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This might be a sign of stabilization in the industry. 481,000 homes. It was little changed from the 82,000 we saw in december. That forecast was 470,000. There had been concerns about supply constraints with new homebuilders not building any particularly lower and homes and higherend homes. It looks like again we might see stabilization there. We are also seeing improvements in the job market, feeding through the home market as well. Better than estimated month over month, down 2 10 of 1 . Julie, thank you for breaking it down. It is time for the bulletin, the top business stories of the morning. Day two of jenny yellens testimony on capitol hill. The chair of the Federal Reserve will be questioned by the House Financial Services committee. Yesterday, testifying before a senate panel. The fed is coming to the end of having Interest Rates near zero. Yellen also said wage growth inflation are too high, which would argue against raising rates anytime soon. Too high . I am not sure about that. Another retailer is following walmarts lead and raising wages. Tgi acts saying lower stories getting raised to nine dollars an hour in june, starting in 2016, those with only six months is. Will get 10 miles an hour. Plans were announced to get 500,000 of its employees similar pay raise. China to reduce a turnover. That is not the wage growth we are trying to say. Hewlett packer the company says the rising u. S. Dollar will hurt profits. Hewlettpackard gets two thirds of its sales overseas. Acrosstheboard Revenue Growth remains challenging, to a the lease, across all the different segments. We see the same pattern this quarter as we did last quarter. It remains relatively more challenged than the pc side of his. The pc side of businesses seeing mixed trends the pc segment doing ok. The enterprise segment is still strongly challenged. Matt the upcoming split into two companies will cost 2 billion and one company will sell corporate equipment and the other will Sell Services and the other will focus on personal computers and printers. Greeces have a warning for athens. The new economic policies are just the starting point. They got praise for coming up with new reforms. The European Central bank says ashes speak louder than words. Ahead of the euro Greek Finance Ministry says that greece has to turn those reforms into action. Much more quickly now. The program implemented. There might be new money available. The question is, it has not been decided yet. There are still plenty of skeptics. Christine lagarde says greek proposals do not offer clear assurances. More cutbacks at the Hollywood Studio behind the shrek movies. Dreamworks animation after posting a 253 million loss in the Fourth Quarter. They artie announced plans to cut 500 jobs and reduce production from the greece from three thumbs a year to two. Charging and the Fourth Quarter for films that underperform such as mr. Peabody and sherman. In chicago, the mayor hit a speed bump on the road to reelection and has been forced into a runoff and emmanuel will face the cook county commissioner garcia on april 7. The former white house chief of staff under president obama got 45 of the vote. Plagued by persistent violence but the city is threatened by a solvency because of 20 billion in unfunded liabilities. I just think it is too cold there. That is how i feel. It is very windy. I am not sure it is really that wendy. It is. More on Janet Yellens second day of testimony. She will be giving the same Opening Statement as yesterday and then will open questions from members of the House Financial Services committee. Lets break this down. Michael mckee. Since michael was here yesterday, i will let you go first. Also, a suede vest . That is another level. Classic is really not a big competition. Classes always you look like that. But tell us what you thought yesterday. I think the fed pretty much have a plan and a plan is to just wait it out until we see more on crete evidence and more Economic Indicators of what is actually going down. We have two months and two more months, to find out if anything can disrupt monitor policy. I think the fed is doing a little bit of they have the plan by mike tyson. He said, everyone has got a plan until you get punched in the mouth. So you are a bit off either one. We see the split in reaction here it almost every Economist Says you get two months, we take it out in march or the march and april meetings we do not raise rates. The Economic Community came out of yesterdays testimony. The fed will raise rates in june for the first time. That was the message from janet yellen. The bond market sees it completely differently. They picked up on her comment about how we are not the inflation and we will not move until we do. And you see yields weighing down on her comments. In june, you would not be pushing yields down across the curve. Maybe today, she finds a way to knit those views together. It would be interesting to see today. In terms of her messages, is that what you want to hear that you might is it the right message . It is the only thing she can say. She will not give you a timetable or a day and will not tell you what they will do. Again, far too many things can come and disrupt the policy plan. The proverbial punch in the mouth, what if china punches the currency wars . If there is a currency war of magnificent size we do not know any of these things on quantitative easing. We are racking up 4. 5 chilean dollars. 4. 5 trillion. If they know they will raise rates and they know they will move, why does it matter when it happens . Is it happens early, what is the consequence . Cluster is not a real consequence economically. It is a great question. They told us the first move would between five basis points. Effective race rate is about 12. Moving up to 13 basis points. It will not affect the economy. What it is is the change in psychology. Seven years, no change in rates. The rate is at zero. Now that environment changes over the long term and as a traitor, you have got to figure out how that will affect what is trading, and what the yield will be at the end of the time youre holding on to this asset. That is a psychological change that has to go through investors minds now. Life is she even as concerned with investors and she is with the real economy . She will obviously stay. Is she worried she might burst a bubble here . The big concern is the Financial Markets. Housing. How is that done . It has done really well for the highend luxury Toll Brothers losers. They are doing ok. Were hearing the housing of the higher prices. The only thing that matters in this country, they do not care about what is going on at the top, the high network people. Still struggling for the middle income. But does it raised to 25 or 50 basis points, will that hurt . 3. 