Transcripts For CSPAN2 Key Capitol Hill Hearings 20240622

Continued the calls for the destruction of israel. These are the people we just allowed, are all lowg in the process to more weapons and to become nuclear weaponscapable. Just last week iran called, as it has for decades for the destruction of israel. And the death to america. In fact, as irans Supreme Leader stood by calling for the need to fight the u. S. , even if there is an agreement. I dont know that weve ever entered into an agreement with another country before that while we enter into the agreement they say and by the way, no matter whether there is agreement or not we want to continue to see the u. S. As an enemy that we need to fight. This deal undermines the security of our friends and allies it legitimatizes irans unapologetic sponsorship of terrorism throughout the middle east. Interesting what could be included, by the way mr. President , what couldnt be included. Iran has repeatedly refused to abide by International Agreements that require inspection of Nuclear Facilities details of facility designs, acquisition and production of Nuclear Materials and what makes us think that iran is going to change that behavior now . The negotiations themselves should lead us to believe that the old iran is still the new iran . This is a bad deal, its a deal that just hopes that in the next eight or ten years the iranian government totally changes the iranian attitude totally changes, our relationship with them totally changes and just hopes that in the interim between the time that we have that hoped for change, the iranians dont cheat. This is a hope, not a strategy, and it is a hope, not a strategy that we let the world much more destabilized on top of. After months of negotiations, iran hasnt released a single american prisoner or they havent announced any intentions to do so. The iranians, the russians, the chinese, the syrians or at least syrians that still are controlled by assad may like this deal, but this is a bad deal for the United States of america. Its a bad deal for world stability. It is a bad deal for our friends. And frankly i think that the law that the Congress Passed that now gives the congress of the United States 60 days to look at it will turn out to be 60 days that the president himself is about to find out whats in the deal that he and the administration signed. This is a serious matter for every member of the senate. I was asked earlier today are you going to are you going to lobby members of the senate as to how they should vote on this agreement when it came up. I said im going to do everything i can to talk about the real shortcomings of this agreement, the destabilizing of this agreement but every member of the senate is going to have to answer for this agreement and this vote for a long time. Members of the senate on their own are going to have to decide what side of this to wind up on, and, mr. President i predict that a majority and maybe a substantial majority in the senate will wind up understanding that this is a bad deal for america and a bad deal for the future of world se the presiding officer without objection. Mr. King fellow citizens, we cannot escape history. We of this congress and this administration will be remembered in spite of ourselves ourselves, no personal significance or insignificance can spare one or another of us. The fiery trial through which we pass will light us down in honor or dishonor to the latest generation. That was Abraham Lincoln in a message to congress, december 1 1862. And i think his words echo today as we talk about the serious and solemn issues before us and the one that will be coming up within 60 days, the consideration of the agreement with iran. We are embarked, mr. President on an historic process a process that will result in one of the most important votes that any of us will ever take in this body a vote that entails risks of war and peace of life and death, of relationships in the middle east and throughout the world. Ive been thinking in the last 24 hours how to approach this decision and id like to sthair that today. Share that today. This is a solemn responsibility. The first step for me is to read the agreement to read the agreement word for word and to note in the margins the questions and data and analysis that we think we need in order to make this decision. Thats number one. Number two is to seek expertise to reach outside of this body to people in the nuclear field. You need to be literally a Nuclear Physicist to understand some parts of this agreement. To arms inspection people, to economists to Foreign Policy experts i hope and expect that this will happen in hearings before the Foreign Relations committee and other committees of this senate. But it also, i think is incumbent upon us as individuals to reach out to try to gain as much knowledge and expertise in the facts of this agreement as we possibly k can. Then i think we need to debate, to really debate, with the senators here in the chamber face to face. Our legal system is based upon the principle of an adversarial system where truth emerges from the fire of argument, and i believe thats something we owe the American People, not the strange debate that we have where one person comes and speaks to an empty chamber anden this another person comes and speaks to an empty an empty chairman. But i think this is an occasion where senators should confront one another with their best arguments, their best facts and listen to one another and make their decisions based upon what they learn and they hear. And, of course, the context of thedditionofdecision is important. We must consider the alternatives. What happens if we dont accept this agreement . What happens if we do . No agreement can be like this can be judged solely in isolation. It has to be viewed in terms of what are the alternatives . What if nothing happens . What does iran do then . What are the relationships in the middle east . What is irans path to a bomb if this agreement is not approved . Mr. President , i did not plan to come to the floor today but im here because ive been shocked and, frankly surprised at the outpouring of reaction from people who havent read the agreement, who havent studied the implications, who havent gained the facts. To denounce an agreement or a deal before the ink is even dry strikes me as an abdication of our responsibility. My message today is, lets slow down appeared take a deep breath and take a deep breath. Lets listen to one another. Lets gain the facts. I have not yet made my decision, and i commend that position to my colleagues. This is too important to become just another political issue. Even though were headed in a president ial year, even though there are partisan differences even though there are differences with this president this is an historic vote and it is a solemn responsibility. We owe our constituents, we owe the people of our states and america a close reading of the facts, a balanced weighing of the alternatives, and our best judgment. Thats what the people of maine expect of me. And i believe that is what the people of america expect of us. The senate has an extraordinary opportunity to regain its place in this country as the worlds greatest deliberative body, and that means we have to deliberate and listen and learn the facts and thats how we should approach this momentous decision. History will judge us, mr. President. History will judge us, not only on our ultimate decision but how we reached it, how we wrestled with the facts and the alternatives and the consequences and how we made this decision that will have longterm implications for this country, for the middle east, for our allies, and for the world. Mr. President , i have confidence in this institution. I have confidence that we can make this decision in a thoughtful deliberative, and consciously deliberate way to reach a conclusion that is in the best interests of the people of america. Thank you mr. President. I yield the floor and suggest th the brutal truth is millions continue to do to her on the brink of poverty. One way our economy can be healthier is for the Federal Reserve to be more predictable in the conduct of Monetary Policy. Economic growth moderation of 1987 to 10,003 the fed follow them were clearly communicated and understandable and predictable rule. America prospereds were left with socalled Forward Guidance which remains amorphous,amorphous, opaque, and improvisational. This leads to investors and consumers being lost in a rather hazy mist as they attempt to plan their economic futures and create a healthier economy. As one former fed pres. Ezra monitor policy uncertainty creates inefficiency in the capitol market. Thethe fomc gives lip service to policy predictability but his statements are vague. The fomc preachesthe fomc preaches the policy is data dependent the obama tell us what date and now. Following mantra policy conventions with the power to amend it or deviate from this in no way interferes with the feds Monetary Policy independence. Accountability and independence are not mutually exclusive. Next we in congress would be grossly negligent if we did not engage in greater oversight of the Federal Reserve system. Dodd frank and 1st sweeping new powers on the fed to regulate and control virtually every corner of the Financial Services sector of our economy completely separate and apart from its traditional Monetary Policy role. Yet too often the fed appears to shield these activities from public view improperly cloaking them behind Monetary Policy independence second the fed has now employed a historically unprecedented massive popups lets credit markets are paying interest is on excess reserves and keeping Interest Rates near zero. Zero. The fed has blurred the lines between fiscal and Monetary Policy. The fed has recently crossed the line by willfully ignoring a lawful