fire under that in a bit of a wakeup call that this is coming fast and could come in a way thats widespread and important fairly quickly if you use a Big Tech Network like they did. We are working hard on it and we appreciate the importance of making quick progress. We have not decided to do this, i think there are many questions that need to be answered around the Digital Currency for the United States including issues of cyber issues privacy issues, and many operational things himself. We will work through that and do that work early and responsibly. Do you feel you have adequate visibility on what the chinese are doing . Do you have a working level context that gives you some idea of what the rollers likely to look like . We certainly have that but theyre in a completely different institutional context, for example the idea of having a ledger where you know everybodys payments is not something that would be attractive in the United States context and the problem with china. But nonetheless they are claiming they will rollout in the countries very quickly. And i urge you the gentleman from texas, mrr five minutes. They give madame chairman and thank you for coming back to committee chairman. We appreciate it. With baseball season slowly approaching, i wanted to make sure one thing before i continue that you are still on team capitalism. Oh yeah. I appreciate that. Experian released the 2019 Consumer Credit review and i want to read a section from the report because i think it accurately depicts the state of our economy. Im a mainstreet business guy in the economy is really good. The u. S. Economy exceeded expectations, record job growth caused Unemployment Rate to drop to his store close while the stock market flexed throughout the year, consumers show their confidence as they continue to borrow and spend evidence by the strong 2019 Holiday Shopping season. The report goes on the hall time high in 2019 the average 703. This translates to people to get better money, a buyer house or Business Loan whatever they need financing to live out the mckendree. What should we be focusing on to continue for jobs that we have seen the past few years . Honestly the focus for me too be whatever long issues that can be addressed like. One is labor force participation, what are the things that you can do that we cannot do that will help people stay more attached to the labor market. We still have lower rates compared to our economic competitors. The other one is productivity, its a legislative and administrative environment that supports growth and innovation in investment. That would be my main focus. I know your aware that is being developed for the world. I had my reservations about entering into a National Agreement that does not conform with the current state based approach to regulating insurance companies. One particular piece of the standard i want to ask about is the flexibility our government was given for solvency standard that would better fit our insurance ecosystem. My question to you, how does the fed ensure the standards being developed will be deemed equivalent by the International Group given the continued resistance you are facing from the europeans . I say, we will not be part of approving any National Standard that does not accommodate our own american insurance framework. We are leaders not follower. Some of my colleagues on the other side have called for a financial transaction tax. I think this is an extremely short side approach to raise revenue that will impact the amount in ways that americans save for the future, additionally the thought that adding an extra layer of tax to other assets is redundant since Capital Gains taxes are already in place and should be lowered. And take away money from successful investment. If we want to expand Economic Growth, we need to focus on lowering the personal and Corporate Tax rate so americans can keep more income and businesses can invest back into the operation. Can you explain how implementing the transaction tax would impact the u. S. Economy . I think i need to stay in my lane. We dont do fiscal policy, if i comment on particular taxes and wondering where that would go. I understand. From a mainstreet standpoint it would really hurt the economy and extra layer of tax, we actually need to cut taxes proved looking a being over in business 50 years, one that catches my negative Interest Rates, can you help me understand economics by negative Interest Rate and talk about the potential threats that it poses to Financial Stability . The number of countries around the world as you know, some of them went below 0, the United States chose not to, we chose not to with the feds, we use other tools when it comes with the largescale asset purchases per Going Forward are in commission would be to rely on the tools that we did use as opposed to negative rates. That is our instinct. The question about intermediation, your breaks and windup creating downward pressure on brink possibility which is expansion. Theres some evidence in many cases we were watching other institutions around the world that have done that and we will have to see what the results are. Thank you for being here. The gentlewoman from michigan is recognized for five minutes. Thank you, madam chair. I dont know if you know 2013 for chapter nine bankruptcy. It was marked as the largest municipal bankruptcy filing in the u. S. History. And while you were here we asked you if the Federal Reserve is willing to back it up or support big banks and corporations during periods of credit market distress that we would want to make equally sure that state and local governments had access to credit. You mentioned you do not have the authority, i would like to submit for the record section 14 of the Federal Reserve act that the feds actually do have the authority to buy municipal debt. Without objection such as the order. Given that you do have the authority, can you explain why shouldnt the federally serve ensure state and local have