Transcripts For CSPAN2 Federal 20240704

Outlined at the Central Banks Monetary Policy before the Senate Banking housing and urban affairs committee. He also talks about the state of the eco inflation, Interest Rates and bank Capital Requirements. This is two hours and 15 minutes. If you would like to give it again you could certainly dor that. The fed has power in shaping our economy. Your job is to promote stable and maximum employment. Today the cost of living is still too expensive for most americans. The fed has one tool available. That tool does nothing to address the cause for wide costs remain too high. Corporations price gouging to boost profits and make the shareholdersrs richer. Higher rates of doomed force, higher Interest Ratesont ons to lower but high Interest Rates are rising housing costs hindering wage growth stifling Small Business that. Now is the time for the fed to decide whether its going to make good on its commitments into families by lowering Interest Rates and the Financial System from wall street executives who used their wealth and power to influence Economic Policy and avoidlity for the ry bets. Keeping the rates too high long strangles the economy. No one wants this and makes it harder for Small Businesses to expand aynd hire more workers undermining job creations and it also stifles overdue investments that are creating highquality good paying jobs and that are t competitive and innovative economy in the world. Interest rates rising housing costs higher and higher for families. Families already facing a tough market with too few options and high prices. I hear from so many who feel trapped those who rent feel they will never be able to buy. Those who already own their homes feel like they will never be able to afford a larger one if they decide to grow their family. If they are fortunate to have an Interest Rate from a couple of years ago they dont want to give it up. It limits their choices in housing supply by driving up Construction Cost its even harder to build new apartments and homesmeos supply in the same time when its harder to afford a mortgage. Families are stuck delaying the purchase of their first long the drives thefu rent up even furth. Americans pay a steep price for the higher Interest Rates and coinre not going to make the less expensive forhe workers and their familie. We know why prices are high years after the supply c same co many of the problems in the economy. Corporations want bigger profits to reword their executives the n the corporate profits soared to historic levels and thats not hyperbole, thats fact. As you know where the prophets went right in the pockets of their executives and that same year the largest multinational corporations gave out 1. 5 trillion in the stock buybacks into dividends. Americans today pay more for groceries then they havee in 30 years. Every time you go to a grocery store, ohioans pay for Corporate Executives bonuses and stock buybacks. Every time you go to the grocery store, Grocery Shoppers are paying for Corporate Executive bonusesnu and stock buybacks. The biggest corporations are always finding new ways to charge people more to increase. Experimenting with electronic price tags so they can change prices constantly making it easier to sneak prices up taking it harder for people to comparison shop and find their store, find the store with of the lowest many increase their profits by charging moreby for less. The media started calling it shrink inflation. Articularly ber playing this out. A bottle of gatorade used to be 32 ounces and now its 28 with the price hasnt gone■ d bit. Thats why the legislation would to stop that kind of deceptive corporate practice. Its the kind of solution we need to take on the corporate price gouging and has nothing to do the fed doesnt only soig the Monetary Policy, you also make the rules and keephe and sound. Weve had positive developments since the last time pied like te Community Reinvestment act. Thank you for your work on this. This took years of listening carefully to all stakeholders it was long overdue. We will be watching to make sure you implement this quickly so banks are fulfilling the purpose of act. I spoke to ohio bankers yesterday and they understand the importance of this. You also updated a proposal the subject of much discussion of the committee, Strong Capital requirements how we ensure shardend investors are on the hook, not taxpayers. Holding the bag for the malfeasance and greed we need to these guardrails in place and i urge you to remain committed to protecting theassie amountnt of money big banks and lobbyists are spending to try to kill these taxpayer protections. Lets finish the job and finalize. Last years bank failure also demonstrates the danger of letting the banks which are believed rules oversight. Its entirely predictable. They are desperate to increase the profits to take big risks that undermine our economy. If things regulators with their hands out accepting no responsibility. Thats why Congress Must test the job and senator scott and i worked on 21 in the committee to hold a Senior Bank Executives accountable when they gamble with customers money. We know that is a source of so much that is wrong in this country. Bigg corporations use power and influence to write the rules of our economy to the benefit of the executives and their investors to the detriment of everyone else. Thats why i stand up for workers and why i stand up for the right to organize. Its why i stand up to take on railroads and Drug Companies into the biggest banks and corporations who try to rewrite margins. I look forward to hearing from you today. Thank■1 you, to promote an econy where Everyone Wants a good job and an opportunity to find. Thank you appreciate you being here. Its certainly the largest since the financial crisis and ive said many times and i will say it again the three major components to the failure, first mismanagement. Second a supervisory failure and regulators were certainly asleep at the wheel. Third, president bidens spending caused inflation that resulted in drastic interest ra■j6p hikes and tremendous los. When you p spend trillions of dollars at the end of covid, we shouldnt n be surprised that we have record high inflation. ■0 record high inflation translates to today 40 higher for gas, 30 higher for your energy costs. The average american is facing because of biden economics is undeniable. Measurable. So im glad to spend time talking about the state of economy. Suffering under the weight of open border and millions disast. I hear from my constituents all the time that inflation and unsustainable costs of living continue to impact their families. For far too many, the American Dream seems further and further out of reach than ever before. The past three years of this administrations failed policies have landed us right in that spot. In fact last month the treasury secretary said■; before this committee and attempted to spin a narrative of how strong the economy is, how welloff consumers are and how much people have mu the bank to the biden economics. But in the midst of this, she also admitted that many prices are not going down. In fact she said and i quote we dont have to get these prices tell that to the mechanics working in south carolina. Tell that to the teacher trying to put gas in the tank. They are spending more of their income on food than they have in 30 years. The truth is that housing t affordability remains at its lowest level in 40 years but inflation isnt the only concern that i would like to raise i would also like to address the Economic Impact during the recent interview on stated thate u. S. Economy has benefited from immigration. Lets be clear immigrants, no d. But when we talk about illegal immigration today we must also face the dire reality the cities are suffering from the adverse impact of illegal immigration facilitated by the Biden Administrations open, unsecure and unsafe southern■u border. Because of president bidens policies, we have seen over 7 million Illegal Immigrants cross our borders and just three years. By the time this happens this year in november, the numbers suggested could be as high as 10 million Illegal Immigrants coming into country. So, we cannot have an honest conversation about the benefits in the labor addressing the elephant in the room. Our country is straid and economy under the weight of illegal immigration. In fact recent reporting has highlighted that cities and statesy across the country are struggling to keep pace. Some have been forced to cut Public Services in order to fund the cost of feeding and housing Illegal Immigrants. Onemple, the poorest kids in the city, minority kids were stuckth at h because the city was using the schools. They recently announced some employers may have theire hours cut in order to reallocate funds towards eies of migrant crisis. How in the world is not fair . Its not. We must get the illegal Immigration Crisis under control because if we dont, our local economies will continue to crushed and opportunities will continue to be stripped from our citizens and their families. Finally, the negative impact of illegal immigration not enough, the tsunami of regulatory red tape coming from our financial regulators further threatens Economic Opportunities across the board. For months, we have heard bipartisan criticism of feds basil three endgame proposal that will restrict lending and access to credit for those who need it the■owas pleasantly suro hear your comments about this and your thoughts on future. 97 of the comments received were negative. Thats good news for the american consumer, good news for entrepreneurs who would like to start aa business but do not hae access to capital and perhaps even for millennials who would like to become a firsttime homebuyer. It the diverse array of interest from community leaders, farmers to housing groups. We even heard opposi very room on this very committee from democratic senators. I look testimony and look forward to asking questions as well. Thank you. Senator scott. We will hear today is we do every six months at least from the chair of the Federal Reserve and the Monetary Policy in the state of the economy. Thank the country. Thank you, chairman brown, Ranking Member scott and other members i appreciate the Federal Reserves semi annual report today. Stable prices for the American People. The economy has made considerable progress towards these objectives over the year. While inflation remains above the fomc objective of 2 , it is used substantially in the slowing and inflation has a significant increase in unemployment. As the labor market tightening has been used, the risk to achieving our employment and inflation goals have been moving into better balance. Even so the committee remains highly attentive to ] inflationh inflation imposes significant hardship especially on those least able to meet the cost of and transportation. Strongly committed to returning the 2 objective into sustained period of the strong labor Market Conditions thatve benefit all. I will review the situation before returning to a Monetary Policy. The strong piece over the pastth yer for 2023 as a whole■ bolsteredy the consumer demand and increasing the supply initiatives. In the housing sector and it was subdued over the past year reflecti Mortgage Rates. Since the middle of last year, 239,000 jobs per month and the Unemployment Rate has remained near historical lows at 3. 