congressional subpoena for documents. Thisdocuments. This is inexcusable and unsupported by legal precedent and cannot be allowed to stand. The feds refusal to cooperate in a congressional investigation threatens both his reputation and credibility. The fed is not above the law. It is a serious matter and must be resolved. Thethe chair now yields to the Ranking Member three minutes for helping statement. Thank you and welcome back. I am pleased you are hear as we commemorate the fiveyear anniversary of the enactment of the dodd frank wall street reform act. Dodd frank was signed in the long just as we emerged from the worst economic collapse in a generation no one was destroyed nearly 16 trillion in Household Wealth and 9 million jobs displaced 11 million americans from there homes and double the Unemployment Rate. We have seen improvement. Significant progress has been made directing practices. Delivered victimized consumers with greater transparency. Putput in place clear rules of the roads. That stability along with the help of extraordinary monitor policy accommodation has led to growth including the creation of nearly 13 million private sector jobs, unemployment falling to its lowest rate since september 2008 recovery house market, Housing Market with significant increases in 401 k balances and the s p 500. These improvements, a picture of an economy that has recovered. The gap between communities of color and women versus the white male counterparts remains dramatic. Aa lackluster 1st quarter and strong dollar is slowing abroad sapping momentum. As such ii hope the board of governors we will continue its slow and cautious approach to raising Interest Rates. As you know, raising interest raising Interest Rates does not in itself create a Strong Economy. Thethe Strong Economy must be the impetus for raising rates. If inflation can continue and numerous indicators of slack, it is my hope the Federal Reserve will fully consider the impact of any potential interestrate increase in the middle class and those communities and have yet to benefit from the economic recovery. I irecovery. I thank you and look forward to your testimony and yield back the balance of my time. The gentle lady yields back. Up over here. Sorry. Theres like you are closer to the botanic garden. Thank you for honoring my request. Todays hearing provides us with another opportunity to examine how the Federal Reserve conducts Monetary Policy and by the development is in desperate need of transparency. The feds recent high degree of discretion and lack of transparency suggests that reforms are needed. I continue to encourage the Federal Reserve to adopt the rules based approach and to continue to communicate that rule to the public. Last congress professor Allan Meltzer testified over the 1st hundred years the Federal Reserve history Monetary Policy is operating more effectively if you follow simple and clearly understood rules. They came close to operating. The best two and fed history. In 1920. 48 and an 8528 and an 85 to 2,003. They operated under some form of golden standard and the 2nd under the taylor rule. Those were the two and only two that have low inflation are relatively stable growth, small recessions a quick recoveries. I ask that you work with me in this committee to develop a foundation for rules based Monetary Policy that we will properly borrow and constrain the fed. While also allowing the fed to be more transparent to not only Market Participants but the American People. Thank you and i yield back. The gentleman yields back. The gentle lady from wisconsin for two minutes. Thank you. You. I am happy to welcome you back and i look forward to your testimony. I think this committee will benefit from your strong background in economics. We are of course in the midst of us cant two years job growth. 5. 6 million jobs. I have some concerns. You talk about slack in the labor market. That slack is disproportionately borne by africanamericans and latinos. So this brings me to the critical importance of the full employment part. And so while we are plotting upward theyre are still many storm clouds. I want to see growth which we will create jobs and decrease the National Debt. I cringe at the austerity policies of this Republican Congress because ii think it works at cross purposes with your progrowth policies. I want to here you talk about that. That. Your predecessor came to congress and said the shutdown for example of counter productivity. We want to get the slack out of the labor market. Congress needs to embrace growth policies that we will help working people, wall street is doing just fine. But we need to invest in education and infrastructure, increase the minimum wage so we can get more Consumer Spending money you know, i read in your testimony that the us exports are slumping but this committee has refused to reauthorize the export import bank. These are unforced errors, and i thank i thank you and look forward to hearing your testimonys. The gentle lady yields back. We welcomeback. We welcome the testimony of the honorable janet yellen. Previously testified before our committee. Evolution is no further action. If the request of the chair i wish to inform all members ii intend to adjourned the hearing at 1 00 p. M. This afternoon. Without objection. The statement we will be made a part of the record and you are now recognized for five minutes to give an oral presentation. Thank presentation. Thank you for being here. Thank you. Chairman, Ranking Member members of the committee, i am pleased to present the Federal Reserve semiannual Monetary Policy report to the congress. In my remarks all discuss current Economic Situations and outlooks before turning to monitor policy. Since my appearance before this committee in february the economy has made further progress toward the Federal Reserve objective of maximum employment. While inflation has continued to run below the level that the fomc judges to be most consistent over the long run with the Federal Reserve statutory mandate to promote maximum employment and price stability china [the Unemployment Rate stands at 5. 3 percent slightly below this level at the end of last year and down more than four and a half Percentage Points from its 10 percent peak in late 2009. Meanwhile most of the gains averaged about 200,000 somewhat less than the robust 260,000 average seen in 2014. Itit is still sufficient to bring the total increase of employment to more than 12 million jobs. Other measures of job Market Health are also currently in our direction with noticeable the clients past year and a number of people suffering longterm unemployment and in the numbers working parttime who would prefer fulltime employment. However, these measures as well as the employment rate continue to indicate that there is just like in labor market. For example, too many people are now searching for a job that we will likely do so if the labor market and stronger. Although theyre are attentive signss that wage growth has picked up it continues to be relatively subdued, consistent with other indicators of slack. This while labor Market Conditions have improved substantially they are in the fomc judgment not yet consistent with maximal employment. Even as the labor market was improving domestic spending in production saw no softened notably. Real gdp is now estimated to have been little changed in the 1st quarter after having risen at an average annual rate of three and a half percent of the 2nd half of last year. An Industrial Production as declined a bit unbalanced since the turn of the year. Will these developments bear watching some of the sluggishness seems to be the result of transitory factors including unusually severe Winter Weather labor disruption and statistical noise. The available data suggests moderate case of gdp growth in the 2nd quarter as these influences dissipate. Wwor continues to grapple with weak markets and financial conditions. Economic growth abroad could also pick up more quickly than anticipated providing Additional Support for u. S. Economic activity. The u. S. Economy also might snap back with influences holding down first half growth and the boost to Consumer Spending from oil prices. As i noted earlier, inflation continues to run below the 2 objective. With the personal price index up only one quarter of a percent over the 12 month ending in may. The core index which excludes the volatile food and energy is up one and a quarter over the same period to a significant extent, total pce inflation reflect influences that are likely to be transitory. Particularly the steep declines in oil prices and non energy imported goods. In indeed they have started to stable recently. Monthly inflation readings confirmed the 12 month change in the pce price index is likely to remain near its recent low level in the near term. My colleagues and i continue to expect that as these dissipate and the labor market improves further, inflation will move gradually back to our 2 objective over the medium term. Marketbased measures of compensation remain low although they have risen some from their levels earlier this year. Longerterm expectations have remained stable. The committee will will continue to monitor Inflation Development carefully. Regarding Monetary Policy to promote maximum employment and stability as required by our statutory mandate from the congress. Given given the Economic Situation that i just described, the committee is judged at a high degree of Monetary Policy accommodation remains appropriate. Consistent with that assessment would continue to maintain the market range for the federal funds rate at 021 quarter percent and has kept the Federal Reserve at their current elevated level to help accommodate financial conditions. In its most recent statement they noted that if judged it would be appropriate to raise the target range when it is seen further