access to times of stress . As you know we have limited authority to buy shortterm obligations. We did do that in the 1970s briefly and have not done it since. I think a series of fed shares in all kinds of different political environments have thought of that as something thats not appropriate for us in the sense is Government Finance thats to be dealt with by Fiscal Authority rather than monetary authority. We focus on the job you gave us which is maximum employment and stable prices into some extent working on bank supervision. Yes, sir no the Federal Reserve retains ability to open emergency lending facilities . Is accurate in stabilizing the economy . Yes to Financial Institutions reduce. When the fed stepped in to rescue banks in the crisis, is because the role is vital. We had no choice to prevent him from collapsing. Filing bankruptcy was devastating. So many retirees, 40 50 years they worked for the city of detroit, but the pensions, completely diminished and gone. Do not believe that the government of detroit in puerto rico also play a role that should be preserved even if the financial crisis makes it hard for them to borrow money . I believe thats not a job for the fed, and the particular role and authorities in lending to state and local government in supporting the mother in bankruptcy is our mandate. Were gonna strongly disagree. You mentioned in the face of another financial crisis you would use the same tools of purchasing longterm bonds and more of the same. Correct. Im afraid that is not good enough. I think your predecessor seems to agree on remarkable to give last month. For instance chairman suggested a Fiscal Program might be helpful during the next recession. Do you agree with that . I think thats an untested and not widely supported. Another spin a group of people that push the idea but i dont think included the former chair. Youve seen something out of nothing. The federal government is supposed to be about people. I dont see that were treating pensioners in the city like the city of detroit which is currently community that has been hit hard by the financial recession. They see a teacher is coming back, if i show you neighborhoods theyll say we dont know youre talking about because poverty has increased, all of those things. We reflect and understand that i believe the Federal Reserve act gives us authority to help and treat, just like we build out big banks that we can do for people for the city of detroit. I thank you for that and again, i will actually asked to look this from a different lens versus the same old process which i believe has not worked for workingclass people. Thank you so much a yield the rest of my time. Thank you the gentleman from arkansas, mr. Hill is recognized for five minutes. Thank you, chair waters and welcome back to the committee. I want to thank you for your discussion that you had with Doctor Foster a few minutes ago, i want to thank you for your work with governor brainard in our discussion on the digital dollar in the work being done at the treasury about that. I want to labor some of the points that representative foster made but some comments on, would you Advisor Committee or asked the fed to Advisor Committee what legal authorities considering the digital dollar. That is a good question and one we are looking at, longwood depend on the design. Exactly. One thing we talked about and had a lot of discussions on the task force is about europes approach true payment provider which is part of their Financial Services code. Part of the open Banking Movement and one would have a regulatory, might be in a bank or nonbank. Is that the feds looking as well . I would not say were specifically focused. But more broadly, we think its a good idea to look at the whole landscape of oversight over payment system. That would be a piece of that, and nadja heard governor brainard talked about that in a number of her speeches. Thank you. Last night the chinese regulators build out, 14 billion loan that they arranged, the chinese banking act set at 41 trillion, 47 of world gdp. His instability in chinese Banking Industry pose a financial threat to the global Financial System, is a financial virus like they were to contribute in, a physical virus . Generally they have had very high debt and that includes the Banking System. The government is actually for several years now, been taking measures led by the central bank to control the growth of that and they start to that through the last couple of years even though those were challenging years economically it was something they were adjusting but its safe to say they have plenty of physical space. They have plenty of power to respond to downturn. I would not go as far to say as their debt is suspended. I think it deserves review, we talked about the misallocation of resources. At 47 of global gdp seemed like an over allocation in the Banking Sector in china. Handful of large issue verse which were downgraded and the idea is that some holders are not permitted by the terms of their agreement with investors, so thats an issue weve been monitoring for sometime now. Some time now. With the leverage when he more generally, yes we are monitoring it very carefully. We see low compensation for the risktaking and high leverage. They are not on mutual funds and Exchange Funds rather than bank Balance Sheet in the sense that the liabilities are longer than expected. Hispanic financial concerns commend you for noting it in the report and thank you for your continuous attention to the. The gentleman from illinois is recognized for five minutes. A. Q. Madame chair and chair manpower. I appreciate you sticking arou around. If i get elected eight times, fingers crossed, i will have as much experience in this line as the energy sector. I still come here primarily as an energy nerd, and i have a concern that we are not dealing with the reality of Climate Change scientifically. We understand viscerally but we havent thought about what it means to have an accelerating