7 . Strong job creation has been accompanied by an increase in the supply of workers among individuals aged 25 to 54 and a continued strong piece of immigration. The job vacancieses have declind and phenomenal wage growth has been using. Job to workers gap has narrowed, it is still still exceedsthe supply of avai. A strong labor marhe past two years has also helped narrow longstanding earnings across demographic groups. Inflation has eased notably but remains above the longer run goal of 2 . The personal prices rose 2. 4 over the 12 months ending in january excluding the food and energy categories. A slowing from 2022 that was widespread across the goods and services prices. A longerterm Inflation Expectations appto well anchored as well as from financial markets. After significantly tightening the Monetary Policy since early 2022, the fomc has maintained the range for the federal funds rate at five and a quarter to 5. 5 5 since its meeting last july. Weve also continued pace and predictable manner. The restrictive stance of Monetary Policy is putting downward pressure on Economic Activity inflation. We believe that the policy rate is likely at its peak for this tightening cycle. If the evolves broadly as expected, it will likely be appropriate to begin dialing back the policy restrained some point this year. ■< Economic Outlook is uncertain and the progress towards the 2 inflation objective is not assured. The restraint too soon or too much could result in the reversal of products and ultimately require tighter policies to gettion back to 2 . At the same time reducing the policy restrained too late or too little could weaken Economic Activity and employment. In considering any adjustments to the target range for the policy rate, we will carefully assess the incoming data, the balance of risk. The committee does not expect that it will be appropriate to reduce the target rate until it is gained a greater confidence planned the inflation is moving sustainably towards 2 . We remain committed to bringing inflation back down to the 2 goal and to keeping longerterm Inflation Expectations wellanch. We understand that our actions affect communiti, busesses across the country, everything we do. We will do everything we can for the pre stability goals. Thank you. They waited when prices shot up in 2021. We cant make 2 that mistake agn at the expense of workers if the fed waits until unemployment starts increasing, it may be too late. We are well aware of the risk and a conscious and what we said is what we expect and what we are seeing is continued strong growth, labor market and progress in bringing inflation down. Ifio that happens if the economy evolves over that path, then we do think■i of the process of removing the restrictive policies will and can begin over the course of this year. Eve has conversation publicly here and that you know working people earn alsoo h the hardest with companies to try to cut costs and layoffs. This town too often seems to forget the maximum employment as part of the dual mandate. Let me ask about bank supervision. Senator scott mentioned last years Bank Failures illustrate the need for strong oversight. Its too big too fast they took an assessment under the supervisory process to identify and address gaps related. The agility■i ifs thats the rt word. Explain what concrete steps the Federal Reserve has taken to strengthen the supervision and any specific areas w■uhere t work to make improvements is ongoing. This is a veryro broad area. Many people, there is a rulebook and so theres been careful studies and thoughts and a lot of listening to understand how we can meet those goals and be quicker and more effective. If you look at the Silicon Valley bank weerough or effectie we were so we are working hard to develop a new rulebook and other sf practstill going to bed and ferret its going to involve earlier interventions and more effective ones and iis work thal be for some time. Thank you. The job of the fed and all Public Officials is to serve American People, not the stock portfolios. Weve seen other uses in this body and Federal Reserve. I wrote you last month asking the fed to identify substantive penalties for board officials who violate the trading rules. Where is that in the p and i expect these rules in place before the next policy hearing in six months. Our own Inspector General gave us six things to work on. I read the list from beginning to end and i said we are going to do all going so weve done five of them and we are working on a six. One last question. More and more Companies Use algorithms that combine competitors price information to engage in what they call dynamic pricing or surge pricing. You know the corporate teams worked hard on another way for corporations to make it harder to seek out lower prices. Arelo you concerned that the adoption of these price gouging strategies, these pricing schemes if you will will attribute to inflation . I think it works both ways. We are well aware of this trend and we are monitoring it. I dont know the implication for inflation it would certainly have implications for consumers who need to be informed. Youi think that this kind of search might lower pricesr overall . My understanding is the idea is that in the slow periods the prices go down and higher periods they gox . Up. But these arehe sophisticated working for these companies they are not going to do things to lower the process. The price mechasm is important in our economy. And i think we need to give companies the freedom to do that as long as they are not failing to disclose the nature of the price changes to the public. I have a few seconds. Researchers indicated it was behind a the last few years. At the supply chain for instance had been more resilient or if there had been more housing avt have made it your job easier . Yes. A big. Part of the inflation ws when we saw in 2023he supply chain problem was unwound and the labor supply shock was unwound as well we saw inflation of the year but its also down to tight monetary policies playing a role asgn■ well. Which leads me to the plea with you to speak out about inflation, about the to inflation. F corporate agreeing withe me what i woud say, i listened to what you said which is remarkable. I cant imagine how a millennial affords a down payment for a the home or taken into consideration their financial future fixing and repairing happens for every i think the issue is far more complicated. Ais combination between the challenges of illegal and trial. It seems every single week there theres another story of another city underwater attempting to feed and house Illegal Immigrants and american taxpayers are footing the bill. As i mentioned in my Opening Statement recently in denver we saw city workers having their hours essentially out so that the city could allocate more. Its almost 4 billion. Couple that with new york you see the governor bringing out the National Guard and state police to reduce the impact of crime at the same time mayor adams says he needs more money because the state of affairs from Illegal Immigrants in the city devastating the economy, scaring the citizens into reducing the opportunity for business assu return so my question is can you explain how its to continue shouldering the burden and the cost and what infoat it relates to the economic outcome becauseho i heard the when you have more folks in the store you have more shoppers except for these days when you have more folks in the store sometimes they are just there to steal. You quoted my m statement what i said before that was immigration policy very much under discussion we dont set immigration policy or comment on it. When the nation is frustrated having the kind ofol negative the poorest part on a daily basis. I was referring to the history. Staying as far as i could from the political c like to remain that way and one is by staying out of political issues so the kind of issues you are talking about our real im not denying that. The impact of the immigrants and cost associated nor do they consider the on states like new york or california or illinois we dont take that into consideration . We do try to estimate population on the size of the workforce and gdp if you look the congressional budget detaile look at the finances. We wouldnt do a very specific assessment like that. Cae first latino Federal Reserve governor and bank that show we are making progress leadership of our economic institutions so i want to applaud that and i hope thate rest of the Federal Reserve staff. I agree with my friend of the Ranking Member that when you tell a story you should tell the whole story. Are you aware the Washington Post february 27 article that sayslet me readit to you. S immigration has propelled the u. S. Job market further than anyone expected helping to cement the countrys economic rebound from the pandemic as the most robust in the world. It goes on to say you economists and labor experts say the surge in employment was ultimately key to solving unprecedented gaps in the economyy that threaten the ability to recover from prolonged take issue with those statements . Theres a lot ofow adjectives and adverbs you wouldnt see in the fed world. The story is i think broadly that there was significant increase in the size of the workforce last year and itt was happening all during the year and we were wondering what it was at was two things, Labor Force Participation and also immigration and if you look at the Budget Office members it makes sense because there was a lot of growth. Without making any judgments on thee immigration or immigration lici. We had a ten or 11 million going unfulfilled in our economy. They lacked productivity necessary for success economically and as a part of that, immigration helped fuel part of our revival coming out of the pandemic. Those werere the essential works when the rest of us home so i agree we need to do what is necessary about to ■g■mcreate the context as a scoe is wrong. In my view inflation is principally due to the massive nationwide housing shortage t zh Interest Rates and underwriting. I would also add underfunding of the programsms that up and expand the supply of affordable housing. If it continues to grow we likely to continue to see rising inflation and how are things becoming less and less affordable for low andidrding te housing coalitions 2023 out of reach report a worker earning the minimum wage in new jersey would have to work two fulltime jobs to afford a modest onebedr r fair market rate. Do you agree that increasing is a problem for the economy . Theres two things going on. ■ theng housing shortage and other is the pandemic effect and associated Interest Rates which are things that will pass through. When that passes through and the rates are normalized we will still have a shortage and it is going to be causing upward pressure on the housing prices. The monetary picy report noted the home purchases by low income households had fallen disproportionately more because the mortgage lenders imposed maximums on the ratio■ service. Im worried no matter how this will interact with of the the ry proposed capitalproposal which n analysis with disproportionately increase the cost of mortgages for black, hispanic and low income moderate borrowers. Given this, isnt there a risk that if implemented without changes that it could make it even harder for disadvantaged borrowers to obtain . There is a risk like that and we are focused