improvement in the labor market and is reasonably confident that inflation will move back to the 2 objective over the medium term. They will evaluate it on a meeting by meeting basis depending on the assessment of realized and expected progress toward its objective of maximum employment and 2 inflation. If the economy evolves as we expect, Economic Conditions likely would make it appropriate at some point this year to raise the federal funds rate target. Thereby beginning to stabilize. Projections in june for the target range would likely become appropriate before year end. Let me me emphasize again that these are projections, based on the anticipated path of the economy, not statements of intent to raise rates at any particular time. The decision by the committee to raise its target range for the federal funds rate will signal how much progress the economy has made in healing from the trauma of the financial crisis. That that said, the importance of the initial step to raise the target should not be overemphasized. What matters for financial conditions is the entire expected path of Interest Rates, not not any particular move including the initial increase in the federal funds rate. Indeed the stance of Monetary Policy will likely remain highly accommodative for quite some time after the first increase in the federal funds rate in order to support continued progress toward our objectives with maximum employment and 2 inflation. In the projections prepared for our june meetings, most participants anticipated that Economic Conditions would involve over time in a way that will warrant gradual increases in the federal funds rate as the headwinds that still read strain activity activity and inflation rises. If if it proves to be more vigorous than currently anticipated and inflation moves higher than expected, then the appropriate path would likely follow a higher and steeper trajectory. Conversely if conditions were weaker than the appropriate trajectory would be lower than currently projected. As always we we will regularly reassess what level the funds rate is consistent with achieving and maintaining the committees dual mandate. Id id also like to note that the Federal Reserve has continued to refine it plans pertaining to the deployment of tools when the committee judge its it appropriate to begin normalizing this policy. Last fall they issued a detailed detailed statement concerning its plans for policy normalization. Over the past few months, we have announced a number of Additional Details regarding the approach the committee intends to use when it decides to raise the target of the federal funds rate. These statements pertaining to policy normalization, constitute recent examples of the many steps the Federal Reserve is taken over the years to improve our Public Communications concerning Monetary Policy. As this committee well knows the board has, for many years delivered and extensive report on policy and Economic Development at semiannual hearing such as this one. When they long announced the policy decision by issuing statements shortly after its meetings followed by minutes with the full account of policy discussions. And, with an appropriate lag meeting transcripts. In recent years they have included Quarterly Press conferences and participant projections for Economic Growth, unemployment, unemployment inflation and the appropriate path for the committees Interest Rate target. In in addition, the committee adopted the statement in 2012 concerning its longer run goals and Monetary Policy strategy that included a specific 2 longer run objective for inflation and inflation and the commitment to follow a balanced approach in pursuing our mandated goals. Transparency concerning the Federal Reserves Monetary Policy is desirable because better public and the understanding enhances the policy. More important however is the Transparent Communications reflect the Federal Reserves commitment to accountability within our democratic system of government. Our various communication tools are important means of implementing Monetary Policy. They have many technical elements. Each step forward in our communication practices has been taken with the goal of enhancing these effective policies and avoiding unintended consequences. Effective communication is also crucial to ensuring that the Federal Reserve remain accountable but measures the ability of policymakers to make decision about policy free of shortterm political pressure in the name of transparency should be avoided. The Federal Reserve ranks among the most transparent of Central Banks. We publish a summary of our Balance Sheet every week, our Balance Sheets are audited annually and made public every security we hold is listed on the website of the Federal Reserve bank of new york, any conformance and transaction level data on all of our lending , including the identity of borrowers and the amount they borrowed is published every two years. We must avoid unintended consequences. This could undermine the Federal Reserves ability to make Monetary Policy in the long run best interest of American Families and businesses. In sum, since the february 2015 monetary 15 Monetary Policy report, we have seen despite the soft patch and Economic Activity in the first quarter, that the labor market is continued to show progress toward our objective a maximum employment. Inflation has continued to run below our longer run objective but we believe transitory factors played a major role. We continue to anticipate that it will be up appropriate to raise the target range for the federal fund rates, when the committee has seen further improvement in the labor market and is reasonably confident that it will move back to its 2 objective over the medium term. As always, the Federal Reserves remain committed to employees and to employee its tools to best promote the attainment of the dual mandate. Thank you, i would would be pleased to take your questions. Thank you. I hate to take up time to ask this, but its an important matter. As we know they vastly expanded the Monetary Policy role of the feds through no fault of your own, there has not been a vice chair for supervision appointed. My counterpoint in the senate has requested that you come on a semiannual basis until such a time that the president fills that position and testify on the macro prudential regulatory role of the fed. Your written response to our request, put to put it politely was not responsive. Will you voluntarily honor our request . If you answer yes ill take that as an answer if its no ill give you a moment to explain. I stand ready to respond to rest request from this committee. Thank you i will take yes for an answer and we will certainly issue those invitations. I want to discuss with you the power of 13. 3 cause. There seems to seems to be a growing consensus on both sides of the aisle that dodd frank notwithstanding its intentions, to constrain 13. 3 did not hit the mark. In fact Elizabeth Warren has been outspoken on the matter and is introduced Bipartisan Legislation on the senate side in this regard. Setting aside the arguments on whether or not the aig bailout was a good thing or bad thing post dodd frank is that your interpretation that the fed retains the power to do a similar bailout of aig where counterparties and creditors could receive 100 cents on the dollar including foreign entities . So let me start by saying the role of lender of last resort is a critical responsibility of the Central Banks to fulfill around the world. Its why the Federal Reserves was created. I i do believe this is a very important power we need to address liquidity and pressures in times when there is unusual financial stress. However Congress Congress did amend section 13. Three in dodd frank to allow the reserve to extend emergency credit to the Financial System only through facilities that have broad based eligibility. We could not use those powers to address the needs of a single firm like the aig situation. Several other firms and aig bailout was made available to a specific firm as long as it was made to multiple firms. There is still nothing preventing the fed from ensuring counterparties and creditors get 100 cents on the dollar. Is that correct . Or do you disagree question marks. Section mark. Section 13. Three was amended to state specifically dash. Im familiar with the statue, im trying trying to figure out if you think it constrains creditors getting 100 cents on the dollar. Well if we have fight feeling Financial Firms we would not be able to place a broad base of facility that was intended to help those firms. That is not allowed by dodd frank. Let me ask you this question. There. There is a difference of opinion there. Federal reserve Bank President recently gave a speech dealing with 13. Three and dealing with moral hazard. I agree the last resort is important but so is moral hazard in creating Systemic Risk. The president said a final step may be required before Financial Stability can be assured. This would would mean repealing the Federal Reserves remaining lending powers and further responding the feds ability to to lend to failing institutions. Are you aware of his views on this topic . I am aware of his views but i disagree with him. When do you expect. He has been amended to limit our powers to bail out a single or a failing firm when do you expect we will have the final rule on 13. 