change. Compounded changes in the environment think about it as well as they should. A couple of data points. The first evidence is ushered into the Industrial Revolution and 50 of all of that which we ever admitted as a species this is a massively accelerating shift and if we went from zero tomorrow we are looking at it coming up and more realistic trends is 23 trillion of Economic Loss in the system. There is some serious Systemic Risks to the economy if we get those on addressed and i just want to understand how you do our thing i being about those risks. Given that the exposed to Climate Change exceed the entire subprime Mortgage Market how is the fed thinking about Climate Change as a risk to the economy. One is the elected representatives to assess the overall production in society and how we will respond to the Climate Change. Nonetheless we have a job to do and that is to think about the potential implications i of the Financial System for the economy and we are at the very early stages of filling in what exactly that means in terms of things like particular assets these are longterm considerations and the we are essentially concerned with Business Cycle issues and that is what we are focused on Climate Change is a cycle. Part of the concern is the actors in the space do not have planning horizons. They may plan with the Sea Level Rise coming. They typically have a oneyear holding period, so even if the u. S. Is successful at reducing the Carbon Emissions there is a reallocation of capital. Its the beginning stages as you obviously know theres a lot going on in the Financial Markets into Public Disclosure happening in expectations around disclosure are changing. Our banks have to be getting that taken into account the risk of the weather events and potentially i suppose a rising level let me give a specific one thats been bugging me lately. If you look at the fossil fuel companies and the debt they hold relative to their assets, given that they are so heavily dominated by the fossil fuel reserves if they were to extract, things are going to be way worse than the 23 trillion i just told you. Have you considered stress testing to see whether the failure to monetize the reserve might effectively make them fiscally insolvent because that sounds like a material adverse event but i wouldnt want to bet that its going to commit suicide. But if i look at the Financial Statements of a lot of the companies, it isnt clear to me that they can monetize those assets. That is a meaningful effect on the risk held today with 700 billion would in the last couple of years. If you consider that a Systemic Risk . It is a risk to the Financial System, and we would be stress testing banks, the bank of england is doing some of that now and we are going to be watching that. They will yield back my time. The gentleman from georgia is recognized for five minutes. Thank you, madam chair. Thank you again for being here. First of all, i kind of want to touch back on this weve touched on the subject and as you know several weeks ago the vicechairman anvicechairman gae outlined a number of changes in would like to make in the regulatory process. He said he intends to bring transparency to the Regulatory Regime by developing a clear transparent standards for designating firms. He also proposed the designation with the categories of limiting only category one firms. So, my question is at a press conference after last month by the federal open Market Committee meeting using the generally agreed with the vice chairman and what he articulat articulated. Appreciate that. Can you give an idea whe of wheu expect it to be confirmed with new rules . I dont have a sense of where that is in terms of the timing of it. At any given time that is certainly one of them. Hopefully sooner rather than later. I dont want to commit to something there are a lot of things we are working on that of the vice chair gives a speech about it i expect we will be moving forward. That is good to hear. Quickly, i would like to touch on all three banking agencies need to have the framework and i know you are hesitant to speak on behalf of the other agencies. If you dont want to comment on that, understand your ideas for the modernization. We kind of agree on the overall goals and our thinking was to try to get to a set of improvements, so we are looking at ways to make the assessment clearer. In our thinking there is a separate test for Community Development and retail lending. Also, the other thing we are seeing is lets make sure that its very grounded in data, so as th the chair mentioned earli, weve got 6,000 data sets that we look out, so i think that we know when we make a change in the metrics we know what the effects are going to be unless we try to develop a proposal around that. There are a lot of overlaps, but they are a handful of differences that prevent us from getting to the full agreement. And the overall objective, do you believe we can remove some of the ambiguity on the projects do and do not qualify clarks absolutely. Transparency as to what qualifies as a player, more objectivity. All of that should help to encourage banks to do more if they really know what is going to qualify and what isnt. I think that is reconstructive. Its about how you implemented and we want to have a high level of confidence that with the change is going to have the desired effects and that i affes what we are focused on. I appreciate that because i would like to see us make changes to where it is in Financial Institutions just checking boxes to get credit but investing in projects that do help revitalize the communities. The study whether any changes and thinks regulatory Capital Requirements are needed because if the Study Concludes that is the case are you open to modifying the requirements accordingly . I think that we have said we are going to be monitoring very carefully what the implementation is showing because of some of the concern that have been raised. Thank you. Probably dont