75 . At been economically, no. But there is a psychological component to it. People think if rates start to go the other way, particularly for housing then it is over. Who actually changed their behavior . Was it middle income people or Financial Markets . It almost went to zero in terms of refinancing. People were pulling money out of them and they send that money. We of that another refinancing move in the last three or four months that now seems to be tapering off as people think rates are going up. The last couple of weeks the rates have gone higher. They go over 4 again, does that kill off any kind of housing recovery . We do not know and that is one of the problems. Does that take into consideration the rates around the world . Of course. That is another thing especially when the 10 year bond, if you ever noticed, is a direct link with the german bond. Theyre headed even lower. My argument why we will continue to see even lower deals come here, and i think within time i will not put a time element on it, but certainly, 1 yield from the 10 year treasury. 1. 8 trillion worth of bonds out there with negative yields. Chilean . Chilean. Thank you so much. We will be checking back with you both later and we will get to the testimony soon. Right now, janet yellen is listening to Opening Statements with lawmakers. The fed chair will be questioned by the House Committee. Wake up. We will not talk about jenny on the whole time. To enforce the look policy when it may interfere with religious expression. Look at those hunks. Stephanie when eric is out, we still need to honor his favorite store. Matt now for top headlines around the world at this hour, highest interest rate. Raising rates and average of 2. 5 Percentage Points 13 . The move comes just days after the move for amex. The lawsuit and costco is ending a lucrative partnership. Shares of Casino Companies are plunging. The reason is weaker than expected gambling and the chinese new year. Down more than 7 . A record high from the casino. The Chinese Government has imposed stricter traveling rules and that has kept a lot of high rulers at home. A hackett back may have involved millions of people who are not even customers of the insurer. The hackers got access to the names and a dresses and Social Security numbers of 79 million people. No more than 70 million were actually customers. He still does not believe any financial or Confidential Health information was accessed here they got your Social Security numbers. Religious groups are uniting against Abercrombie Fitch. The team faces a religious eyes challenge bias challenge. The Supreme Court is hearing the case. Abercrombie claims it has the right because of its policy. Bob of Bloomberg Businessweek is covering the story. Lay it out for us. You are not allowed to discriminate against someone he because of their religion. However, the employer is allowed to set religiously neutral policies such as everyone who works here has to wear shoes. In between those two is detention. We have a job applicant who is muslim, showed up for her Job Interview with the headscarf on and Abercrombie Fitch admits that they understood she is wearing the headscarf because of her religious practice. They turned her down because they said you do not fit with our look and did she did did she have to say, i wear this because im a muslim . Matt why would she have to say that if they knew it already . They definitely know it. They admit they knew it. That is correct. Unless you put the burden on the job applicant, you will have too many cases where the employer is guessing about the situation that is not a fair burden. Stephanie but they she was were in the head scarf and the burden is on them . The lower court said that because the job applicant failed to say to the Job Interviewer, i am wearing this because i muslim because of that, she loses in the employer wins. That is what the chamber of commerce and all the big as this is want to preserve. Could one make the argument Abercrombie Fitch could say we have this look, this is how we sell product. There is not a dispute about that. You could not come in here and wear tshirts and expect bloomberg to come in here. That is not true. Moments ago, they told me my mess he hair is getting them down. But if you said you have to wear your hair in a certain way because you are a buddhist, you would then have an argument and bloomberg would have to consider whether to accommodate your religious practice with its religious neutral policy. The shame here is that the point of the law is not to create conflict. It is supposed to set up a situation where people comedy one another. We will see whether this game court comes up with some type of announcement that encourages people to accommodate somebody he commented each other. Accommodate each other. Matt you wear it because that person is attractive and since a certain look. If i do not need giant, unwashed treads, why should i have to hire that person . You would not necessarily be obliged to. If you made an argument that we would only want to hire women rather than men, were only people who wear their hair in a certain way, can we do that across the board were not discriminating against people with a religious practice what if i am told i want to be in their runway show, but as a religious practice, i overeat and im a little chubby . I think you would probably have difficult difficulty sustaining that claim. If he said you wanted to join that company, but you were kosher because you were jewett or you kept the islamic version of kosher, and they said, we refuse to accommodate that and you have to either bacon cheese or, they probably would not get away with that. Lets unless you are doing an advertisement for a bacon cheeseburger. Classes they wanted to hire you than they could. Class of muslim could not argue a company that sells bacon did not hire me because stephanie Abercrombie Fitch cologne. I happen to think it is fantastic. I have been places and im like, what is that and im like what . So you hang around people who wear that cologne . A collegiate cologne, but it only sells to young foreigners. Who wear no shirts. Thank you paul so much. Coming up, we will go to capitol hill where the House Committee is going to start to question fed chair janet yellen. Expect the inflation to decline further in the near term. Welcome back. Giving you an update on the movements we are seeing in the market, i want to start with under the radar movers, so to his week. Take a look at sam adams, a boston beer company. Shares are plunging 17 . It is the worst day in nearly six years after the company came out with earnings not quite up to snuff. In particular forecast for the company for the full year. Energy coming in well below estimates with its numbers. . 11 versus the . 