on that. It . The senator from south dakota. Thank you mr. Chairman. I appreciate the way that youve approached in front of this committee, and i understand your desire to stay as neutral as possible with the politics with regards to the endgame proposal. In an analysis of that proposal at 97 were either opposing it or expressing substantial concerns. In the hearing last march on the monetary report, you stated the Federal Reserve is a consensus organization, and you said and i quote i will do everything i can possible to bring people together in consensus and have a capital framework that could be broadly supported. My question to that is do you currently believe there isri a consensus on the capital framework . I believe we will have one. Im confident we have such a consensus when we do move so we could expect that you will probably not call a vote on the proposal until you believe that there is a consensus . We are just in the process of digesting the comments and making appropriate changes. As you are aware, i have weighed in several including im concerned about the lack of transparency and the negative effect on Home Affordability by dis incentivizing banks from offering loans that primarily help firsttime homebuyers and low to moderate income. Im concerned that it will make buying a home harder than it already is and i fear that it ie lending from the largest banks particularly with regards to the secondary market and their impact on banks. Would you be willing to withdraw the proposal or propose with significan modifications addressing the concerns i and others have raising specifically with regards to the impact and im thinking of fannie and the impact might be. What would you see the process involving those particular■ ■ ■p issues well aware and focused on those issues we havent decided what to do about that get but in terms of process we are not at the stage of making that decision. If it turns out to be appropriate and we get to that point, we will not hesitate to do so. I dor think there areg some ry would occur and im certainly hoping the Federal Reserve will find ae that may include significant modifications if it were brought out all is that a fair statement . There will be materials and broad changes before it comes back to the committee for consideration. A limited level of price growth isnc■eved to help facilitate economic expansion, reduce the risk of recession and help businesses and consumers plan however during the Biden Administration weasel inflation climbed to 13 and at those thos are now the p new norm. I k you make it a policy not to comment on the administrationsom fiscal polic, but its well known i believe high inflation and high prices have been a direct result of president bidens policies■ that the Federal Reserve has limited tools to address some of the c demandside. What have been some of the unintended consequences fromyou . We talked about the inability to look at treasuries and increasing Interest Rates and so forth but can you talk about some of the things youve seen thatt were negative with regards to trying to respond to those high inflation . I Interest Rates arewe hard r businesses ands people and they are the tools we have to use to bring inflation down and our job atattime when the high inflation comes its their job to restore price stability and thats what we are doing. Banks that was a very substantial thing and the supervisors met with us we were aware of it. And other surprises we were able to get this far and get inflation down and that is just a great result not consistent with of the historical recd pos. The only tools available. Thank youenator warner of virgis recognized. Its great to see you. I would point out to my good friend from south dakota, i do think if wed gone back a year to 18 mo have predicted a soft landing and i know youre not ready to declare a victory by any means that the fact that inflation has come down i think some of things like the infrastructure billing to some of president bidens policies have kept the economy growth that the levels without seeing a dramatic rise and that is something we will have an opportunity to litigate over the next eight or nine time around regulation. We can never presume we are one area i raised with you is lending to nonfinancial firms and let me be clear theyve done productive things in our society over the years but when like the president of dudley and former president said t this reliant it do you think are the risks as we see this push out more and more lending to the nonbank sector how much do we know about these institutions and they have smart sophisticated lending profile right now and dont want additional loans for six to nine months do you think our d system would be able to pick up the slack. We have the■u system where youve got deposit insurance andra access to the discount window and all those things. If you goof the funding we see s limited partners meaning they cant pull their money out. They signed a contracttr and funded these deals so what you see now is a significantly that kind of thing. The point is the bigger it grows and more diverse it is happening tside of the perimeter and you worry that when there is another crisis we will be surprised but there will be ways it can break down so i think we need to be smart about the way its absolutely moving thats whats been happening for a long time i just think we need to be thoughtful about understanding where the risks are emerging. They might say we dont want you to lend anymore but at that moment of crisis thex lending dries up and one thing i never understood as i got to understand a little bit more, many lend it to these large institutions so they make money off those relationships. I would like to come back another and that is the question of the use of the discount window. I know banks say we are concerned about the stigma. I hwould require mandatory use of the discount window and also the idea that having the mechanics of the discount window open if e nonbank hours. Theres a lot youre right it be brought into the modern agen and we need to do more to eliminate the stigma problem and make sure banks are able to it when they need to use it and thats a broad work program. I think before we start adding a whole host of issues we need to use some of the tools oute there. I was about to take control. Welcome. If you have time after the hearing. We sent a letter indicating our concerns and the current in thel but its alsoo worth noting wee got bank trades, national nationalhousing conference, naa, habitat for humanity, National Coalition the list goes on and on who have concerns in the current proposal. Heres my concern. I think we are trying to make the best of what was foundational he a bad proposal, so im in the category of people who think that it should be re proposedop because one of the reasons i did not support the nomination as i felt like we were going toio be here it was clear before he ever got confirmed that we were going to be in this place and here we are and i think the industry felt the same way. All the stakeholders some of them are on the other side so i provide the idea we should reproposed it and talk about the reality. The prior fit his supervisor has made comments that maybe we needed capital standards but what we talk about raising Capital Requirements and reducing the Regulatory Burden today if we can do it responsibly. Theres no evidence of the current proposal and that may produce a different set of comments that would be instructive to a final proposal that realistically will include Capital Requirements, so what time horizon do you expect we would try to make the best of this foundation or go back and take a look at it . We are going to work through it as quickly as we can. My guess is we will work this out over the course of the year. If you take a look at the operational risk, the concerns publicly privately i do think sometimes its easier to knock down what i think is a Poor Foundation and build a better house, so i just wanted to make that comment publicly. I have a question about inflation. Some of the words we come up with. President biden is using the idea and■b for creating smaller Portion Sizes for potato chips if you have rising input costs and youre not able to control that and youre in a mginal business to begin with and now cant even reduce the quanes how does the business make that work . We see the aggregate level and as weve supply get better and demand go up a bit, its coming out of the pandemic we see inflation coming down. We saw food■ inflation between 2021 and over the last three years weve seen about 21 . I think we have an industry thats trying to provide products that Consumers Want and now they are chastised for trying to figure out how to make the numbers work. So it is compounding to■du me. I want to stay on time but i have a question i think the chair mentioned and the charitable clarify but in the opening comments i thought he suggested the stock buybacks and dividends were a key factor of inflation. As this one of the top five reasons were experiencing the inflation that we have right now . I see stock buybacks and dividends as the same thing but different form. I wouldnt comment on anything the chair even may have said. I like to avoid that. Im not going to ask about policy because i think your■y consistent on that but i cant imagine if we decided to outlaw the stock buybacks Dividend Payments we would have a material affect on inflation so im not going to ask you to respond to that but you could assume they think that would be helpful. Im not in economist but i cant imagine that it would make the jobascan you opine on that . I think it would be quite a change in the capital markets. Shareholders could have nothing to do with it. Thank you mr. Chair. Senator smith. Thank you mr. Chair chair powell. I appreciate■ y on housing and Housing Affordability. As you have pointed out overall pricesav considerably since the fed began raising the rates yet the housing costs remained resilient or hh. Ressing the affordability crisis but was there well before the pandemic. Shortly before the fed began tightening i asked you about how the higher interestee rates coud by making mortgages more expensive and i think at the time you argued we had in excess housingt was kind of the root of the higher cost and that the goal was to bring the demand closer. So my first question is the Housing Market has cooled significantly the last two years. Is it your view that its enough that the housing supply and demand is better and balanced and followingex on that given te limited tools understanding that at what point will you think uve dmy view is we are well pae in congress to take action on the housing supply side but im interested in how you see this dynamic. We are not focused so much on housing and housing inflation but more the aggregate which is also goods thas more than half of the inflation. The a thing there are things in the housing sector that we didnt fully anticipate. One of them just was people and very low Interest Rate mortgages arent selling so. The of homes is incredibly low and thats why there is very little in the existing home sales. So again theres two sets of factors. I think as the overall inflation continues to come down, you will see the Housing Market started to heal and get better and it should go up again but youre going to be left with the ngerterm problem of supply. I think thats right. What i see in minnesota is that the higher Interest Rates are driving up the cost construction and Mortgage Rates. Youre seeing people that arent leaving a house thats a little too small for them because they afford it. People are staying in their homes longer and do so theres sort of this double whammy of construction slowing at the same time that there is this great needed to address housing that is happening and its interesting a recent analysis found the monthly mortgage payments, a recent analysis found of the mortgage payment on a home assuming 10 down payments is about 2,200 a month. 