have time to get into other questions, so with that i will yield back the balance of my time. The gentleman from california is recognized for five minutes. Thank you. Chairman powell, you frequently have spoken about your belief and importance of maintaining the independence of the Federal Reserve. Do you still have that belief and has anything changed in the new year . No. We dont want the fed to be making decisions on Interest Rates and any factors other than the best interest of the country, and i know youve had experience with the president publicly and aggressively attesting to lower Interest Rates and appreciate your continuing to affirm the independence of the fed. But its not just the president , there are a lot of people out there that would love the opportunity to weigh in on the federal decisions. What other kind of people might want to influence you in regards to the decisionmaking . Potentially a wide range. You say they might want to intervene. The answer is i dont really know the answer. We respect what they do and people often when i need them they shy away from giving advice. They feel like they dont presume so you do not feel unduly pressured by the special interest. What you say that someone like the ceo of amazon could benefit from having influence over the decisions is what about Kelly Ann Conway and has the president expressed his public views does she have an interest in amplifying the message that is overall her job. That is a party after the dinner i went to. Where was it held . Besoss home. Saturday night after the alfalfa dinner. And january, 2020, recently . Can you imagine how attending a lavish party at the 23 million home along with chairman ivanka and jamie diamond might get to the public that they were not immune from external pressures . I would certainly hope not. What did you talk about at the party . I didnt talk to any of the people you named it. Can you tell me who you did talk to . I escorted my son and his brandnew wife and introduced them to general mattis. I would just suggest this attendance of this kind of event with these kind of people is inconsistent with what i would otherwise commend you on forgiving a very good job of reaffirming to the public and the publics mind to see this is counter to what you have been doing. The biggest atomic drivers, what has been making our economy grow, with factors . Factors that have been making it grow, the hardworking American People. What you have seen is tremendous growth in some sectors and less in others. Of course the Big Technology companies were not around so youve seen lots of growth in some areas than others less so. 38 million women join the work force and without those the economy would be 25 smaller so when you talk about the health of the economy and gdp growth, but i dont hear a lot about and i would like to hear more about is the economic effect of things like child care availability. It grew 25 and the cost of childcare showed up 2000 . You are an economic expert, can you put a number on that . So many colleagues at the Federal Reserve just to address the comments that came from my colleagues recently come is it unprecedented for the chairman of the Federal Reserve to attend a party or reception . I dont know that we want to say just because you are at an event somehoandevents somehow this is nefarious. You might have actually talked to a russian on a subway or something. The way that these things are linked is embarrassingly partisan. What im concerned about is the co market. Back home of a lot of people dont know if there is such a thing as rico but it is a factor for the economy and some of the warning signs have given rise to the fed with a blend between regulatory action and Monetary Policy to inject a lot of cash into the market. Can you explain the process of how they are going about receiving factors that are contributing to this spike in what youve learned from a few . In Early September, there was a spike in their rico rates and the federal funds moved outside of our band and the target range for the paper so. Its on the cash deposit reserve banks needs to be higher than we thought. We have immediately sent forth a plan and executed to create to produce an outcome its odd that our action is to inject cash from the Federal Reserve to grow the Balance Sheet at the fed instead of looking at the underlining regulatory things. What have we talked about and because the board talked about in terms of regulatory factors injecting cash to fix the problem. The supply demand for cash for basically banks that need to have a certain amount of liquidity purposes. Without undermining safety and soundness we would look at ways in which regulation might have interfered with the otherwise free flow of cash to where it was needed. The vice chair hit on a broad theme which is important and it is the idea of making the treatment, the supervisory treatment of cash the same as that of treasuries. You could achieve a better flow of liquidity without affecting the overall level of liquidity in the system which is what they are looking for so that is a very profitable line. Thank you for that. One of the changes as the Market Forces are coming we are talking about replacing the benchmark rate and of course it includes 250 entities, but there is a concern is you have done this, the best rate isnt necessarily. Isnt the fed taking the best proposed rate offered in these deals or are we getting it out at a special rate for the top ten . When the liquidity is injected, im sorry. I missed that. The rates that we have been offering wont be a persistent issue. When its at the highest rate isnt paid to the best availab available . Anybody is eligible to. What the gentleman like to ask the witness to provide more answers in writing for the record of . I appreciate the suggestion the gentleman from North Carolina is recognized thank you for your testimony. If the board member voted against the controller proposal describing it as a deeply misconceived proposal