3 because three because we know there were 800 pages dedicated but we see no such effort in defining the concepts and solving it in broadbased. We are presently seeing no strength to this. When are we expecting to see a final rule . Wiese put out a draft rule and received a number of comments and are working hard to come out with a revision. I expect it will be out in the fall. Thank you the time has expired. We now recognize a Ranking Member for five minutes. Thank you mr. Chairman. Chair yellen, this morning i woke up to yet another story about discrimination against minorities. It seems honda has been caught by charging higher Interest Rates on their loans to africanamerican and latinos. When i hear those kinds of stories im reminded about the predatory lending practices that took place in this country in 2008 and how these practices were targeted to minority communities. When they compared the income and the credit that blacks and minorities, the credit records to the credit records of whites, it could be the same that they were paying higher rates. When i when i look at the loss of wealth in these communities based on subprime lending, i cannot help but wonder when this is going to stop. While we have you here today and were talking about policy and Interest Rates qualitative easing and et cetera, i dont know how much you can do to deal with this inequality. I dont know if theres anything you can do that deals with discrimination, that deals with racism, that deals with income inequality that deals with the problems that causes this great wealth gap that so big now that it will never be closed. We hear a lot of talk about income inequality and the wealth gap and we look at the high Unemployment Rates in the African American and latino communities and sometimes you just think, despite the struggles despite all of the work, despite the challenges some of the stuff will never go away in this country. So, i guess im asking you because you have a responsibility for some of what goes on in this economy relative to some of these issues. What could you do . What could you do about honda and the banks and the creditor practices that continue to vouch you know African Americans and latinos, and offer these products to our community . What do you say about all of this . Let me begin by saying the practice that you described and the inequality, the impact that it has on africanamericans and disadvantaged groups is something that greatly concerns me. I think it is of tremendous concern of all americans. In terms of what we can do when it comes to lending we are responsible for supervision of Financial Institutions to make sure they adhere to fair lending practices and we test regularly in our consumer compliance exams to make sure that the firms we supervise are abiding by congresses rules pertaining to equal credit opportunity act to make sure there are not unfair Credit Practices that are being directed toward minorities or toward any americans. That is an important goal that we work to make sure the banks we supervise meet their responsibilities, which i think has been a benefit to low and moderate income communities, and more broadly, and, in terms to our monetary responsibility, maximum employment and stability are the two major goals that are assigned to us. The the downturn that we experienced after the financial crisis where unemployment rose to over 10 , was particularly punishing to africanamericans and lower skilled workers. A Strong Economy, getting the economy recovering and trying to get it back to maximum employment, lowering the Unemployment Rate traditionally africanamericans and other minorities have had higher Unemployment Rates. We dont have the tools to be able to address structure of unemployment, but across groups, but a Strong Economy generally really does tend to be beneficial to all americans. That is is what we are working toward. There are other policies that i think congress could consider that would address these issues. The time of the young lady has asked byard. We now recognize the young man. We share a respect for rulesbased Monetary Policy as you put it when you served on the fed board in the mid 90s. What sensible Central Banks do and we are in pretty good company. The past president of the Federal Reserve bank of philadelphia spoke of the importance of rules and regulations. To practice it as part of us systematic policy framework. I believe that is the key way to affect policy decisions. Testimony before this committee in december of 2013 former director of the Congressional Office also endorsed a rulesbased policy saying certainly i would like to see a far more ruled base up approach by the Federal Reserve that doesnt rule out discretion. They can pick the rule they want to operate, but if they can provide it to the congress and the American People the American People will know what they are up to and they themselves have said Forward Guidance is critical. We need to know what they are going to do. Rules provide that. Im curious when you and your colleague at the fed will adopt a rules based policy. So you used the term systematic policy and i want to say that i strongly endorse following its systematic policy and during my term as vice chair and as chair i have tried to promote a systematic Monetary Policy. I believe believe we do follow a systematic Monetary Policy dash. But not a rule youre willing to share. Not a rule based on two variables but let me point you first in the Monetary Policy report on the second page of the report we have a clear statement of our longer running goals and Monetary Policy strategy. Any strategy has to begin by articulating what the goals are very clearly and the strategy that will be followed. Thats what we do their. But you do agree a rulebased policy is a better way to go. I dont agree that a rulebased policy is a better way to go. There is not a single central bank in the world that follows a rule that would rely on only two variables we take into account wealth of information informing our judgments about the economic outlook. The way we make policy systematic is we provide, and you can see this in Section Three in part three of the Monetary Policy report, each individual, each participant writes down their own forecast for the economy and the appropriate policy that goes along with it. From that you can get a clear sense of how we expect t in line with our forecast. Im not convinced that is clear because others in the market dont believe thats clear. Other economist dont believe thats clear. We are not trying to handcuff you, but we are asking that you write a rule within descriptive parameters to use as a reference point. Truly use it as a reference point. I know one of things you expressed here was we could find ourselves, if we had a rule, we could find ourselves in a negative Interest Rate. Simply solve that by writing a rule that says once we do that were to go to zero and no lower. We wont call it the taylor rule, well call it the yellen rule. We have something that will give predictability. Whether its others that have been in the federal Bank Reserves have said that predictability and transparency is the way to go. I know you know that we have a good discussion draft floating around that has some of that information in their, so just so im clear, you dont believe there is a time that will be right to again go toward a rulebased policy . I think we need a systematic policy, but i would strongly resist agreeing to follow any rule where at the stance of Monetary Policy depends on only the current readings of two economic variables, which is what youre reference rule relies on. Thats what the reference rule relies on but thats not what you have to follow. The ims says you shouldnt be raising Interest Rates the central bank had said lower rates to get lower late rates. Theres a lot of confusion out there as to the direction we are going and we are looking for clarity. We are following a systematic policy. The time has expired. We recognize this lady. Thank you so much and my colleague, the the chair of the Monetary Policy and trade subcommittee has been discussing with you the taylor role. Id like like to pursue that a little more. The ims is warning that if greece leaves the eurozone that it might slow growth internationally and impact the u. S. Much harder than expected. I would like you to speculate how if you are handcuffed the taylor rule, how would would that impede your response to such a crisis . The taylor rule would tell us that it should depend on only two variables the current level of real gdp or the out put gap and the current level of inflation. It obviously wouldnt take into account in any way our judgments about growth in the Global Economy how we expected the european economy would be affected or Global Financial markets by these such developments. So in that sense it really restricts any simple rule restricts the setting of Monetary Policy to a very short list of variables and typically there are current values. Thats one of the reasons. We spent spend a great deal of time and the forecast that we include in our Monetary Policy report that the participants right down, we present to the public every three months. Incorporate all of the kinds of information, what what we think is going to happen in the Global Economy, and those are Economic Developments. Those factor into our Economic Forecast and our view to the appropriate role of policy. We are providing providing a great deal of information to the public by providing these participate forecast. Our participants are telling the public how, in light of their recent forecast, concretely concretely with numbers, they think Monetary Policy should be set. That is information about the so called reaction function, namely the relationship between the economy and Monetary Policy. It is incorporated in Something Like the taylor rule. Thank you so much. Can you provide us with a quick update of this implementation of the socalled collins fix . We appreciate the Congress Passing the collins fix. In light of that we have a great deal of flexibility now to Design Capital standards that we think will be appropriate for the firms that we supervise including the insurance based savings Holding Companies in the insurance. We are working working hard to put in the Public Domain through orders or proposed rule when we figure that out. Thank you so