2200 a month that means the cost of owning a typical home is higher than 30 of Median Income which is kind of the measure of affordability. D weve got a lot of issues of people being priced out of the home in the Housing Market. So from where i sit, the cumulative issues of the Mortgage Rates are a challenge and until we can get to the bottom of addressing the Housing Affordability challenge that we have; would you le. I ordered a transcript of that hearing. I learned a lot reading it. You were asked a question about inflation and you asked a question a question about prices declining and here was your response. I would like to quote you if thats okay. Quote, so the prices of some things will decline, others will go up but we dont expect to see level, that doesnt tend to excn very negative■l circumstances ed quote, did i quote you accurately . I believe you did. Later you were asked about the National Debt . Im sure i did. Your answer was and again i, the United States is on an unsustainable path. The u. S. Federal government on an unsustainable fiscal path and that just means that the debt is growing faster than the economy so it is unsustainable, end quote. Do you remember say ive said that many times. I think thats okay. Later you said, integrity is priceless and att the end thats all you have and we end, we plan on keeping ours, end quote. Is that accurate statement . Yes, it is. Thats why i want to ask you about fdic. Have you read the article in the wall street journal entitled, quote, strip clubs nude photos and a boogie hotel botoxic atmosphere, bank regulator, fdic. I think i read a couple of months. Fdci stayed on paid leave for weeks after child porn arrest, end quote . I dont remember that one. Okay, did you read the article entitled also in the wall street journal, quote, fdic chair known for tempergnored bad behavior in workplace, end quote . Honestly i read so much. I cant i remember the whole the broad particular stories. Did you read the article in which aormer female employee of the fdic allegedly recalled her male colleagues saying wome needed to use sex to get ahead at the fdic . I did not recall that. Did you read the article in which a female Risk Management examiner during a lunch with a d become friendly with that examiner and complain today her about his marriage telling her he wtshe allegedly said, quote, obviously he allegedly said, obviously if i walked into this office andy you were naked id fuck you right here . I dont remember that and i do you remember the article about mr. Randal ditch, a supervisor examiner in denver who alleged demoted to a nonsupervisory examiner position in tulsa after having s twice with a subordinate female employee and other number of other rule violations. This articleditch had urged to not, quote, be a close quote and drink shot of whiskey during working hours. Here is my question, i could go on for a while youve past your five minutes. Do your question once . Minutes, consumed the whole five minutes with your monologue of well, you did six minutes. I timed it. Senator kennedy i have let you go way over the five minutes. You get your question. But you did six minutes. I chair this committee. I understand. You still did six minutes. Check thee record. Im going to youll be at 6 minutes in 15 seconds if you continue the argument. I just want the record to be clear, mr. Chairman. In light of these allegations if they are proven howth can if fdh is going to throw the Banking Community upside down . I dont know how i would make the your point if proven. I think we have to decide bozzle 3 on its merits. Thank you, chair. Tha you, mr. Chairman. Thank you. Ut senator butler is recognized. Thank you so much, chair, and chair powell, good to see you in person and thanks for the time to pick up. I want to pick up a little bit where senator smith was in relationship to Housing Affordability and hopefully making the point about rents. It definitely is an importanttea and i know across the country where at least according to the California Department of housing and urban development renters in san diego are paying about 50 of what is more than what is considered affordable and statewide. The majority of renters more than 3 million households are spending mored than 30 towards rent. Nearly onethird, more than one in 5 million households pay more than 50 of their income and the chicago fed president even referred to c housing as a missing piece of the puzzle in ath to lower inflation. So to the continued conversation and i know a point that youve made about how inflation has a disproportionate impact on lower household. How is the feds Monetary Policy impacting the supply of Affordable Rentals . I dont know how we are affecting the affordable housing. Thats not our bailey wick. A key point that you made in an earlier, i think, reference about and in your response to senator smith about the policy and calculation of rent. Its actually conceptually challenging to inflation, we convert ownership. Turnover once a a year so you lk at market rents and, you know, whats happening with signed leases may be very different from what was happening a year ago. So its complicated. The good thing is we understand all of that and we lookhr housis overall as one of the three important categories along with nonhousing categories and goods inflation inflation. Thank you for that in the line of affordability and housing, very general to the broad Monetary Policy and state of economy and to california and i raise this with secretary yellen when she was here, the insurance tbap that are presenting themselves due to Climate Change. And where one in five californians love in that of fle and seeing more and more Home Insurance providers withdrawing from the state. We have talked about this in our preparation for todays conversation. Can you talk about or share with us how it is that what you think the impact might be of this protection gap coverage on the overall stability of Financial Institutions and the broader community. Mr. Powell insurance and automobile insurance, things like that, that is a significang we control from a regulatory or supervisory standpoint. In the term, companies are withdrawing from writing insurance in coastal areas and 10 years from now how are we going to get hazard insurance . And maybe the government ll5■ step in, but its a continuing issue. Senator brown of ohio senator vance is recognized. Thank you for being here. These hearings are important and have an opportunity to provide oversight what is go on in the fevered that affects our constituents. I wanted torm focus on basal3 and there have been various proposals that draw them down to focus on the Regional Banks and go back to one of the most significant crisis in our Banking Sector and the u. S. Spoke in private and i believe in public, but one of the concerns i have when we talk about Capital Requirements on the banks and there is maybe an argument that they would have bought longterm treasuries and even treasury bond risk and would hasten the collapse. I guess i want to start here, when we talk about some of the basal regulations, what was the original sort of proposal for which b fall under those regulations . This time around or earlier mr. Powell its down to well there are four categories of banks and this is down through the fourth cat engineer. The proposal thats out there now does extend to category four as well as 3, 2 and 1. What is the management that you have proposed . Mr. Powell 100 billion. There is some discussion about whether you apply them ate through that decision process at the fed where you guys are and justify drawing down to the 700 billion threshold. Mr. Powell and there is one category and big regionals and they are big banks and they them is a two. But they have different taylor of regulation and the question iso ask the question since it was a category four, what if anything needs to be changed, regulatedded there was tailing all the way down. Below 100, those are community banks, thats a difft regime as well. This makes sense. We want to have a diverse Banking Sector. Thats a great benefit to our country and very unusual for an advanced economy. So its something we want to preserve. Sen. Vance im sure you know, chairman powell, but just to put this on the record. A lot of the commercial lending, a lotf consumer lending, about f of that lending, consumer lending, is provided by the Regional Banks. I believe huntington in my home state of columbus is the number one s. B. A. Lender in the entire country. So to your point, i think these do provide incredibly important benefits to our economy. ■e you hear people talk about the economic miracle. Im curious, in the process of amending the basel requirements, you have guys made a decision about where to set the threshold yet . And when do you expect to set that threshold . Mr. Powell we havent made any final decisions. Weve put out for proposals some months ago. A proposal. And weve gotten a lot of comments, as im sure youre aware. Were chewing through those and digesting them and were just beginning now to sit down and talk about the changes that iginal proposal. Sen. Vance and when do you expect to issue a final proposal . Mr. Powell i think its going to take some time. I think its more important to do it right than it is to do it fast. My guess is well get through this and be done over the course of the year but it could be faster than that, it could be slower than that. Sen. Vance im wondering, being mindful of time, i have 30 seconds left, would you be willing to commit to say that in the process of amending, the fed will remove the Regional Bank drawdown and limit basel to the gsibs or 700 billion or above . Mr. Powell i cant get that specific to this point. Were clearly looking at the whole tailoring issue. Sen. Vance i appreciate that. I just repeat, given what actually happened with the Banking Sector [indiscernible] first republics not to apply a regulation to that because it doesnt solve the underlying problem. My fear is if you apply it to banks of 100 million and above, youre doing just that. With that in mind, ill yield. Thanks, mr. Chair. Chair brown senator tester of montana, is recognized. Senator tester thank you for being here, chair powell. We appreciate your work. Difficult situation. But i think you have done a really good job. Thank you for that. Look, success at the fed mandate for strong employment and stable prices is critical for Small Businesses on main street. For farmers, ranchers, for montana families. You fall all the metrics. From your perspective, where is the economy at . Now and where is it going . Chair powell the economy is growing at a healthy, sustainable pace. Thats the one thing. Second thing, the labor market is very strong and quite tight still. 3 3. 