that was fundamentally undermined and weakened in the Community Investment act. Can you comment on the deficiencies of the misguided attempt for the civil rights and banking law . Our goal isnt to be commenting on the proposals. The public is getting at now and we look forward to seeing the comments they make. I can talk about how we are thinking about this but its not for us to be publicly commenting ocommentedon the other agencys. Will the Federal Reserve release its own proposal on the Community Reinvestment act that takes into account the needs of the low and moderate income communities . We havent made a decision about whether or when to make a proposal that the whole effort was undertaken with a view to create the modernization proposal. They have maximum employment so will they set up a goal for the wage growth and are you considering this approach as a part of the framework review . Those are the two objectives and those are the things we target. I dont see is targeting a particular level of wage growth. Have you considered adopting a wage growth for example once we set a percentage. We have said we want to nick the 2 more credible and we have been missing it for a decade now on the low side. We want to resoundingly achieve 2 inflation. Why has the fed decided to support the changes to the rule given that the banks enjoy certain benefits to the discount window and that the rule was intended to limit the banks on engaging in risky behavior and a. We did put out a proposal on part of the rules and of course we think that proposal is consistent with the letter and the spirit of the law and its up for comments now and we will be looking forward to reviewing those comments. I understand that youve collected a large number of metrics from the bank subject to the rule yet its never been made clear exactly how these metrics are used to determine whether the bank is complying. Is that true . We published the first i want to say six or seven years ago and very widely the regulators and Financial Institutions found it to be a bit unworkable so we set out to provide a simple set of metrics and ways that they could conduct illegal activity and add more certainty that they were doing so without having to prove every single trade it was in the heart and mind of every trader said theres going to be trading activity around about legal activities that were not covered by the rules so i think that is what they are doing and we are trying to make it more efficient in a way that is consistent with the letter and the spirit of the law. The gentleman from North Carolina is recognized for five minutes. Thank you for your Insurance Regulations into collaborative work with the u. S. State injured commissioners on solvency regulation of also the pushback against the efforts to try to force their system of insurance regulation onto the unique and sound insurance Regulatory Regime notwithstanding the progress today many are telling us that the europeans are still resistant and ultimately seek to change our regulations that they mirror dares. Will you commit to reaching out to your peers to call them exclusively the u. S. Will not be adopting a european Centric International capital standard and that we have our own rules that work pretty well . We have a statebased insurance regulatory system and the federal role is what it is and its not something we are seeking to change and we are committed to that Going Forward. They are seeking to change us. Have you had any conversations with any readers on the International Capital standard . Know i have not. Is there any reason why not or is it something that has been avoided . Im not involved in the insurance. I would encourage you to continue to press back. We have a great system that continues to work well. Also, as a part of the finalization efforts, and other changes to the capital rules will have the effect so can you discuss your views on the level of Capital Markets related activities such as Market Making or underwriting . That is in the functioning of the economy they do need to be appropriately capitalized. I would say that overall it is about right and i dont see the need to further raise capital so we are pushing forward in the fundamental view but i dont see them as needed to raise overall levels of capital. Can you share your views on the Capital Requirements in things like Market Making and underwriting how they could affect the balance between the bank driven and marketdriven finance in the u. S. System . To the extent you raise the Capital Requirements they move to less regulated and supervis supervised. Theres been a lot of discussion and others monitoring the market. In fact you have a couple of questions on the topic today when people discuss the issue sometimes i think they are referencing different thing so to help us get on the same page in your opinion how would you define leverage loan . Typically they would have the leverage of maybe six times cash flow. Theres different ways to think about it but the best way is probably not investment. Do you think theres a difference in the Banking Sector . I think theres been a trend over time for the leverage loans to be held outside of the Banking System and that has accelerated so there are far fewer than are on the books of the banks with deposit insurance and safety net as opposed to collateralized Loan Obligations extremin exchange driven funds r mutual funds or Pension Funds in. Thats where those are going now so its more like its become a distribution as opposed to a traditional lending business where they would be clumsy and put it on the Balance Sheet. You have a bank performing a function on behalf of a sophisticated investor and in this case it is but thats something we need to keep monitoring. Thank you madam chair and thanks for being here. I would like to return to the topic of Climate Change. On the working class communities likworkingclass communitiesliko district they are often the hardest hit. Climate change is also a risk to the