much. The fiveyear look back our colleagues did say that weve been trying to be too big to fail. I dont think frank dodd is trying to be too big to fail. It directed us to be increasing the safety and soundness of Financial Institutions particularly those that are most systemic. It gave us tools to raise capital and liquidity to impose capital surcharges on those firms that would be deemed most systemic. We can use stress testing as a methodology to make these firms much less likely to fail and the amount of capital and liquidity is increased massively since the crisis. In addition dodd frank gave us both title to orderly liquidations which would be a new tool to resolve. I think youve covered it. Back to my idea about the labor market. Do you think ending the sequester and raising the minimum wage would be Good Strategies for getting our labor markets back together . This is a matter of congress. I knew you would say that. The time has expired. The chair now recognizes the gentleman from new jersey. Good morning. In front of me last night i read through what is called the joint staff report the u. S. Treasury market on october 15, 2014. It was the staff report that looked at what happened in the market back in midoctober. Are you familiar with that report and do you adopt that report even though i know the name of it is the joint staff report . This is a technical matter. Is this just the staffs opinion or does this include your opinion . Im certainly aware of its intensive staff work by staff in a number of agencies. I certainly support the report. Okay good, i assume so. I guess there are two questions. I also read your testimony in the addendums to your testimony this morning. First of all, is there a problem and secondly what was the cause . I thought we would all conclude that there was a problem but thats not clear from looking at the addendum to your report that came out as far as your testimony, where it says at the bottom despite the discussions and disruptions, the liquidity and a nominal treasury market do not indicate notable deteriorations. Then you go on to say that there really wasnt much problem in liquidity of the market. You give some talk about that. So i think theres a problem in other people think theres a problem. We had hearings on this and we were told there has been dramatic changes with respect to the market in recent years. So the question is is rich kitchen right that theres a problem in the marketplace or are your staff and you write that there is not a problem . Lets find out if theres a problem first of all. So i dont thing its clear whats happening in these markets. Know, but is there a problem . The report you mention that was just released looked at a 12 minute window carefully in which but overall he is saying there has been deterioration and there is a problem overall. Other panelists have said there is a problem on the market. Youre saying and your staff is saying there isnt any. It isnt clear whether there is or isnt a problem. By some metrics, liquidity looks adequate by trading volumes we dont see a problem but there are metrics that do suggest theres a problem so this is something we need to study. We need need to study it further. So youve studied it so far and have an 80 page report that looked at it and i find it troubling that it doesnt come too much conclusion. What i was looking for was the second question that the chair and i asked and lou and others what was the cause of this . This still fails to come up with any particular explanation. It runs through about a halfdozen half dozen explanation saying these are not the problem. One of them that it does refer to, it says the growth in electronic trading and other factors and regulations. That word regulation only appears twice but your staff says regulation is an indicator to the changes in the volatility and the liquidity in the marketplace. Said regulation is part of the problem right . We just dont have a conclusion about about what happened in the treasury market at this point. Regulation could have contributed in some way to this but there are many other things going on as well. It doesnt say that in your addendum at all. It doesnt say deniers death report. It doesnt say regulation. It doesnt say that here. We never got that answer from sec. Lou or anyone else from the administration. Are you saying today that yes regulations such as Capital Requirements they are potential problems in this area . There are things to look at. We have no way to know that those things you mentioned our problems. During this window. Mask your question . Did you direct your staff to look in to see if that was a problem . They dont say it once in the report that they looked at regulation as a causation. They looked at all other measures. Did you direct them to look at that and will you in the future . We asked them to look at what caused this very Unusual Movement and to study what possible causes and they were unable to find any single cause. They they pointed to a number of factors that could have been at play and it needs further study. Its galatian to be on that list of things that we look at. There is no evidence. Your time has expired. We now recognize ms. Maloney. Welcome chair yellen. I know some of you have been critical of your performance but i think you have done a tremendous job and i want to publicly thank you. You have been very responsive to congress and you have also managed to wind down the quantitative Evening Program very smoothly and right on schedule without causing any major disruptions in the Financial Market id like to ask you some questions about financial policy. Foreign Development Including the turmoil in greece and china, in your words, pose some risk to United States growth. Has the turmoil in china and greece changed your view about the appropriate timing for the first Interest Rate hike . So we look at interim National Development very carefully in developing our forecast. We have been tracking closely developments in greece and china and other parts of the world. The issues that exist are not new. For example, the committee in june was aware of these developments and in june when the participants wrote down their views of the economy and appropriate policy taking into account these developments and the risk they pose, they still thought the overall risk to the u. S. Economic outlook were balanced. They judged that it would likely be appropriate sometime this year to begin raising our target range for the federal funds rate. Of course we have continued to watch these developments, these Global Developments unfold and we will in the coming months. Who are we to judge that these developments did create substantial risks or werent changing the outlook in a notable way, then a change in the outlook is something that would affect Monetary Policy. As weve said all along, we have no judgment about the appropriate date to raise the federal funds rate. Our judgment will depend on unfolding Economic Developments and how they affect our forecast. You stress in your testimony that the pace of rate increases is more important than the timing of the first rate hike. Many economists including the imf have argued that the fed should wait longer to start raising rates, possibly waiting until next year, but should then follow a slightly steeper path of subsequent rate increases. My question is, if the fed eights longer than current forecast to start raising rates, will that mean a steeper rate of rate increases . If we wait longer it certainly could mean that when we begin to raise rates we might have to do so more rapidly. So an advantage to beginning a little bit earlier is that we might have a more gradual path of rate increases. As i indicated the entire path of rate increases does matter. There are are many reasons why the committee chose an appropriate path of rate increases is likely to be gradual. Given that we have been at this for over six years, it has been a long time, so when we finally begin we will be looking at what the impact of those decisions are on the economy. That strikes me as a prudent approach to take. As you know the markets have been anticipating a rate increase for quite some time and then it will follow one of the meetings that has a press conference afterwards. Currently there is a press press conference after every other meeting. As a result in the market view the fed only has two more chances to raise rates this year in september and november. Would the fed fed feel comfortable raising rates for the first time without a press meeting scheduled afterwards. In other words are the july and october meetings on the table for rate increases . Ive tried to emphasize that every meeting is a live meeting and we could make decisions at any meeting. Weve emphasize that if we were to make such a decision, we would, we would likely have the press a briefing afterwards and we recently conducted a test to make sure that members of the media understand how technically they would participate in such a press briefing. Time of the general lady has expired. We now recognize the gentleman from missouri. Thank you mr. Chairman. A few weeks ago we met and had a long discussion about a number of topics. One of them was Operation Show point. I asked you at that time or mentioned that i was very concerned from the standpoint that oversight reform of this report that they put out with regard to the internal email and memos that showed that they were going well beyond their Statutory Authority and duties in trying to limit the ability of certain legal business. It was impacting a lot of banks in a negative way. The fact that you oversee some of those banks as well, i felt you should be pushing back. I thought you should have a meeting with chairman greenberg. Have you done that yet . Yes i have done that. Ive had discussions with him on Operation Show point and our views about what