7 unemployment for the last 24 months. Thats the longest period in 50 years. Third is inflation. Inflation was too high. Its come down sharply since■ te beginn the headline number has come down from e 5 down to 2. 4. The core number is at 2. 8. I think it was at 4. 9 a year ago. These are big declines. We are in a very different place. A healy place. We are going to use our tools to keep that strong economy, keep that strong labor market while we continue to make progress on inflation. Tor tester one of ths where there has been inflation, i dont know where its at now. But food rose quite rapidly. Im a farmer. Prices now compared to what they were a year ago are actually off. Compared to six years ago they are up. Compared to a year ago they are down. My question to you, chairman powell, is there anything you can do specifically to deal with food costs . Xw chair powell im telling a farmer his business, but if you look at the food cost to the consumer, part of that is commodity costs. That was partly spiked because of ukraine grains and oil and that thing. The rest of it is a lot of costs in t leaves the farm to get collected and processed and trucked around and put on the shelves and in the stores. All those costs are just part of the general economy. As the labor market cools off from its overheated status two years ago, you will see, and you have seen, food inflation flattening out. The really high rates of inflation have come down. The prices have not. Er correct. I would just say that cattles doing better. Grain actually has dropped in price at the farm gate. Debate with you at all. We probably agree but it would take too long, too much time. We have other stuff. ■e chair powell i would be learning from you. Senator tester you discussed in previous hearings im the pandemic shutdowns and supply chain issues have had on economies, globally. How does the u. S. Economy look today compared to our competitor nations . Particularly china . Es. We are doing the best of anybody. We have the strongest growth an lowest inflation of advanced economies. China is a whole different story. China is having significant difficulties with its economy right now. They are in a very different place than we are. Senator tester to repeat what i heard you say, the economy of the United States is basically in better shape than any other economy in the world . Chair powell major economy, yes. Senator tester one of the other challenges out there is housing. In communities across this country. Whether you are in montana, a city in ohio, Workforce Housing in particular is a top priority, top commodity. Ke organizations working to address this. I meet them every day and i appreciate the work they are doing. How do these housing supplyup it the fomc uses to make decisions . Chair powell housing prices dont go into the data. Housing starts and renovations, things like that, are business activity. That shows up. When it comes to inflation, we convert ownership into an imputed rent. Then we look at rents. Thats how we look at that. We are not directly affected by changes in housing prices. Over time those will drive rents up. Senator tester are there Economic Trends that you see for housing . Chair powell yes. Two big things going on. One is, we have this underlying shortage of housing due to things like difficulties of zoning. A lot of close in to cities, places already built. More difficult to get zoning, more difficult to get people and materials. Thats one thing. Thats not going away. Then there is just a ton of things happening because of the pandemic, because of inflation, because of higher rates. Those are in the shortterm, those have really they are weighi o as rates come down, and that all goes through the economy, we are still going to be back to a place where we dont have enough housing. Senator tester thank you for your work. I appreciate it. Thank you. Chair brown senator cramer of north dakota. Senator cramer thank you, mr. Chairman. Chairman powell, good to see you. Its been a rather uneventful couple of days considering you spent two days in this place. I dont im not going to upset that. I did appreciate your response earlier to senator scott when he asked about immigration. He said the fed hasnt been omething us you and you talked about over the years, that is climate. The role of climate in your job, climate risk, banking. You oven said, the most common statement was, we should stick to our knitting. Stay in our lane. Similar to what you said probably to senator scott. But that said, in october the fed, the o. C. C. , fdic issued climate guidance as you know for institutions. Im just curious did congress somewhere along the line give the fed authority over climate poli as well . Is that another one of those things somebody took on . I realize you are not the dictator, only the chairman of the fed. I would be interested as the chairman your views. Chair powell our assignment is the safety and soundness of banks. They understand and can manage the risks that they face. Thats our assignment. We said in climate world we would do two and only two things. One was to do an illustrative stress scenario not stress scenarios, scenarios, climate banks are already doing this. The large banks who are subject they are already doing it. They are doing business internationally and dont have a choice. We said we would do that we also said we would offer guidance on not on level of climate risk or anything like that. Just on what had you to do to be in a position to assess. For my thinking thats what we are doing. We are not doing there are no new initiatives. We are not going to change our Capital Requirements to reflecte are not a climate policymaker. That is really the business of elected officials. Senator cramer thank you. Im going to bring up another topic. Th Central Bank Digital currency. I think from a lot of my friends out there i think there is know there is some confusion. Im easy to confuse. There are a lot of people that get confused about what is meant by the administrations admonition to continue researching, experimenting, looking at a digital bank sentry currency. I think people back home look at that and go oh, my gosh, they are going to control this now. Could you maybe just differentiate a little bit what people think of in terms of a bitcoin or their held digital currencieshat a Central Bank Digital currency, who in my view, should emulate cash. It still should be about the dollar. Could you explain to people back home . Chair powell we are nowhere near recommending let alone adopting a Central Bank Digital currency in any form. The idea is as technology has evolved money has become digital. But the government doesnt issue digital money. Its digital if you look at thed those dollars. The thought was the government could create a digital form of money people could transfer am that raises a concern that if that were a government account, the government would see all your transactions, thats something we would not stand for or do or propose here in the United States. That is how that works in china, for example. But thats not if we were ever to do Something Like that. We are a very long way from thinking about it. We would do this through the Banking System. The last thing we would want, the Federal Reserve, would be to have individual accounts for all americans or any americans for that matter. Only banks have accounts. Thats the way well keep. Its just its a question of following technology as it evolves in a way that serves the public better. People dont need to worry about Central Bank Issues currency. Nothing like that is remotely close to happening any time soon. Senator cramer that was helpful. Thank you. Chair brown senator cortez masto of nevada is next. Senator cortez masto thank you for your good work. I want to talk a little bit about the commercial real estate and whats happening there the Financial Stability Oversight Councils 2023 annual report identified commercial real estate as a financial risk. D the feds monetary report also noted commercial real estate prices continue to decline, especially in the Office Retail and multifamily sectors. Because of the low levels of transactions in the office sector, prices have not yet fully reflected the true decline in the value. Can you expand on the emerging risk the Federal Reserve has identified in the commercial Real Estate Market . And im curious, can you discuss the compound risks identified in commercial real estate lending, particularly at banks with large c. R. E. Concentrations and high fractions of uninsured deposits . Chair powell sure. Let me say i think there are very, very few transactions in commercial real estate right now, particularly in the troubled areas. Its not a question of prices still falling, its a question you dont have the price discovery. You just have to assume the prices are very low and have come down a lot. On commercial real estate, we have a secular change in people working from home. This is one big part of it. That means that ■4 many cities the Downtown Office district is very underpopulated, there are empty buildings in many manger and minor cities. It means that all of the retail that was there to service the thousands and thousands of people who work in those buildings, they are under pressure, too. Banks will have made loans to many of those buildings. This we have known for some years. What do we do . We have identified the banks that have high commercial real estate concentrations, particularly office and retail. And other one that is have been affected. Went dialogue with them around do you have your arms around this problem . Og do you have enough capital . Do you have enough liquidity . A plan. Youll take losses here. Are you being truthful with yourself and owners . We have been working with them. For some time we have been doing that. This is a problem that well be working on for years more im sure. There will be Bank Failures. If you look at the very big banks its not a first order issue for any of the large banks. Its more smaller and mediumsized banks we are working with them. We are getting through it. I think its manageable is the word i would use. Its a very active thing for us and the other regulators. Ill be. Senator cortez masto do you have concerns let me ask you this. As you are talking with these small and mediumsized banks, we know there will be a contagion we have seen in the past, do you have concerns that if they fail somehow this will impact the Financial Sector . Are you predtrying to address that and prevent that from happening . Chair powell we are trying to stay ahead of that. We also reached out to banks that had high concentrations of uninsured deposits and particularly uninsured deposits estate in the office sector. We are well aware of that issue. Just trying to stay ahead of it on a bank by bank basis and overall. So far we have been able to do that. Concluded that the distinction between the f. H. L. Banks roll and that of the Federal Reserve discount window of lenders of last resort has not been cleared, especially during times of market stress. During the 2023, we saw banks rely on advances from advances from the federal home an and didnt have relationships with the Federal Reserve to use its discount window. I know you talked a little bit about that with senator warner. How is the Federal Reserve working with the Federal Home Loan Banks to ensure that banks establish protocols to borrow from the feds discount window prior to times of stress . Chair powell we work with the