Financial Sector. Jim cramer on the host on cnbc in a discussion last week said the nature investors want nothing to do with fossil fuels because of concerns about Climate Change to guard against Climate Change impacts the bank of england has decided to stress test the uk capital banks against the risks associated with Climate Change or the Federal Reserve follow suit and develop climate related stress tests. We are monitoring what the bank of england is doing and by the way, those are stress tests that are not like ours and the ability to distribute. It incorporated in Climate Change into economic forecasts would become more important. Climate disasters such as the wildfires that swept through last year are currently labeled transitory risk by the Federal Reserve, but we know the weather events will become more frequent and severe end of the island of which the communities of color. It would shift from being considered a transitory factor to a structural factor they are not for the longer term, its whats important is the next year or the next two years and three years. Climate change just operates on a longer cycle than that. Of course as Severe Weather becomes more common thats connected to Climate Change and you will see those things in the forecast period and certainly the supervisory practices as well as the economic forecast. In a recent speech on the economics of Climate Change, they said they participated more actively in climate related research and practice, the Federal Reserve can bfederal ree effective in supporting a stable Financial System. Do you agree with the governors statement if yes, what more will the fed do in the future to identify and mitigate the financial risk of Climate Change . I do think its incumbent to do the research and understand the implications of Climate Change over our supervisory role looking after Financial Stability. I think it is in the early days for that, but the public will expect that we do that and that we take the measures we need to take to make sure the Financial System is resilient. Do you agree with her statement . The Big Bank Mergers and market concentration, three months ago the Federal Reserve approved a merger that created the sixth largest bank in the u. S. With more than 450 billion total asset and difficult reserves own Research Suggests the failure of a single 250 billion bank would be far worse for the economy and a 50 billiondollar bank. They warned that the fdic would be able to wind down a bank the size of the combined trust without imposing significant losses on the Deposit Insurance Fund destabilizing the Financial System. For the conclusion that this transaction would not appear to result in meaningfully greater or concentrated risks to the stability. I think we can and do it. We dont think the mergers under the statutory framework very transparently and with a number of public hearings and we looked at all the statutory factors and essentially you have the banks coming together to perform a Regional Bank at ten to or smaller than many of the other Regional Banks. Thank you, i will yield back. The gentleman from tennessee is recognized for five minutes. I heard your statements and opening remarks in regards to some of the questions that weve had today. Ive noticed this morning in a report that the traffic at a u. S. Port is expected to climb in february almost 13 in march between nine to 10 yearoveryear. Assuming those numbers are, what impact if any would that have on the Retail Sector an and what if any would it have on the overall economy . I think theres a lot of uncertainty about what the effect would be outside of china and the United States. The question we expect it consistent that there would be some effects. The question would be the size and scope of. The bottomline question does it represent a Material Change into something we should react to as a monetary change it is too early to say will b where we be monitoring it like everyone else and that is where we are. Along the same lines, and also they quoted from the bank of america security reports of a survey of 3,000 companies about the global supplychain and Many Companies around the world are looking at relocating and cold to report a quote on quote tectonic shift looking into other areas of south asia, india, also north america. I dont know if you are familiar with the study of the bank of america security study is reported or not. Or those numbers are anecdotal statements consistent with anything the Federal Reserve has seen . Im not familiar and therefore i cant comment. There are a number of channels through which this could have an effect, first of which is just tourism. Second is our ability to export its list because there will be less going on so there are exports that could go down. You mentioned are really supplychain, so many u. S. Companies by intermediate goods as part of the final product, so the supplychain issues we dont have any evidence on the net. We will have to wait and see. Theres no way to be confident about anyones assessment or range assessments. I think that i know your answer but i will ask anyway. The report mentioned between our country and china and the impact that its had but also automation and the increase in automation. Does that sound consistent with relocating the supplychain . Separate from the questions about the virus, the quickly has been on the part of the American Companies a lot of activity in moving to other jurisdictions like vietnam as just mentioned quite a bit. I saw a report last week and a number of others that had american businesses moving in the production activities out of china to others and that certainly has happened. Along those same lines, i represent part of methodist and it was made to three weeks ago that the relocating a new facility and incidentally have questions on the minimum wage. They start at least 15 an hour plus benefits that talked about the new jobs in combination with automation in terms of packing and shipping. You talked about