25 estimates by analysts and lending club after coming publicly last year, having its worst day ever and its earnings missed estimates. The ceo of that company will be on bloomberg west later today. And a winner as well. Take a look at the Live Entertainment company that produces electronic dance music shows bob, the ceo of that company, is offering to potentially buy it out and take it pilot test private. The stock went public october 13. His offer is coming after that takes slide. Join us after the break for more Market Makers. Join us on bloomberg television. Live from bloomberg headquarters in new york this is Market Makers with Erik Schatzker and stephanie ruhle. Matt Erik Schatzker is on assignment in greece. Stephanie a lot happening here as well. Matt if you are not sick of it do not we will continue to bring you more fed speak. Q a day with janet yellen on capitol hill is about to begin. We have got richie here. At the ready. We have got mike mckee here at the ready. Stephanie we will go to the committee right now. The republican senator chairman of the House Financials Services committee from is leading it off. Question your testimony that a modification of ford debt for guidance will not necessarily lead to a modification of the target fed funds rate. Is that what i heard you testify . That Forward Guidance does not necessarily leave lead to a modification of your target funds rate. Classic means a modification of the guidance would mean that we wish to consider whether or not to raise the federal funds rate. I am reading from your testimony now. The ford guidance should not be read as indicating the committee will necessarily reach the target range . Yes. I questioned then how much again guidance there is in for an guidance. We have had this discussion before in private and in public concerning a predictable, rulesbased Monetary Policy. Prior to becoming chair, we previously served as a member of the board. I believe you indicated the ruling particular is what sensible, sense of banks do. In the previous testimony, your last testimony before our committee, i thought i heard you say that you still believe that, but that timing was not correct because were still in extraordinary times scared perhaps im putting some words in your mouth. That was the essence of what i thought i heard in the last testimony. Yesterday, before the senate you testified i am not a proponent of chaining the federal market in its decisionmaking to any role whatsoever. A couple of observations. I think you are familiar with perhaps rule is an intimidating term but under his legislation, call it rule, call it process, call it methodology, the fed could set the role and the fed could waive the rule. The fed could change the rule is will at will, as long as they publicly told the rest of us what it was doing. So i am not sure what, the fed would be chaining itself 2 00 p. M. My question is this. Do you no longer believe that a rulesbased policy like the taylor rule is what sensible Central Banks do . Is it a question of timing or have you simply changed your mind . The viewer was offering, a statement i made in 1995, i was comparing the rule to other rules that were yet simpler. Indicating that was a rule that up until that time, from the mid80s until the mid90s, had worked well. It is just that your statement of yesterday does not seem to leave a whole lot of wiggle room. I do not believe the fed should chain itself to any mechanical rules. I do not believe in 1995 and i do not believe it now. I have the privilege to meet the taylor right after 1993 and i agree with the views he expressed then. He said, operating Monetary Policy by mechanically following a policy rule is not practical. Let me ask you this question benchmark for the central bank could refer to in deciding let me ask you this question. To waive the rule and change the rule, how is one chaining themselves . I dont believe any mechanical rule that links Monetary Policy to one or two variables, in the case of taylor rule type questions, it is two variables. We take into account a wide range of factors that impact the performance over time of the economy. I think i understand your position. Im for it im beginning to run out of time here. The second to last question i will ask yesterday you stated in Senate Testimony that you are not seeking to alter doddfrank apparently in any way or form. This was in an answer to a question by senator warren, who i believe may be fairly alone in doddfrank, sacred texts. Just as many issues. There are many aspects that could be improved in when in one way or another. Alcaraz had problems with the pushup position. A board member daniel, has indicated concern for the level and expressed support for institutions below a certain size of the rule. Franklin himself indicated a willingness and interest in changing nonbank designations, asset thresholds for Automatic Bank designations. Vocal rule in user margin, loans held in portfolio. My question is, is there any context for the answers you give, or do you believe doddfrank should not be altered in any way . We are not asking them to alter it. It provides considerable flexibility that are appropriate to the institutions that we supervise. If we were starting from scratch, no doubt we would have suggestions for different ways of having formulated one thing or another. It has been a very useful piece of legislation and has provided a roadmap for us to take strong action to improve the safety and soundness of the Financial System and we found ways to use the flexibility to appropriate. Kuester predecessor, barney frank. You seek no modifications. The chair is way past the time. He seems on the thank you. The chair and i have met on more than one occasion to talk about Community Banks and whether or not there were steps that could be taken to ensure that Community Banks are not overly burdened with regulations and separate out the Community Banks, regional and big banks. It is not that barney frank or i or others believe that there never ever can be any modifications were any changes. We have a we said we are open to technical changes and to working in areas where there may be confusion or appears to be duplication. I want to know you to know that some of being raised to you is an ongoing discussion and hopefully, if we could get equal operation from the opposite side of the aisle on some of these issues, then there may be some room for some technical changes or modifications. Having said that, im interested in what is happening with our living wills. Under title i of doddfrank, as you know, robust living wills under title i are crucial to ensure we are truly in the too big to fail. Many women of the public wrote to the Federal Reserve expressing frustration that the living wills are being appointed, specifically the lack that makes it to estimate was of public to set props prospects for doddfrank, to reduce the complexity of the worlds most difficult Financial Institution and allows them to be resolved under ordinary bankruptcy proceedings without endangering the broader economy. In an august 2014 press release, the fed noted that that both they and the f dic were working to its floor ways to enhance public transparency. I wonder, if you can, to elaborate on this commitment what are different what Additional Information does the fed plan to release to the public so we can know whether or not you are doing what we intended in reform, is each living will is thousands of pages long does the public have any transparency of the fed is on releasing about 30 or so pages of the plans . First of all, we understand the commissions are not adequate. The big banks