Federal Home Loan Banks because in many cases banks were moving their loan from the Federal Home Loan Bank to the fed. We need to have smooth transfer we need to be in good touch with them. Even more important than that is that banks, any bank in the United States, needs to be in touch with the discount window. Know how to be able to access it. Be able to access it. Have appropriate collateral. Have control of that collateral. In m it was incredibly inefficient and took a long time for banks to actually go through that function. The home loan banks are ahead of us in technology. We know that we need to really invest in technology to get our banks, all of them, in touch with the discount window in a way they can use it quickly should they need to do so. Senator cortez masto thank you. Chair brown senator hagerty of tennessee is recognized. Senator hagerty under your tenure, mr. Chairman, the fed has taken the stands that the 2 inflation target shouldnt be viewed as a snapshot in time but ther needs to be achieved, quote, sustainably. When inflation was running well above the 2 target back in 2021 and early 2022, the fed was patient and allowed rates to offset below inflation that occurred prior. It strikes me odd now while we are stl well above target inflation, and have been for the prior year, market seems to expect the fed to immediately t inflation threshold. My question is, does the inflation rate reaches 2 , would that be considered a return to the target rate on a sustainable basis . Or is it still the case that inflation would need to more or less overcorrect well below 2 before the fed makes the rate cut adjustments . Chair powell we it would take us a while to really get mfore settled sustainably at 2 . Thats not our test for changing Interest Rates. Interest rates right now are in restricted territory, they aree. We would not wait for inflation to get to 2 . Monetary policy works with long lags. We have said for some years that we would start restoring the federal funds rate to a more normal, almost neutral level. We are far from neutral now. We do plan assuming the economy moves along the lines we expect, we do plan on starting a process of dialing back senator hagerty i know we allowed the economy to overshoot when inflation wasigh. Ade up for years of low inflation. Trying to scare that with the fact 7 chair powell we didnt do that. We adopt add framework that said we would do that. Suddenly a few mons later we got almost an explosion of very high inflation. Thats not what we were looking. We said moderately above or modestly above 2 . This was not modestly above. We reacted. We thought that the mistake we made we thought that that inflation would go away. It was transitory, it goes away quickly without effort by us. We figured out at the end of 2021 that was not the case and we acted. Senator hagerty you dont see that abrupt dynamic the other way . Chair powell i think we are in the right place. We are waiting we are waiting to become more confident that inflio to 2 . We do get that confidence. We are not far from it. It will be appropriate to begin to dial back the level of restriction so we dont drive the economy into a recession rather than normalizing policy. Senator hagerty go to the Balance Sheet and talk about that. We have seen a dramatic expansion of the feds Balance Sheet over the past couple decades. In 2005 it was 800 billion. Its 7. 5 trillion today. Doubled since the pandemic was under way. Through quantitative tapering the fed is attempting to reduce its footprint. The concern i have is on the other hand Government Spending tends to just continue to be8 profligate. We are running a 1 trillion deficit every 100 days. We are flooding the market with treasury debt and putting pressure on Interest Rates as well. Whats lost on many of us here is the spending levels will only make your job harder when it comes to lowering interest ■erates, not to mention there ia tacit expectation that the fed will step in once the markets can no longer absorb our new issue lance. I think this issuance. I think this deserves more attention. We are at the point your objectives may be very much at physical policy. Havior or am i missing something or is increased net issuance by the treasury lead to higher rates . Chair powell in principle more supply should lead to modestly higher rates. Thats not going to affect what we do. Thats not a problem for us. Our Balance Sheet no expected. We have decreased the size of our holdings by almost 1. 5 trillion. Senator hagerty i think its troubling we continue to put physical pressure by continuing to put we are run ago testifies of 1 trillion every running a deficit of 1 trillion every 100 days. The issuance is required to deal with that. Putting more pressure on the fed. Making your job harder. I think we need to take that into consideration. Another component of this topic, your colleague said he would like the fed to shift holders toward a larger share of shortterm treasuries. Prior to the financial crisis about a third was in bills. Now they are around 3 of your total securities holdings. Do you share the goal with governor waller . If so, how long would it take to us get there . Chair powell a while. Thats an issue in our fomc meeting in a couple weeks we are going to have our first really deep dive on what to do with the Balance Sheet. Thats one of the issues. I dont think well deal with that at this meet, but over time you love to own not a lot of m. B. S. I can see a case for shortening the maturity. Its not something that would happen quickly. We are not actually looking at that. Thats sort after longer term aspiration. Senator hagerty we talked about this before. We are in an election year. You are getting pressure i heare from lawmakers to adjust rates. Im not saying to raise rates or lower rates. Im here to emphasize the fact the credibility of the fed remains to be data driven. The reserve currency of the world depends on that and i encourage you to maintain that posture. Chair brown senator warren from maactts is recognized. Senator warren its been a year since we had the second, third, and fourth largest Bank Failures in americast greedy Bank Executives were part of the problem. The fed as the chief regulator of the biggest banks was part of the problem. Under your leadership and direction, the fed steadily weakened rules for the biggest billionaire banks. Exactly the banks that failed last march. In other words, chair powell, you failed to do your job to keep these big banks in line. When these banks blew up, you went in to spin mode, promising the fed would do better. After years of hemming and hawing you finely agreed to put in place basel iii rules that would strengthen capital and i mean the biggest banks. These are the feds proposed rule would apply to only 37 of the nations 4,500 banks, only the banks that have 100 billion or more in capital. Chair powell, when you testified before this Committee Last june, i asked you about taking responsibility for Bank Failures. And you said, quote, the main responsibility i take is to learn the right lessons from this and to undertake to address them so we dont have a situation like this where we had unexpectedly a large bank fail and spread contagion into the end quote. As part leaing those lessons you also said, quote, that you agree with and support, end quote, vice chair for super vision barrs recommendations for strengthening the feds rules and supervisory practices for the big banks, and that, quote, confident youre, quote, confident they would lead to a stronger and more resilient Banking System, end quote. I just want to be clear. You havent backed down from any of your comments from a year ago, have you chair powell, right lessons, dont let this happen again, supporting vice chair barrs recommendations, which include stronger capital standards. Chair powell no. Senator warren still stand by that . I understand those 37 big banks dont like higher capital rules because they are like insurance. They would make the banks safer but they cost a little money and would nip into the banks profits. So these 37 banks are swinging their very considerable weight around to try to weaken the capital rules. They spent tens of millions of dollars running ads during sunday night football and millions more for an army of lobbyists to try to twist arms here in congress. Impressive spending, but who exactly are they trying to impress . A man on the inside . Despite all you said last year, when the banks failed, about recommendations to strengthen rules for big banks, public reporting now says that you are driving efforts inside the fed to weaken the capital rule. You even told the House Financial Services Committee Representatives yesterday that you think its, quote, very plausible, close quote, that you withdraw the rule. Ne analyst put it, i dont think they will. They wont pass a final rule without powells support, suggesting that the rules will have to be weakened, quote, toa appease powell. Chair powell, im having trouble reconciling the statement you made last year, which you say you hold on to, statements you made when the headlines were all about three giant Bank Failures, and now your reported efforts to quietly weaken the rules that would strengthen capital str7rds fo prevent more Bank Failures. Let me just give you a chance to clarify the record here. Are you committed to finalizing the strongest version of the basil three capital rules this basel iii capital rules this year . Chair powell let me first say that we have taken and are taking many more steps to deal with the problems that revealed themselves at Silicon Valley bank. Thats around supervision senator warren im asking about rules. The ones you have required for years now to put in place and have dragged your feet■n on. Mr. Powell the basel iii rules are not directly related. They are not the thing that is directly related to Silicon Valley bank. They are a and i would just say that we put them out for comment. We got the comments. Anybodys free to go read the comments. My view is that it will be appropriate to make material and broad changes to that before we finalize it. In terms of i didnt senator warren broad changes to strengthen the rules . Chair powell material and broad changes. We are talking about what that will mean in the end. I did not say that we would withdraw the rule. I said there is a concept reproposal. I said, we hadnt made a decision on that. If tt board of governors, thats something we would look at doing. Senator warren everything you said a year about supporting the vice chair, who is responsible for writing these rules chair powell you and i had a long if you read it again. Senator warren i have. Chair powell you will see i am doing exactly what i said i would do. Senator warren you said you would support vice chair barr to get us strong rules. Now he is putting out rules chair powell that was about Silicon Valley bank. The vice chair for supervision has every right to bring proposals to the board. That has happened. As i made clear in our colloquy you are not the comptroller of the currency. When i do Monetary Policy i have one vote. There are 11 other voters. Thats the way it works. Its not different from the vice chair for supervision. Senator warren are you the leader of the fed. When the heat was on you talked a lot about getting tougher on the banks. Now the giant banks are unhappy about that and you have gone weakkneed on this. The