your concerns with automation and the effect that woulit would have on emplon the future. Can you see the two coexisting . Over the last two and a half centuries we have seen advancing technologies. If theres been a concern that it would replace human labor, and that has happened but what has happened is its made it more productive so theres a displacement of current workers overtime the advancing technology has led to rising incomes but that doesnt mean there wont be disruptions in the left pane for people in the short term but nonetheless the process over time has led to rising incomes. The gentleman from florida is recognized for five minutes. I would like for you to explain to me for the past almost three hours or two hours and 45 minutes when you were talking in memos on the committee speaking in terms of how well the economy is doing and how we have more opportunity for jobs and the economy. When you started speaking it was up 125 points. While you were speaking it went down. Can you tell me why Something Like this occurs, was listening to your speech this morning in front of the Financial Service committee is it because of constant Interest Rate, how cano you explain that . Im not following as i sit here listening to the questions. I know the president tweeted something similar. Do you react to that or does it not mean that much to you . Also about how it went down, the cutting of Interest Rates, do you react to that or is it just something that happens . My colleagues and i are completely focused on using the tools to support the American People and the achievement of the goals and that is all we are focused on. Explained to me from a staff report, it was stated that starting in july of last year that from about three different times, the Interest Rate was cut by a quarter . How do you make the decision when you made this all the way through september to the Interest Rate. We were looking at confusing is whewhen we did that and yes s definitely to support the economy. Part of that was to offset the effect of Global Factors into their eye would say trust the slowdown in growth in the Global Economy went on and on and we felt it needed to offset a antique insurance against the effect that might have on the u. S. Trade policy uncertainty was weighing on the economy and we tried to offset any potential effects and take out some spare. The third reason is that we wanted to do what they could guard against a more prolonged shortfall of inflation from the 2 objective such as inflation moving back up, those were the reasons why we did those three things and that is the thinking that we had and announced. Could there be a correlation between the student debt crisis and the slowdown of the Housing Market which we talked about a great deal in the last couple of months . Many are not able to get homes because of the high debt to income ratio. Could there be a signal that there is a great need to addre address . The rising student debt there is increasing evidence that shows students that cant pay or service that debt have difficulty having normal economic lives. I havent seen any evidence that would suggest its an important factor driving the housing industry in the last seven or eight months and just overall good labor market showing up in more housebuilding in housing sales. I have a lot of students at my district and many of them are coming out of school. The concern going into the job market how can they best to shae in the American Dream without getting help from their parents so with that i would yield back. The chair wishes to remind members we have a hard stop at 1 p. M. And the gentlewoman will be the final member to ask questions and with that of the e gentleman from indiana mr. Hollingsworth is recognized for five minutes. I appreciate the time into both in private and public have been complimentary of the work that you and your colleagues have done not only in calibrating the conditions to match the current economy but also the frame work by which you make many of your decisions and present it in public. I know a cornerstone of what you have been trying to say is to bring more transparency and its one of the decisionmaking sand press conferences that you have added a lot of transparency to so its hard for me to understand some of the challenges in the Capital Buffers into the inability to pin down changes to the expectation of changes especially when its already started. I know ms. Wagner also asked about this and i think i sent a letter to you signed by every member on this side of the aisle to get a feel for the changes that are going to be made and what is the timeline for those that would undertake these stress tests. They are trying to make decisions with the multibillion dollar Balance Sheet. This time is now upon us and we are still being vague about what is coming down the pike and when we can expect even when we could expect it to arrive before this so i wonder if you might get some more reason to buy you and your colleagues have been more hesitant to answer the. I cannot give more clarity than exists so we do expect it will be in a stress test this year and we will do that in a way that is timely. Some of the aspects of this need to be calibrated. We put a lot of in the place you and thought we were doing the right thing in doing so but perhaps we have the unintended effects that were not as great as we thought they would be or maybe perhaps this wasnt the area we needed to focus on and i think we would agree this requires significant calibration Going Forward. Do you expect there will be a further review of the tests to reflect either Current Conditions and what we have learned since the crisis about what works and doesnt may be adding to significant reserves in the same positions. My strong view is that the levels of capital particularly in the largest institutions are about right and theres no intoe need to lower them. Helped me understand what you look at to sahave to say this mt right. They are higher in