we believe the top ceos do not even know or understand the complexity of institutions and these are extremely important if we are to have a plan back which we can resolve them in the event we determine they are putting us all at risk. What can you update us about these living wills . Let me say were taking the living wills process very seriously. We have worked closely with the fdic and last summer, issued a set of joint letters to the largest firms, establishing a clear set of criteria of things that we want to see in their next submissions. There are very significant steps that improve the odds of resolve ability under the bankruptcy code. We have told them, for example, they need to establish a rational and less complex legal structure that would improve resolve ability. That they need to develop a Holding Company structure to support resolve ability, that they need to change the way some of their derivatives contracts state provisions, include state to death state provisions that would aid resolve ability. We have told them they need to make sure the chair services that support critical operations and core business lines would be maintained throughout resolution. We are working with the firms to make sure that by july of this year, when they make their next submissions, that we see very meaningful improvement. I will say that in some of the largest firms, we have seen very meaningful steps toward reducing the number of legal entities along the lines we have suggested. If we do not see the kind of progress we expect, we have told these firms that we expect to find their submission is not credible. So we are taking the process very seriously. These living wills, there are often tens of thousands of pages and they contain a great deal of confidential information. That does not really belong, i think, in the Public Domain. We have insisted they provide for mission in the public portion of their submission. We are working to increase the amount of information, the amount of detail, that is in the public portion so you would be able to get a better understanding of how they are proceeding on this. Let me move to another subject area quickly. The architect of the rule, it said one loophole that remains in his namesake rule is a merchant banking, which allows our bank to engage in the economy. Shopping centers. We have one to separate the business of banking from the real economy. Blurring these distinctions runs the risk of banks engaging anticompetitive behavior. Manipulating markets and driving up costs accruing too much political power. Any thoughts . The fed is engaged in a careful review of the activities along these lines, with respect to concerns these raids about safety and soundness, we are likely to propose new rules. With respect to market manipulation commodity areas manipulating markets, market manipulation is something the fcc are charged with overseeing. The chair now recognizes the gentleman from michigan to it from michigan. Thank you. I appreciate you being here again. Before we go into an issue regarding political influence on the fed, i want to briefly touch on where the chairman had gone regarding my federal reform bill. Just to be clear, we do not say you cannot change a rule. What were looking for is clear forward explanations about where youre going. I want to do this four times a year rather than twice a year. My friend from texas said he is concerned about gaining control from congress and concerned that we might not be all that functional having that dragged up twice a year, happened in that special whom by era of watergate, not exactly a time of great cooperation on the hill but it was because of precisely making sure the house and the senate had proper oversight of an entity they created, the Federal Reserve. Should we be equally or even more concerned about threats posed by executive branch influence . I think we just hit on a perfect example of this. It is sort of an absolutely no changes to doddfrank. Rather than the policy that has been talking about talked about by the Ranking Member or the former chair, or has been voted on by this committee to my friends across the aisle join me in voting unanimously for two of my bills that changed doddfrank. When dealing with derivatives reform, a package the executive branch officially opposed because it sailed through this committee. You join us twice a year, but it is my understanding we hold near weekly lunches. Last year, according to your public schedule from february to december alone, you held 51 meetings with the white house and 23 meetings with lawmakers. I do not know exactly who those were. Vice chair. A meeting with me was not one of those 23, but that is 42 hours of your time meeting with that. That is three to one you are dealing with the executive ranch versus the legislative ranch. You are willing to share any of the items discussed, that would help with transparency and any of the agreements made during these. If not, i guess i just really want to discuss the feds independent spirit is it being unduly influenced by the executive branch . The Federal Reserve is independent. I do not discuss Monetary Policy or actions that we are going to take with the secretary or the executive branch. We can further the Financial System on a regular basis. We participate jointly in Many International meetings, including g7 and g20 and we confer on matters that are coming before those groups. I would love to have a summary of those conversations. That would be wonderful. We see our Television Cameras over here on cspan and another of place a number of places right now. My goal with that particular bill is to do more of this. This is healthy for us. By us, i do not mean us as a legislature. I mean us as a system. I do not want to see 16 hundred ave policies pushed through the fed. The chairman talked about we believe we could have changes to doddfrank. It appears a position of the white house. Information where we felt it really hampered our ability to appropriately supervise. A case in point would be application of the amendment to our ability to design appropriate capital rules. It is critically important that the Federal Reserve be accountable to congress and we are accountable to congress it provides all of the inputs Congress Sees for appropriate oversight. My colleagues and i have testified 16 times over the past year. Which provided it is clearly important for us. The time of the gentleman is expired. The chair recognizes the gentlelady from wisconsin the Ranking Member of the Monetary Policy and subcommittee. Thank you so much. It is such a delight. I will start with the liquidation facility implementation and i want to know about your crossborder mechanism. The liquidation entitled to is a procedure set up in doddfrank for liquidating a firm. We were discussing something different, title i which is the provisions firms need to make in their living wills. That is what im saying. You mentioned update us on what is happening with crossborder. One of the things that could make it difficult in order the liquidation or bankruptcy, to resolve a firm or