appropriate policy was an part of the banking agencies with risk back to howard our examiners we both certainly agreed on the importance of making sure that examiners and our policies dont discourage banks from Offering Services to any business thats operating within state and federal law. He and i agreed thats appropriate policy. Did he indicate to you how he is going to stop Operation Show point within his own agency . I dont want to speak about his policy. I think its important that you make the point to him that he has to stop. In this report this report of his own emails within his own department, he is implicated as being part of the problem. Therefore, its important, i believe that important, i believe that you have a discussion so he has to cease and desist both activities and you will make sure thats done. He made explained to me that there are policies in place to be certain that his examiners are abiding by the policies. That is the banks that we supervise in the examiners in examining them do not. If at some time you find this is still continuing, will you confront him about that . If that is happening in the banks you oversee, will you confront him about that . Will you stop him from doing that if you see it . I will continue to discuss with him this issue to make sure that our policies all right. With regard to another issue we discussed one of the concerns that i have especially with insured and assets as we are designated, there doesnt seem to be a way for them to be not designated. There is no path thats written out. Obviously you can say they need to change their Business Model but i think it would be helpful whenever there designated, to say whenever you do this this and this, these are problems that can cause you not to be designated. I really dont see any path for that to happen. Can you elaborate . They review they review every single year the designations of firms and considers whether or not they are appropriate or no longer appropriate. Firms that are designated are given very detailed materials to enable them to understand the basis for the designation. I would just encourage you, every year, to be sure to put something in there so there is certainty on the part of the folks that are designated. I have 30 seconds left so let me get one more question and with regard to the boards charge of it adopting capital concerns for insurers. This is important and that this is the first time the fed ever got involved with Insurance Company capital standards. Would you commit commit to us or prioritize adult mastic capital prioritizing any of those would not become effective in the u. S. Thats my concern. We want to make sure that the domestic Insurance Industry is protected. Thank you mr. Chairman and welcome back chair woman yelling. You were quoted in a june 17 american bankers article as stating that the Federal Reserve was examining ways to improve its implementation of the Community Reinvestment act amid concerns that regulators are letting too many poor communities go unserved by banks. How would the Federal Reserve effort seeking to improve implementation of the Community Reinvestment act encourage advancements in places like the ones that i represent such as ferguson missouri and other communities throughout this country that are in poverty . Weve been working to improve implementation of the cr regulations with other banking regulators, and weve been doing that in part by trying to improve our guidance, adding questions and answers on the reinvestment, and do we came out with additional cue and day in 2013 and and we are working toward our further additions. So what this guidance does is help to meet the needs of low and moderate income folks. By doing that i hope what we will be doing is encouraging banks to consider providing the kinds of Banking Services that people in these communities need to be an important part of their program. Along those same lines of questions, you stated in your testimony your concern about the limited availability of Mortgage Loans. As a supporter of dodd frank, has the law given us unintended consequences and tap down banks ability to lend money in order for people to get Mortgage Loans . So its hard to say. I mean certainly lending standards are much tighter than they were in the time up to the financial crisis. I i think most of us think appropriately so we dont want to go back to those standards but the steps weve taken may be having some unintended consequences. We may need to work on that to make sure that credit is available. So do we need to tweak the law in order to allow banks to really get money out and into our economy and allow people to realize the American Dream and purchase homes . There are a number of obstacles that banks seek in terms of lending. There are matters that they are working on with fannie and freddie. There remains uncertainty about securitization and rules around securitization and weve not really seen an active market comeback for private residential mortgagebacked securities and that could be part of whats happening. The Federal Reserve released a report titled strategies for improving the u. S. Payment system. A followup to a 2013 consultation paper that signaled its intention to expand its presence in electronic payments. Why has the fed embarked on this Faster Payment Initiative and what does it hope to achieve and what is the Federal Reserves plan . Our basic plan is that we want to see a faster and safer Payment System in the United States. We think many steps can be taken to make that possible and the main rule we expect to play is that of the convener to bring private sector participants to the table to talk through these issues. For them we have set up task forces on faster payments and safer payments. Participants are discussing what they can do in order to bring this about so we are trying to play the role of facilitator of bringing people to the table. Time of the gentleman has expired. We now recognize the gentleman from wisconsin mr. Duffy. Welcome chair yellen. Along with my colleague we have been doing an investigation. We have kindly asked for you to reduce documents in regard to this leak. You you have failed to comply. They issued a subpoena for those documents and you failed to comply. What is your Legal Authority in the case of lower statute that allows you not to comply with the subpoena . First let me say that we have cooperated with the committee. No, no i have limited time so give me the Legal Authority that you have not to comply. Weve asked for document and you have not given them to us. We have said that we will give you the documents that you requested but we are not going to provide them now because this matter is the subject of an open criminal investigation by the boards Inspector General and by the department of justice. They have indicated to us that it will compromise likely compromise their investigation. You are the chair. You can read the statement all day long but i want to know the Legal Authority you have. Basically you said in the letter that the oig requested but you dont give it to us. You are not bound by the dod j or the oig. Weve asked for the documents. You said you will not give us the document. Is it fair to say you do not have any Legal Authority because you do not have an exemption. We said we will give them to you but we will not compromise and open investigations. We want to see this investigation succeed. You do. Lets talk about that. You want to see that succeed. Lets talk about the timeline. Congress is going to obstruct an investigation when it had information you did nothing to perpetuate an investigation that would do this to the truth. Eventually the ig did their own investigation and then they closed it and guess what . Congress did forward and said listen this is important stuff. As Elizabeth Warren would say we just dont want to have those that are wellconnected get information three weeks. We should know who the leaker is and so is because we pressured the ig with eight closed investigation and we pressured you and all of a sudden there is now second badeaux no no we cant it be that documentation because its a pending investigation and we are concerned about you jeopardizing it read madam chair it appears that you are the one who is jeopardizing or the fed is the one who is jeopardizing this investigation. Am i wrong . The fomc has in place a clear set of rules that are to be followed when there are allegations of elite. You didnt follow them. They called for a review of the incident by the council and the fomc secretary. We have described to you how that review took place. It took place before the review is complete. The Inspector General reclaiming my time. Did the general counsel per year guidelines talk to the fmo seaboard or did you make a recommendation to the ig . The requirement is that it initially be reviewed and solely determine whether they make a referral to the ig. They didnt do that. Before his review was complete he was informed by the ig but the ig had undertaken his own investigation and therefore the ig was already looking at it before it was necessary for him to make a decision. My time is almost up. If anyone is trying to sweep this under the rug its the fed. Congress is trying to bring light to this. I sent you a letter with response to your denial from chairman hensarling and we have a full page of footnotes where congress has done oversight during open pending doj prosecution. We have the right to use documents. You have a duty to provide them to us. You have cited no Legal Authority to deny that request. We are entitled to do oversight. I hope that you will reconsider your denial. I yield back. The time of the drummon has expired and the chair recognizes the gentlelady from alabama mrs. Sewell. Thank you chairman for being here today. I wanted to bring your attention to the wages and what i see it as income inequities and really get your take on what we can do as far as monetary policies to close that cap. Since the height of the financial crisis the u. S. Economy has made remarkable progress particularly compared to other parts of the world. Here in the United States in employment rate fell from 10 to 5. 