the quality of the capital. That is undoubtedly true that we all agree that during the crisis or the pre crisis they were not adequate as it does say they are higher is that the amended terms of our day to high or too low word about right and what do you use to indicate . The stress test for one and you throw out ththey would throe scenario that is the equivalent were stronger tha than what hapd in the Global Financial crisis since they denzi do these instie the wherewithal to remain reasonably well capitalized enough to continue to have the market. That is the question to be about certain minimums in that the int by a giant barge and suggests capital is too high. The stress tests are a great test for that. You can see how it might be caught in a circular logic we can btheycan be caught in these independent we believe thats right without Going Forward and changing some of the underlining factors that go into the stress test you can always say that as long as they trim the bar that its about right, no matter what the bar is they want to go back and look underneath the hood and say why are these correct the way weve done these is that the right way to do that so maybe its as theyve indicated that absolute to the question is if testing the right thing or are we doing the test correctly doesnt include the right variables that is what they are looking for is clarification on how to expect that review as we talked about that we had a conference last summer with experts and academics, people from the banks. We are doing that all the time, everything is a stress test and transparent and things like th that. You are recognized for five minutes. I also want to thank the activists in the room that has e been organizing for the more responsive that i know having been raised by a human rights organizer that activism can be a fulltime job. The decisions you make to impact everyday working people. Your decisions impact how many jobs we have, who has both jobs, how much they are being paid and who is most harmed when unemployment is high. Now some said we want this to be shared and we need policies to make that happen. However, the approach has never successfully ansuccessfully ensh wellpaying jobs are available to everyone who wants to work even for smalltime. In may 1944 address them if they are called for a second bill of rights, which included the right to a useful and financially rewarding job. Justice Thurgood Marshall argued the right to a job is by the 14th amendment. And Martin Luther king called on the government to guarantee of job to all people who want to work and are able to work. And the legacy has often refused to just one speech at the march on washington often mischaracterized the march on washington was the march on washington for jobs and freedom. It was a march for economic justice. Doctor king and coretta met in boston and i dont think she gets enough oxygen for the role she played in the movement. So after doctor kings assassination, he picked up the mantle to adopt a full employment mandate and was actually standing behind president carter as he signed the act into law and thats the reason you are here today. In the interest of time if they would indulge me yes or no, given persistent concerns about inflation, do you believe the Federal Reserve can achieve full employment, and bifold employment i mean anyone who wants to work and can will have a job available to them. First, thank you for that history. I didnt know that. That is what we are working to do at all times and we are never going to say that we have accomplished the goal but they certainly mention progress. Can a federal job guarantees succeed where the Federal Reserve has upcoming yes or no . Thats a hard one to answer. Guaranteeing the job that is the history that i was providing. By all indications the economy has had output well below for eight of the last ten years and most of the decades prior. Is it true that most of the period has seen unemployment well above target while we almost never see inflation above target . That is true. So meanwhile, black unemployment remains double that. The fed began raising rates in 2016 even though inflation was still below target and when the rate goes up, unemployment tends to as well. Do they consider how raising the rate would disproportionately impact those that are already struggling to secure employment like communities of color and individuals that were incarcerated . I would say its continued to go down quite significantly as we begin to raise the rate at the end of 2016. Did they consider how raising rates would disproportionately impact of those who were already struggling to secure employment . The right thing to do is get Monetary Policy back towards the place where its reflected in an economy that have recovered quite a bit for the benefit of all people including low and moderate income people. Theres a lot of people still recovering. But in the interest of time given that thereve been no sign of the economy overheating since then and you are now cutting rate is at the possible you began cutting them too soon . We have to make the decisions in real time. Weve learned something since then and that is that it can be lower than most people think. Severe minimum, knowing what you know what you still have supported raising the Interest Rate when the fed did . Hindsight is 2020. The decisions are what w on what the time. With more americans have jobs today if they didnt increase over the past three years . I dont know. We are at a 50 year low. Its a good question. Thing you. I would like to thank chairman powell for his testimony today. Without objection all members have five legislative days with which to set it additional written question for the witnesses to the chair which will be brought to the chairman for his response. I ask you to please respond as promptly as you are able. Without objection, all members will have five good as that of days with which to set it extraneous materials to the chair for including in