a contract provision that goes into effect immediately to make payments to holders of liberal contracts. It is important there be at least a short time a day or so during which a stay is put into effect on the provisions. We have asked the firms, it is one of the provisions of the living wills to change those contracts to provide for such a stay. They have had discussions and we have with the International Derivatives association that has a private sector entity that has a master contract or we are making progress. My time is eroding and im satisfied with the answer. Let me congratulate or thank you for your excellent speech for any quality on the survey in consumer finances. We have had 59 months of private sector growth i give this speech to my constituents because they scratch their head and they are not feeling it. You talk about the fed. I guess i want you to comment on inequality and what you think the fed does to our economy. There are many factors responsible for the rising inequality. Many factors are structural and they have to do with the nature of technological change. What we can do is try to assure a generally strong labor market where it is possible for those who want to work to find jobs in a reasonable amount of time. What sectors those jobs will appear in but the policies we follow and the general state of the economy have an important influence on the overall strength of the job market. Were trying to achieve a job market where we have individual individuals who want to work and are able to find work. Thank you. We wrote you a letter i would say the most Fiery Exchange really was between the center and the congressman and janet yellen really around following the rupee read i was very impressed. She stood strong or you do not see many people sitting in the seat testifying to push back like that. Classes is unusual because normally, the fed share shows more deference but he was misquoting her and she wanted to make that clear that she had never advocated using the rule as the fed guide to how they make monetary. Im surprised each time a lawmaker lets her speak. Stephanie Janet Yellen Matt just talking. Stephanie stop the talking and we will be right back. Live from bloomberg headquarters in new york, this is Market Makers. Stephanie welcome to the second hour. Matt Erik Schatzker is on assignment right now increase while we watch janet yellen questioned by lawmakers in washington. Stephanie before we break down everything she has said so far, i want to take you down to the bolton, the top business stories of the morning. Day two of janet yellen on capitol hill. This time, the Federal Reserve chair testifying for the House Financial Services many. A contentious back and forth with the Committee Chairman and she reiterated her position that the fed should not use devices to determine Interest Rates. I do not think the fed should chain itself to any mechanical rule. I have the privilege to meet with professional professor taylor right after he proposed in 1993. A sign that the housing industry may be stabilizing. A faster pace than expected, the rate was little changed from decembers figure, the highest in more than six years. The weather may have skewed the results. New home sales fell more than 50 to an alltime low. And it was a happy holiday for the discount retailer that posted betterthanexpected profits now focusing on the u. S. , and he got rid of the moneylosing use it in canada last january. The news about the danish torrent toymaker, lego today. The fullyear revenue rose 14 in 2014 and was helped why new toys based on the lego movie. The maker of gets about 60 of its sales every year from your collection. By the way, it putting out a sequel to that movie called the lego movie sequel. Hiring a reader for my favorite website. Everything is awesome when you are tired of a team. A doubledecker couch, that is pretty awesome. Responses creditors say talk is cheap and they want to see action now. The imf, the european commission. Great proposals for financial reform are just the starting point of finance minister signed off on the way for a four month extension of the bailout. Frances president sounded optimistic. I think a good compromise has been found which the greek people have expressed, which also affects the rules of the European Union and particularly the eurozone is charged with safeguarding. Sounded more optimistic in his native language. Coming up, greeces point man on the bailout talks. He sat down with the greek finance minister. Those grounded 737s at Southwest Airlines are back in the air. It can resume flying 188 planes taken out of service because of this inspections. The faa gave the southwest five days to update the check. Southwest was forced to cancel 95 yesterday. It all has to do with standout standby hydraulics systems. Probably not that important. We will take you back to janet yellen in d. C. In just a moment but i want to get a Quick Reaction from our inhouse expert Michael Mckee and our bloomberg economist. Ricardo what do you think . You should be watching wages. The mandate is price stability. You watch the price of labor. Wages are stagnant. They have not gone anywhere in a long while. That is the key to Monetary Policy in the future. He would be fascinating if our elected representatives would ask that of janet yellen. So far, what is striking about this is they went immediately into their own political projects and are not asking about Monetary Policy in the economy. I feeling every time they got to the podium, they spent two minutes and 56 seconds just talking. They have always held monologues but usually the first couple of questions, they asked about Monetary Policy, where the fed is going, what we think of the economy. It is the semiannual testimony of the economy, which is what they have been doing which nobody has been asking her where they think the economy is going. And now four times a euro. A year. Stephanie back to the stage, janet yellen is taking questions right now. Explained that the new capital standards will negatively impact access to credit, especially Small Businesses. However, banks will continuing will be continuing, robust growth in 2015. Is there any truth to that claim . We look carefully at Small Business lending to try to determine what is causing it to grow so slowly. We hear from the business and banking side that in fact the demand for Small Business loans is not very high. I think the Banking Industry at this point is looking to give additional Small Business loans, not based with much demand. The uncertainties caused by the crisis and also the fact that home values fell so much also the value in a person passes home is an important source of funding for a new Small Business, so the Small Business formation has been weak. I think individuals thinking about starting Small Businesses, given the uncertainty in the economic environment, have been risk averse in their behavior. We are trying to take the steps we can to make sure that funding is available. That leads to my next question. You commented recently that rebounding housing prices have