3 in june and the president has pointed out in his budget over the past four years we put more people back to work in the United States and europe has and japan and other nations however despite the overall employment gains there are still some districts mine included that have folks who want to work who havent been able to find work. The hourly Labor Compensation has been tending to lag behind the growth in particular and the president s budget projects that the share of National Income going to labor rather than to capital will remain at the store closed years to come. What in your view can and should be done to reverse this trend and ensure that workers reap more of their wards in gains from our growing economy . Im particularly interested in the disparity that exists among minority and employment. I can tell you in my own district of alabama while the overall nation has 5. 3 unemployment our median average unemployment in a district that is disproportionately africanamerican is right at nine to 10 which is vastly different. We would love to know how you think their monetary policies can go about changing that trend. So Monetary Policy is aimed at trying to achieve a strong recovery in the job market and while we are not there yet i believe we have made substantial progress. As the economy improves and the labor market gets stronger i would expect to see the growth of wages pick up over time and at this point i think we are seeing at least some first tentative signs that wage growth is increasing. Its been running at a very slow pace. There are often likes between improvement in the labor market and a pickup in wage growth. Do you think Unemployment Rates, is it more because of this actual changes are cyclical factors . O. Cyclical and structural factors matter so cyclically estimate labor market picks up the pace of aggregate wage growth will pick up but structural factors are also very important. Productivity Growth Matters over time to real wage increases and productivity growth in recent years has been frankly very disappointing and that may be holding wages down but across groups differences in wage trends across different groups in the labor market i think reflect a deeper set of longerterm structural influences and go way back to the late 70s or mid70s where we have seen growing gap by education. We have seen a persistent increase in the returns to highskilled workers and stagnation at the middle and at the bottom. You think changes in our tax or spending policies could help close that gap quicker . I get that you know systemic problems and persistent poverty caused lots of segments of the population to have their unemployment lag behind sort of overall unemployment. I really want to know if there are substantive things we can do as far as tax or spending policies i would hasten the closing of that unemployment gap . There ares large literature on this and many economists who have made suggestions about things that congress could consider that would address inequality certainly with high return to education and skills being a very important factor in determining wage outcomes policies that address education at different levels. Are there any particular policies or outreach efforts in order to really understand the difference in communities of color with respect to the wage and income inequality . We do have surveys. We are trying to collect information. Household surveys that enable us to gain better insight into this and we have Community Development efforts that are addressing low and moderate income communities to try to see what could be done. Thank you for your efforts and i hope youll continue. The time of the gentlelady has expired and the chairman recognizes the gentleman from tennessee mr. Fincher. Thank you madam chair. I appreciate you being here today and im going to get right to the point rate the couple of lines of questions cost benefit analysis and raising Interest Rates and what impact that will have a National Debt versus personal debt and the Committee Room being remodeled i have also been watching the tvs which are very informative and the charge that i think are being shown by my colleagues on the other side of the aisle if we would just change the top to progress that has been made since republicans took control of the house in 2011 and i think the charts are great so appreciate my buddies on the other side of the aisle getting a kick out of that. Back to costbenefit and all of this. The small mediumsized banks lending institutions all over the country, the impacts of doddfrank being burdensome overburdened some just two or three questions and you can answer and we will move on. Is the feds independence and setting mandatory policy mean that financial relations are above the law and is anyone at the Federal Reserve done an analysis of the cumulative impact of doddfrank regulations on broader variables such as Credit Availability Economic Growth Capital Capital formation and perhaps most importantly job creation lacks the cftc, sec these other agencies do this. Why arent you doing this and can you shed some light on why you were not and would you be open to doing it . We do a great deal of analysis to try to understand the costs of regulations that we put in place and their benefits. For example with respect to the basel iii r. Choir meant. We participated along with other countries in a very detailed costbenefit study the likely impact of raising capital standards. We came to the conclusion that even though there might be a very modest burden on bracing spreads and the cost of capital to the economy, the cost of financial crises had been so dramatic and so large that the impact that we would have a producing the odds of a financial crisis passed the costbenefit test easily. We regularly make sure that we comply. So not to interrupt but would you be open to doing a specific costbenefit analysis for every big decision because what you are saying, i know its very complicated that you are saying well in order to make sure we dont hurt this one over here we are doing this here but we are not going to give you the information. Its not cut and dried. Would you be open to doing a costbenefit analysis, yes or no no . We do follow the analysis thats required by current law and in some cases i think it would be difficult to do that. Congress for example in doddfrank already made a judgment that they want to see us put certain requirements into place based on congresss judgment that it would make the Financial System safer and sounder. They put out proposed regulations for comment to try to accomplish an object it that congress has assigned to us because they determined it would be beneficial. It seems like a common sense approach. The sec cftc and other agencies we have a common sense approach cost benefit analysis and i think you are saying that you are not in favor of doing that at this time and maybe Congress Needs to do something else. Let me move on. But you are not in favor of it. Raising Interest Rates nationally the debt that we always see the current National Debt. Personally the debt that Many Americans are low in this country. When we start down this path of raising rates im afraid theres a whole generation of people that think the Interest Rate 0 as the standard because they dont know what Interest Rates when i was a kid when Interest Rates were 18 to 20 under the carter demonstrations that when you start down this path of raising rates might there he is we will go into another recession and you cant raise rates again because rates are already low. The only answer is dumping more money into the economy and that gets very serious very quickly. Do you fear that raising rates is going to do this . We are not going going to raise rates if we think its going to put the economy into a recession. We will raise rates because we believe the economy is Strong Enough that it is appropriate to have higher rates to meet the objectives assigned by congress. This is a concern for u. S. Well. Bui wouldnt do something that would jeopardize unless inflation were at risk. The time of the gentleman has expired. The chair recognizes the gentleman from illinois mr. Foster. Thank you mr. Chairman and thank you terry yellen for appearing today. You know that net exports that is to say trade imbalance has been in the substantial drag on gdp growth. The house and senate will soon go to conference on a customs bill that is part of a trade passage passed into law last month so my concern is and continues to be around the potential for our trade partners to undermine the value the free trade can have without strong enforceable provisions on current currency manipulation. During the debates the administration put forth the position and insisted it was impossible to do fine currency manipulation in any way for example with the imf definition of currency manipulation that would not have him paged on your ability to have accommodative Monetary Policy including quantitative easing in response to the downturn. My question to you is do you agree with that and specifically in what ways would for example of imf definition of currency manipulation prevented you from accommodating Monetary Policy . So i do with rape with the concerns that were expressed about currency manipulation. First let me make clear that im opposed in the g7 and g8 20 have weighed in that intervention in currency markets by government for the sake of changing the compact Competitive Landscape and purposely trying to avert trade to a country is wrong. Its an upper brit behavior. Our Treasury Department is deeply