American People need a leader at the fed who has the courage to stand up to these banks and protection our Financial System. Thank you. Chair brown senator danes of montana is recognized. Senator daines i can tell you montanans are continuing to see the impacts across the board from inflation thats been brought on by the policies of this administration and by colleagues across the aisle. I commend you for the job you have done in trying to rein in inflation and encourage you to■ face. Last time i checked its going to get more political around here between now and november. Im also encouraged contrary perhaps to my colleague from massachusetts, im encouraged by your comments yesterday that there will be broad changes to the basel iii proposal which as■ currently proposed would have significant detrimental impacts to credit cost and availability to Small Businesses. Lastly, i commend your answer yesterday that the fed is not a Climate Agency in considering the impact of Climate Change is not a factor in achieving your given mandate, congressionaland. Mr. Chairman, i recently joined many of my colleagues in writing to■ y would mandate Regional Banks issue new longterm debt. Im concerned that this will have a disproportionate impact on smaller Regional Banks because they are required to hold their longterm debt at both the Parent Holding company and insure depository bank■< levels. Can you explain how this aligns with the tailoring requirements set forth in the financial reform bill that we passed back . Chair powell i have a longer term debt proposal that lines with that. First of all, thats been out for comment on that one, the comments are in we are reviewing it. I dont want to say too much, but the theory of it in the first place was that they are those banks are not subject to the living will process to the extent that the gsibs are. Is we them more resolvable without imposing all of the burdens that we impose on the gsibs to have elaborate resolution plans. That was the thinking, i think, on the calibration of it. We have voluminous comments. We are looking at them. Well make an assessment and move forward as appropriate. Senator danes i know our smaller Regional Banks wou b hel deliberation, mr. Chairman. Senator daines i know our smaller Regional Banks would be happy to hear that thoughtful deliberaon, mr. Chairman. Understandably you had to raise Interest Rates to fight the fires inflation brought on by reckless democrat spending. However a major side effect of that is the impact the rising rates are having on the cost of servicing the outofcontrol National Debt. Senator hagerty alluded to this in his questioning minutes ago. Looking at c. B. O. Reports, Interest Payments on our debt will increase 32 this year, and will now exceed spending for the entire defense department. I have significant concerns, many do here in washington, Many Americans do, that we eventually policy and Monetary Policy converge. Meaning that the fed would ultimately have to worry about the impact rate setting would have on Government Debt or even potentially the risk of a default. Chairman powell, i know fiscal policy is not in your purview, but could you ever foresee a situation wherfiscal irresponsibility snowballs to a point that the fed would have to factor this into its Decision Making . Chair powell i think we are a long way from that. Thats a real thats a terrible place to be. Thats a place where some poor emerging Market Countries have found themselves over the years. For the United States to get to that point i think its unlikely. I do think, its not our business, we should stay out of this fiscal business, ill say what other fed chairs have said, we really need to get back to that discussion about fiscal sustainability. Both sides need to get together. The kinds of things that have to happen can only be done on a bipartisan basis. I really hope that we go back to a place where those discussions are happening again. Senator daines i have heard from a number of stakeholders about upcoming changes to liquidity regs, including an ultrashortterm liquidity requirement. As with any policy decision establishing the facts matters, its important that financial regulators have a complete thorough understanding of the financial environment before releasing a halfbaked proposal rule or guidance. My question is, what do you believe is a sufficient time period that would allow your agency to accurately calibrate new sound and reasonable liquidity requirements. Chair powell that is a great question and one we are struggling with. Particularly with all the other things going on. We are looking at some this is in response to Silicon Valley bank. We are looking at some liquidity innovations and asking ourselves what form that should take and how long it should be up for comment. We are not ready to do that. Thats the question we are asking. Senator daines follow on question and im finished. Will you confirm prior to the Federal Reserve issuing any new liquidity requ collection that would allow for meaningful analysis of all potential policy options . Chair brow p chair powell maybe. Chair brown thats very short. Chair powell i dont want to make a specific commitment like that without talking to the people who are carefully in touch with this. That is the right thought. Chair brown thank you, senator. Senator fedderman from pennsylvania is recognized. He got here last. Although if senator warnock sits down the next five seconds, are you ready . Youre so generous with each other. Im happy to have the junior colleague chair brown senator fedderman is recognized. Senator warnock is recognized from georgia. Senator warnock thank you, chairman. Thank you very much, mr. Chairman. Bank spending buy backs is rising again. The consumer small revenue has increased. Interest rates are high. Depositors, ordinary working families, working people with bank accounts. Not a lot of money in wall street aounts remains low. Chairman powell, im concerned that when banks dont incrse the Interest Rates on bank accounts, families are losing out on dollars that could be in their pockets. Again, they dont havehe portfolios that some of the folks in this room would have. Is that good for the economy . Are you concerned that banks under your supervision are doing this . Chair powell not paying sufficient senator warnock correct. Chair powell thats a question i havent heard. They have the option of and banks compete with each other. Ill be happy to look into that. I hadnt heard that concern. ■ senator warnock i think it is worth taking a look at. Many lower income individuals and families, they dont havemae available, but we saw high Interest Rates and that not being reflected in what depositor is able to benefitm■ from. Could those individuals and families benefit from a high Interest Rate on their deposits . Chair powell sure. For a long time we had a lot of mail from people at the fed to the fed saying you should raise Interest Rates because we are not getting anything on our checking accounts. We solved that problem. Senator warnock dont think we are asking for that. Given the reality let me pivot, the Monetary Policy po for housing has fallen, the strong labor market has kept prices high, that matches what i have been seeing in georgia. Too many folks cant afford a home. According to the Monetary Policy report, Mortgage Rates were averaging around 7 last month. Thats tough for lower income home buyers. Increases of just a percentage point or two can be the difference between owning a home or not. Are you concerned about this interplay between lower demand yet stubbornly high prices and what it means for folks trying to buy a home . What do you think is driving these high prices . Chair powell the Housing Market is in a very challenging situation right now. You have this longer run housing shortage, but at the same time youve got a bunch of things that have to do with the pandemic and inflation and our response with higher rates. You have a shortage of homes available for sale because many people are a very low Rate Mortgage they cant afford to refinance so they are not moving. Which means the supply of regular existing homes that are■ for sale is historically low. And very low transaction rate. That pushes up prices of other existing homes and also of new homes. There is just not enough supply. The builders are busy, but they are running into all kinds of supply issues still around zoning and workers and things like that. Its quite challenging. Rates are high, so people who are buying, a lot of the buyersy without a mortgage because the mortgage is expensive. Will i say the first problem, the longer one problem, supply, the other problems associated with low Rate Mortgages and high rates and all that, those will abate as the economy normalizes and as rat n well still be left with a Housing Market nationally where there is a housing shortage. Senator warnock no question we have a supply issue. This issue of high prices, lack of supply, of course disproportionately impacts some communities more than others. According to the Monetary Policy report, the employment rate for the black prime age labor force, persons between 25 and 54, reached a historic peak in 2023. The gap between blac prime age employment dropped to nearly 50year low around 3 . We can appreciate progress for the 3 gap is still significant. Would you agree that it is important to continue, to continue focusing on narrowing this gap. If so, what tools does the Federal Reserve have to do this work . Chair powell its very important. The single best thing we can do is get prices under control, inflation under control so that we can have a long expansion with the record is clear, a long expansion really gives low end e spectrum. Because the labor market gets very tight, inflation is low, and they benefit more than anybody. Thats where we were before the pandemic. Wed like to get back to that place. Senator warnock i think there are some other legislative tools the congress could use. Ontinue k with the chair in the ways we have already done to improve that rate. That difference. Thank you. Chair brown senator from wyoming is recognized. Senator lummis thank you, mr. Chairman. Nice to see, mr. Powell. My first question is about cdbcs. Theres been chatter lately on the social media that people are concerned about the fed creating a cdbc without legislative authorization. You and i have discussed that before, and as you know there are other means other than a cdbc that could use Digital Assets to create a secure and instant Payment System other than a cdbc. The question is this, do you still agree that the Federal Reserve cannot introduce a u. S. Central Bank Digital Currency without congressional authorization . Chair powell i do. Senator lummis thank you. That calms peoples fears. The people who are concerned that we could end up with Something Like the digital yuan used as a means of surveillance. I think that will calmom thank you so much. My next question is about yourn. Core c. P. E. As you know theres a disconnect between how you measure inflation and how the American People see inflation, because the American People are spding their money on gasoline and food and rent. Things that have gone up a lot. And they hear about these improvements in the economy, that t their everyday lives. Can you explain what measures you use to evaluate inflation . Just explain to the American People why you dont factor in the things they spend money on every day like food and gasoline . Chair powell actually, we do. Our statutory target is inflation. Its not core inflation. If you look at headline inflation over the last 12 months, thats it, thats our goal, its 2. 