restored much of the housing wealth we lost during the recession. Working families experiencing some of the largest gains. With the prospect of economically stimulating lowInterest Rates coming to an end, does the fed have other tools to help lower and middle income family built wealth for their longterm . The main term to help Families Build wealth aside from making sure the banks satisfy their obligations and making sure they serve the needs of low and moderate income communities is that we need a strong job market and a strong economy. Where jobs are readily available for those who want to work. We have provided a great deal of accommodation even when the time comes to begin to raise our target for shortterm Interest Rates, we will continue to provide a great deal of support to the economy and make sure that we will continue to see a job market that continues to improve over time. That is an important objective. Thank you. The gem it from new jersey mr. Garrett from our Capital Markets subcommittee. Thank you. To follow up on the chairs issues, the socalled independence of the fed. There has been a lot of press focused on this issue probably cuts of the like it likelihood of the audit to moving on to congress. The main criticism by you and folks over at the fed has been this legislation has somehow subject the fed to inappropriate political gestures and forcing them to make decisions on political grounds. You just said yesterday, the fed is a bill that would politicize Monetary Policy. You would bring shortterm political pressure to bear on the fed. In theory having the fed simply implement monetary changes based on facts, it sounds appealing. In practice, it is not anywhere close to what happened that the fed. The chair just gave one example. Let me run through seven examples or more by you in the fed which clearly indicate the fed is already acting in making decisions clearly on a partisan clinical basis. You mentioned one about the fact we had weekly meetings with the department of fed. Another one is a clear and revolving door for political appointees and the board of governors. The third one, the former chair bernanke eat, unprecedented decision to formally endorse the president and the fiscal stimulus plan. The reason given was he was trying to seek political favor for his reappointment as chair. Also, his decision to announce qe3 just weeks before the president was to face the election back in 2012. Fifth, your meetings at the white house the day before the presence of the election, and your speech on income inequality a Major Political theme in the past election, just weeks before the election. Finally your meeting an open door policy meetings with liberal Advocacy Group Advocacy Group spirit taken collectively, it is unbelievable each one of these things could have been coincidental. It paints a damming picture the fed has already been completely immersed and guided in all partisan politics. You are lobbying the other side of the aisle, extremely hard, do not agree to require agencies to be more transparent, against moorcock five around the ability to use your bailout authority. You are lobbying hard against doing more Economic Analysis of your role making and youre also lobbying against additional public scrutiny and congressional oversight. When one thinks about it, i am not sure who is lobbying more you or the banks you oversee. Given to me as far as who you are seeing in congress, it is a 21 ratio, who you are lobbying hard with democrats to republicans. On your monetary positions being praised by democrats and criticized by republicans, your party made Monetary Policy partisan clinical exercise. Having congress oversee your agency more thoroughly will not make it more political than it already is. The whole original idea here about having political monetary decisions was at the push would be to reduce the economy but the exact opposite is happening. People pushing back on your decisions are those arguing or a tougher monetary elsie, not a looser one. On that last point come as far as meeting with outside, liberal organizations, i wonder whether you can agree today you will meet with folks on other side of the spectrum and meet with some of them who have a different view on this. Were meeting with such a group on friday. What is it called . The americans for principles in action. I am sorry. We meet with a wide range of groups. I think it is a weak mischaracterization of our meeting schedules. My meetings are entirely public. My schedule is completely in the Public Domain. That is where im taking this from. This was handed to me. It is Public Domain because all you are trying to do is make it a little more Public Domain with regard to the regulatory section, which he admitted to hear that you are willing to have a robust oversight as far as congress. You did not answer one question. Lets close on this. The chairman of the subcommittee asked if he would make available the transcripts or the summary of the meetings you have and you do not answer that question to the chair. Would you make that available . These are private and oneonone meetings and i do not think that is appropriate. If i had breakfast with you, i would not make a transcript of what we discussed. When you discuss the Monetary Policy, that is a private matter . We have common interests and responsibility for the economy and i think it is entirely appropriate that we can confer on what we see happening. The time has expired. The chair recognizes the german from massachusetts. Thank you. I will tell you i am shocked shocked i tell you, that you are actually meeting with the president. Or the secretary of the treasury, or anywhere anyone else pretty should be sitting in the closet making these decisions on your own. Im personally shocked that you were anyone else would care about growing income in. What a terrible thing to care about. By the way, my schedule is private. What i say in meetings is private with my constituents with people i dont agree with with people i agree with. If you open that door, i challenge all of my colleagues democrat and republican, to do the same. Open every meeting you have with everyone, including lobbyists. By the way, madam chair, have you donated any money to a member of congress . No. Have the banks donated any money to your knowledge . I am assuming they have. I think they have. By the way, madam chair, hope im on your Christmas Card list because i would be very offended if i dont get a Christmas Card. With all of that nonsense aside all of that hypocrisy aside, that does not mean i agree with you on everything. I cannot tell you how strongly i disagree with the feds recent decision to take Municipal Bonds and to clear them, not highly coody assets. To tell banks they cannot hold them as capital means, of course there are risky meetings. To tell them it may as well tell the banks to take the cash and stuff it in the mattress. That is the only safer place for investment. It is not a question of sake safe. It is a question of liquid and how rapidly these assets can be converted to cash. They have never been a