engaged with other countries. Understand. The question is it impossible to make actionable objective criteria to define currency manipulation which would not have impinge on what we have to do in response . I believe its difficult because many factors influence the value of currencies that are traded in markets. You are aware the imap definition does not talk about the value of currency. We have to be running a persistent trade surplus and accumulating additional Foreign Exchange reserves and you have to be holding excess foreign reserve exchange reserves. Its my belief that none of those three would have been triggered by all of our response and the question is soviet administrations position was fundamentally wrong that imf definition would have prevented us from you know the accommodative Monetary Policy that was so important to rescuing our economy. So my concern with this is that i think its important for countries to be able to conduct monetary policies that does pursue domestic objectives. Those policies are not intended to impact currencies but it goes they do affect Interest Rates and Interest Rates affect Global Capital flows they have to pass on currency values. All i have said about this topic is that i would worry about any type of legislation that could cripple Monetary Policy from achieving the objectives that congress has assigned. The precise question is, is there anything you did that would have triggered the imf definition . I am not sure. I havent studied that carefully enough area to. Would the possible for you to get back to us what they answer on that precise question . I have a little bit of time left so im a physicist, are you familiar with our 9 cents quote that any theory of the universe should be made as simple as possible but not simpler and are you ever reminded of that quote when you talk about things like the taylor rule . Imagined the entire universe can be reserved, reduced to a linear relation to a handful of variables . I think thats a very good point and i think it is apropos of the taylor rule. It would be nice to be able to reduce appropriate policy to the current values of two simple variables but i think the world is more complicated than that. We cant take everything into account that there are important things that need to be considered and that is why we have an fomc that has been asked to bring a great deal of information to the table. The last thing is sort of a corollary of that which is if you have something that is a function of many variables and it is changing over period of time in response to a single one of those variables then that obviously does not mean that the real response function as a single function of a single variable. The time of the gentleman has expired. The chair recognizes the gentleman from california mr. Royce california mr. Royce churn of the House Foreign Affairs committee great. Cherry yellen in your first appearance as fed chair before this committee you commented on the need to move forward with Housing Financing reform and youtube continue believe the current state of our secondary Mortgage Market poses a Systemic Risk and should congress and the fhfa be taking steps to share that public risk backed by taxpayers with the private sector . Secretary lew suggested such an approach. We would have to support. So i mean i have long said and my predecessors have as well we think it would be desirable to see congress address g. At the reform, to decide explicitly selfconsciously what is the appropriate role of the government and the Mortgage Market and to try to bring private capital back into the Mortgage Market. There are a number of ways different strategies congress could take to accomplish that but i do think its important for congress to try to resolve those issues. Thank you terry yellen. Last year iowan with others wrote to treasury secretary lew and copied you regarding our concerns about fsocs lack of a formalized process for reviewing nonbank Financial Institutions and we shared concerns about the need to conduct a thoughtful review of the Insurance Industry before moving to designate individual insurers. The afsoc has taken steps to understanding Asset Management industry which were needed after the report specifically Federal Reserve governor trujillo has been market wide analysis in an activity space systemic review but they afsoc is not taken steps to understand the Insurance Industry so do you think it would be appropriate to conduct a thorough study as well quack shouldnt all nonbank institutions face a similar process for review . The Asset Management industry is one where afsoc. It appropriate to focus on activities and to look at whether or not they are our Systemic Risks associated with some Asset Management activities activities. Examples would include liquidity and redemption risk and use of offBalance Sheet leverage. With respect to insurance this is not a matter of going from reviews of individual companies and the activities type of approach. Its not something that fsoc to the best of my knowledge has discussed. Let me go to my last question. And their brave 2014 i asked about the deepening crisis in the commonwealth of puerto rico. He said then that the Federal Reserve was monitoring developments and continue to analyze potential consequences for Financial Stability of these events. You also said it would be best to not have the Federal Reserve stepped in as a creditor of a state or municipality. You said that it is more appropriate for congress and not the Federal Reserve to address Financial Issues based by states and municipalities. Do you believe the best. Com would be the Puerto Rico Electric Power Authority and its creditors come to an agreement without any Government Intervention with respect to this issue . With out what . Without Government Intervention but instead work it out between the Power Authority and the creditors. This isnt a manner in which i have an opinion. The Federal Reserve comments something that the Federal Reserve cant and shouldnt be involved in. I think its appropriate for congress to consider what is best to do in this case and its not a question of which i have formed, i have informed judgment judgment. What we have been doing is obviously monitoring developments in puerto rico which economically are very difficult. We are looking to see are there risks that are being transmitted to the broader municipal debt market and we are not seeing signs of contagion. Thats another topic that is obviously important but exactly what should be done in this situation i think its a matter for congress to consider. In the past 2 cents last night to have the Federal Reserve stepped in. I continue to believe that very strongly. The time of the gentleman has expired in the chair recognizes the gentlelady from ohio ms. Beatty. Thank you mr. Chairman and thank you Ranking Member. Thank you for being here today and let me just say we are very proud to have the last week in the great state of ohio although it was not columbus the capital. We certainly look forward to having you come just a few miles north to visit us. My first question is, to follow up on congresswoman waters question where shed asked about discrimination and the laws of wealth based on subprime lending and part of your answer im not sure if you got to finish, when you said that there were some other policies that congress could pursue to address discrimination and inequality. Can you elaborate on what those policies are . More broadly in terms of inequality among households in terms of wealth and income there are many factors that affect inequality. They tend to be deeper Structural Forces including technological change that is increasingly skilled demands for a workforce and a return to a skilled workers relative to those who are less skilled. Certainly education, training are matters that are within congresss domain to consider how to make sure that individuals have access to a worldclass education thats going to enable them to earn a higher wage policies affecting infrastructure and Capital Formation entrepreneurship, other things also affect inequality and i was referring to all of those factors where congress could potentially play a role. Thank you. When you were here in every before this committee januarys Unemployment Rate was about 6. 6 overall. About four months after that the rate decrease to about 5. 3 however in africanamerican communities while it declined it went from 12. 1 to 9. 5 or send over that same period. While africanamericans Unemployment Rate did decrease the number is still high. In fact it has doubled the International Employment rate and you would agree that is unacceptably high so my question is as you assess the health of the labor market to what extent are used taking into account the fact that minority communities dealt ace unacceptable higher rates of employment and is there any outrage or anything that the Federal Reserve has engaged in to understand the extent and communities that i represent . There really isnt anything directly that the Federal Reserve can do to affect the structure of unemployment across groups and unfortunately it has long been the case that africanamerican Unemployment Rates tend to be higher than those on average in the nation as a whole. It reflects a number of different sources of disadvantaged better operative there and our national Monetary Policy we are trying to achieve a situation where jobs are broadly available in the economy to those who want to work but we seek the maximum sustainable level of employment or we have to be careful not to try to push the economy to a point we have to worry about inflation remaining under control and given our focus on inflation there are certainly limits on what we can do for any particular group. Thank you and ive a few seconds. But the continuously talk about the office of minorities and women inclusion. Yo