4 . Core inflations. Its 2. 8 . The reason is that some energy and food prices have come down. Those dont count in core. Our overall legal target is headline inflation which is our best effort to capture the cost of living that people face. Its not perfect. You have to make all kinds of adjustments that arent easy. I mentioned housing earlier. How do you measure housing inflation. Lots of issues. Thats what we target. The reason we look at core, though, is that headline inflation tends to be more volatile and tends to be pushed around by Commodity Prices which really dont relate to the overall state of the economy. So core tends to be a better predictor of overall inflation than overall inflation is. Headline inflation which does include food and energy. Senator lummis mr. Chairman, id like to include a letter in the record that senator tillis and i and two democrats on this committee have submitted with chair brown without objection. Senator lummis my question is this. What do you think is more likely that it will be harder for consumers to buy a house and Small Business to obtain a loan under baseigrate outside the bag system which may be harder to assess because its opaque . Chair powell i didnt get your question. Senator lummis with regard to basel iii, if there are more constraints on lending activity, what is more apt to be the consequence of that . That its harder for consumers to buy a house or a smalla loan . Or that lending just migrate outside the traditional Banking System . Chair powell if there were anything that constricted credit in the Banking System, they would probably be both things. Probably fewer loans made, but in addition there would be nonbank lenders more than happy to make the loan. Senator lummis i have a chicken and egg question here. Starting with tarp in 2008, there has been a very aggressive printing of u. S. Dollars up until today. Drive during that 22month period of covid. My question is, which comescn first, Congress Spending more and so you respond by printing more money, or are they separate considerations . Chair powell its hard to get my mind around that question. We dont print money to fund the deficit. Thats not what happens. But when the government borrows, it borrows. It issues basically the government borrows to fund deficits is what happens. Senator lummis right. So that would indicate to me that you do respond because we in spending, in deficit spending, are creating a demand to borrow. And youre responding chair powell we are not making loans. We are not lending money to the government. We are not financing these deficits. Senator lummis so there is no chicken and the egg relationship . Chair powell there is not really, no. Id have to think about this. I got to think about tay why dont we continue this . Senator lummis id love to. Your thoughts earlier about fiscal sustainability and how we could work with you and bipartisan, maybe next year, to address these issues. When you say things, you have to be careful because what you say has ripple effects outside of this building. But it would sure be nice if we could sit down with you on a bipaisan bas and have thos discussions in a frank way. Chair brown senator fedderman of pennsylvania is recognized. Senator van hollen of maryla. Senator van hollen let me start by thanking senator fedderman for allowing to question. Mr. Chairman, good to see you. Real wages are up. Thats good news. Over the last couple years wages have been going up. That means more families have more spending power in their budgets, right . Chair powell yes. Senator van hollen worker productivity is up, right . Senator van hollen corporate profits are up . Chair powell i believe so. Senator van hollen worker than corporate profits, right . Chair powell i dont know the answer. Senator van hollen the charts i show suggest that. That would indicate that in last corporations decide to pocket was profits more of the gains they get from their workers labor that we should be able to continue to have increases in real wages, is that right . Chair powell yeah. Senator van hollen its important for people to recognize these corporations are doing better than ever. And they are deciding now to essentially return the gains made through their workers od more to shareholders, obviously shareholders will get a profit, but the question is whether or not workers share in that profit to the extent of their worker productivity. As you know we have seen a great gap over decades between rising worker productivity and real wages. We are hoping to close that gap. Would you agree that it would be goodd worker productivity increases . Chair powell i think if you include benefits, thats a significant that gap. I looked into that, but not for some years. Generally speaking peoples compensation should equal should be over time equal to increases in productivity. Senator van hollen i appreciate that. I also want to ere is the tradeoff on workers wages, and also an issue with price gouging. We have seen record profits. We have also seen very high prices, these corporations are charging for things like groceries. ■■h i listened to a little bit of exchange with the chairman earlier, and of course i think yon■ur answer was people will charge what consumers will pay. But it should be known that these corporations are reaping much larger profits now than they were procovid, right . Chair powell some of them are. Im not super focused on individual corporate profits. Corporate profits have been high overall. Senator van hollen they are high for a couple reasons. One is that they are charging consumers, and the other would be if they are not sharing the benefits of Labor Productivity with their employees. Have heard a lot of claims by some of our republican colleagues about the causes of price increases, and i think its very important that American Consumers recognize that corporations are choosing to charge themhe grocery store, or engaging in things like shrinkflation rather than in order to have more of their profits. Let me turn briefly to a letter that i sent to the vice chair of other federal regulators ine january of this year regarding the basel iii Capital Requirements. I support the overall effort. Is we did raise concern with respect to a different issue which we think is the harmful impact it could have on Clean Energy Tax Credit Investments and all of the regulators testifying that day, including the vice chairman, said they recognized this was a significant issue and hope to address it. Would you agree with that . Mr. Powell yes, i would. Senator van hollen thank you. Its great to be here with you today. I dont know, maybe in america were talking about a cookie that was 18. I was alarmed and i hope we investigate that there is a cookie that costs 18 and dyo believe that an he can dote on twitter about a cookie that costs 18, is that reflective of our economy and where were at or not . Mr. Powell i certainly hope not. I dont do much shopping these days butve cookie. Sen. Fetterman and now, i believe that the American Economy now is the envy of the world after everything right now, correct . Mr. Powell yes, were performing very well compared to our peer group. Sen. Fetterman say that the stock markets are all a bit record highs, right . Mr. Powell pretty close. Sen. Fetterman yeah. And inflation has been pretty effectively addressed, right . Mr. Powell coming in sharp lip since the middle of the sharply since the middle of last year, yes. We have a ways to go. Sen. Fetterman and corporate profits are pretty robust, is that fair . Mr. Powell i believe it is. Sen. Fetterman . We can agree that and dont understand why more people seem to be talking about a cookie that costs 18, but thate as well. But given that, now, since things are pretty great and were in really great, excuse me one second, place, but now im concerned and theres rumors going around that basel, theyre going to change and theyre going to reduce the capital. And i about that because i dont know why we would want to also, i want the record to reflect on youre much smarter than i am, but i would be concerned that things are in a really great place right now, we can all degree on that, i would be concerned to change Something Like that because i wouldnt want to have Something Like what happened with s. D. B. I want to get your take on that. Mr. Powell sure. So u. S. Banks are well capitalized and generally speaking theyre quite well capitalized and were nl levels. Really in the basel iii end game, capital may well go up and what were talking about is ether the proposal that was put out by the Bank Regulatory agencies, including the fed, which has now been the subject of quite a lot of whether, you know, what changes will be appropriate to that. Thats what were talking about. Were not talking about reducing existing Capital Requirements. Sen. Fetterman ok. And then i also want to play off of a comment made by my colleague from tennessee. I actually agreed with him and hes concerned about the deficit, about its 1 trillion for every 100 days. So now if the federal government added 3. 5 trillion to the deficit by extending the trump tax cuts, would that increase or decrease inflation . Ng to fall back on our longtime reluctance to comment on fiscal policy. We take fiscal policy decisions, whatever they may be, we thing as they are and we conduct Monetary Policy to achieve 2 inflation. But we dont score inflation c. B. O. Does that. ll make a jud. But its not something we do because were an independent agency and that requires us to stay the heck out of politics. Sen. Fetterman so i dont want to put you on the spot but would those kind of tax cuts help nflation or inflame inflation . Mr. Powell i dont know what the affects would be on inflation. Do i know broadly speaking we ne to get to a place where revenues and spending are better aligned and i think Everybody Knows that. And i think we used to talk about this a lot 10 years ago. We dont talk about it as much anymore. The pandemic was a special thing. Great to get back to that on a bipartisan basis. Sen. Fetterman ok. Well, in my i have about 30 seconds left. I want to go on the record. I think youve done a really■ great job and i think our economy and i do agree that it is the envy of the world as well. And im confused that more people are talking about cookies or mcdonalds meals and those kinds of things, its not reflective on the strength of this too. I just want to thank you for your service. Mr. Powell thank you, sir. Sen. Brown thank you, senator fetterman. Thats the last questioner. Thanks for your generosity in yielding to colleagues who got here for whom you got here before, if i said that right. Thank you to chair powell for skroeupbing us today for joining us today and every six months and sometimes more often. I look forward to working with you. To strengthen our economy. Senators who wish to submit questions for the heang record are due one week from today, march 14. Chair powell, please submit responses to those questions for the record no mo 45 days from the day you receive them. Thank you again for your testimony. [captions Copyright National cable satellite corp. 2024] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] ■k■qz■