problem and what this does is drive up costs to tax aorist and simultaneously reduce investment in economic enhancements. That is what these are used for. It is a shortsighted, wrong policy, in my opinion, even though i am not on your dance card for many different things. I also want to talk about to be to fail. The fdic and you both basically said the second, not the first the second of these living wills were inadequate. If the fdic was preclear about it. I would like to submit a copy of their comments for the record. In his comments, he said they provide no credible clear path through bankruptcy that does not require unrealistic assumptions or direct or indirect public support. And on and on pair in my time is running out to one simple question. You said earlier, you would give them a third try. We will not know the results of that third try forgive or take a year from now and maybe longer. If they do not meet your requirements on the third try, what you said i wrote it down here somewhere something along the lines that you would be upset or you would say, oh my goodness, if my mother or my teacher or might priest told me if you do those terrible things i will be very disappointed i do not need to tell you, it did not much matter. Constant, i said we would find the plans we will find them to be not credible if we do not see progress. What is the practical if we find them not credible we belong with the fdic and would be in the position to impose Additional Capital and liquidity and other requirements. Would you break them up . They would then have two years, i believe, to show us that they had made changes that we would then have to find. So five years, they still have potentially three years before any serious concert is is to prove to you they no longer operate are a threat to the entire u. S. Economic system. We have put in place much higher capital standards and liquidity. That they have been found insufficient by virtually anyone who studied these except the fed. We issued a rule about how we would conduct the living will process. The last line of the letter says, in theory, title i is still too big to fail. It is not the passage of the law but rather implementation that determines whether the issue is resolved. It is insufficient at the moment. The time of the gentleman has expired. The chair recognizes the gentleman from texas. Thank you and chair yellen thank you for being here today. In the last few years, there has been a lot of discussion about a Financial Institution being systemically important and section 165 of the doddfrank threshold of 50 billion that designation then triggers an enhanced standard. As we have discussed, i am not a big fan because i believe it is implicit of an institution being too big to fail. With that said, the 50 billion threshold currently in place i do not think in my estimation it is really working. It places an undue burden on the midsize banks that are not systemic to meet additional enhanced standards. I want to applaud the congressman for their leadership in the issue. This month, the office of Financial Research released a study expanding systemic important indicators. They looked at five factors enter sized, interconnectedness complexity, and cross jurisdictional activity. This came out of the committee as you are aware. Does the Federal Reserve agree that these five factors that were used by the committee are the primary and hitters of the finest all Financial Institutions importance . We will certainly look at factors like that and take this into account in deciding on institutions systemic importance. I mean, i completely agree 50 billion Banking Organization is very different in its systemic footprint and a 2 trillion organization and section 165 does allow the board to differentiate among Companies Based on their capital structure and riskiness and complexity. We have done so in writing rules pertaining to the 165 standards. There is flexibility, not total, but a good deal of flexibility to tailor our supervision and requirements to the systemic footprints of the firms and the requirements of the 50 billion firms are not the same as they were firemens the more systemic institutions. But basically the parameters you have only let you determine what happens to people in the box, but not who is or who is not in the box. When you look at that study, you realize one of the least of the company the companies determined to be systemic, a huge range between the firms that are larger and not systemic. I think if you look at that chart, and you have seen that, is there is a big gap there. The big gap is problematic and i think a lot of people think we need to do better in that area. If you think these standards are acceptable, would you be receptive to accepting a different arrangement where we used standards adopted and if the fed has additional standards that you would like to include in that, so everyone would know whether they were in or out of the box . Trying to draw any line and have some firms just below and some firms just above creates an element of arbitrariness. Wherever that line is, we retain that problem. It is important the statutes enable us to differentiate and try to tailor rules two different firms of different complexities that are important. There are some things we must apply to every firm over 50 billion the same would be true if that were changed. He does not allow you now to draw that line. The line is john for you. I hear you saying you think that is a flawed process . Scion saying wherever you drop a line there will be a kind of arbitrariness associated with it. If you drew it at 200 billion, i still say most 200 billion firms are different than the very largest Financial Institutions and we would still want the flexibility to be able to impose different requirements. He should not be trying that, is that what youre saying . You said it was arbitrary . Should we not draw the line . Classic if congress chose to draw a line and to apply enhanced standards to a certain class of firms, what im saying is we absolutely recognize that with in the large class of firms they do differently in terms of complexity and systemic footprint and we need to tailor pregnant tesh regulations that are appropriate and not identical for the largest and the ones that come closest to wherever that linus. Chair recognizes the gentleman from massachusetts. Thank you, mr. Chairman and thank you, madam chair. Good to see you again. I was reading something recently in the financial times. Desmond of the American Enterprise institute he talked about the depreciation of the dollar, the strong dollar coupled with the decline. Matt we will take a little break here while janet yellen continues to endure questions from washington politicians. Stephanie i will say, she is standing strong. It is something you have to be able to do. I give her an a for not lashing out in not getting upset. I agree 100 with mike. Taking punches and defending them off very well. Matt i would give her a b. I think she could come off stronger here. You have to give a much firmer answer or ask for a better Stephanie Matt miller saying what she has to do. I will say give her an a. We will be back with more of Janet Yellenss testimony in just a few. Live from bloomberg headquarters in new york, this is Market Makers. Stephanie welcome back to Market Makers. I am stephanie ruhle. Lets give you the bulletin. The top is this stories of the morning. A lot going on. A promising report for the housing industry, new homes sold at a faster pace than expected. At changed from decembers figure, the highest in more than six years. Weather may have skewed the results. I am going to guess, especially in boston the sales in the south climb to the highest level in more than six years. Breaking up will be expensive to do for hewlettpackard. It says it will cost 2 billion to split into two publicly traded companies and will cost 55,000 jobs by the end of the fiscal years. Shares are falling after the Company Reported quarterly and fullyear forecast that missed estimates across the board. The company said a rise in u. S. Dollar will hurt profits. It gets two thirds of its sales overseas. Across the board, Revenue Growth means challenging to say the least across all the different segments. We see the same pattern that we did last quarter. The pc side of the business is seeing mixed trends with respect to corporate pcs versus consumer he sees. Pcs. Stephanie you know who is having a better day than hewlettpackard me. You hear me nail his name. More than one million American Express cardholders will start paying higher interest rate. They are raising their rates an average of 2. 5 Percentage Points to 13 . The company says it is making the change after looking at rival Interest Rates for borrowers with similar credit profiles. Matt the bank of scotland is cutting back its footprint. Rbs will reduce the number of countries it operates in by two thirds. That would leave them in 13 countries, it will also sellers u. S. Loan commitments and related derivatives to a financial group. It is owned by british taxpayers. It has been cutting jobs and assets to improve earnings. A federal judge has ordered apple to pay a Texas Company in a Patent Infringement suit. The jury said that itunes used patents from smart flash without permission. The trial was held in tyler, texas. For the harshest critics of the white house on that upcoming speech to congress, is really Prime Minister Benjamin Netanyahu National Security adviser susan rice said his speech will be destructive to ties between the u. S. And israel. He accepted the invitation from john boehner to speak about iran without white house approval. Rice spoke to charlie rose. We are in the process of training and devising and equipping the Iraqi Security forces in 4 different locations across iraq. We have supported them in their Ongoing Operations as they have sought to take back territory captured by isil. We have supported the kurds as well. Matt you can watch all of that interview with National Security advisor susan rice on tonight on charlie rose at 7 p. M. Eastern. Stephanie markets overseas are closing for the day. Lets take you to julie hyman who is looking at the action. Declines in europe, not huge ones. If you take a look at the stock 600, the dax, we are seeing mostly declines. Generally there is a negative tone. Not a lot of action on the greek front. Some of the oil performers in the european markets not do so well today. Royal dutch shell have been trading lower. Oil has bounced around particularly we are seeing a disparity between london and the bti but it looks like the trading is negative. The French Insurance Company coming out with earnings that beat estimates, strong results from its Life Insurance business. As for greek stocks, declines once again. The greek ranks seeing sharp declines banks seeing sharp declines. Stephanie julie hyman, thank you giving us the latest. I have lost my mojo. Julie hyman, senior markets correspondent, a pleasure. I appreciate you joining us this morning. Matt you are so focused on janet yellen testimony that you cannot think of anything else. Stephanie she is still getting grilled by members of the House Financial Services committee. I want to bring back Michael Mckee and rich yamarone. We set as across the board, in terms of her grade. We are not wrapped up in, any surprises we should be on the lookout for . I cant believe it took so long before some of the astra question about the economy. Asked her question about the economy. As the economy picks up speed, wages will start to rise, and that will bring inflation higher. That is the sum total of what she has talked about on the economy today. The surprise that nobody earlier asked her about it. You always expect these political question, but usually it takes a wild to get into that. They went for it immediately. Matt this is why i came out with a b. Stephanie the whole goal is for her to be a stabilizing agent, how does petulance help that . Matt they are not asking her questions about her job. If i were her i would make that point. Heidi great some alleles for someone elses miscues how the you grade somebody elses miscues . The currency war situation, the deflation, or disinflation. Some of the questions had been relevant on the regulatory side. Asking about the living wel ills. They did ask about the dollar and they asked what you think about these living wills that are over 1000 pages long, how is there any transparency. They do not give her any time to answer. Stephanie how does any of this surprise you . This is a giant showcase. Of course Maxine Waters she is putting on a show for her constituents. She is not doing it for us. She is not having a real conversation with janet yellen that will affect fed policy. Matt you are saying the hearing is not designed to actually achieve anything other than stephanie it may be designed for that, but thats not what happens. You can see me on tv, imd doing this ideally most congressional hearings are similar to this. They are just not televised. Matt carl levin does it right, the subcommittee for investigation, when they went after goldman sachs, that was a factfinding mission. Stephanie yes. The london whale was on it. We know the facts of what is going on. We do not know how these things end up and the course all of these actions take. It is unprecedented territory we have never been in this situation. Stephanie if Larry Summers had gotten that job, how would this be playing out . Thats an interesting question in terms of the way they address her. Because she is a tiny little woman do they address her differently. Are they harsher than they would be with larry, who would do what matt suggests. The economics would not have played out a whole lot. Larry is a great guy, if you do not believe me, just ask him. I think he would be a very disruptive entity. He would be extremely political. He missed the boat on this infrastructure thing. We should have had that a decade ago. And if a structure to replace the dilapidated trains highways airports. Everything we have is dilapidated. Matt i do not want to get too far off the beaten track we have the worst infrastructure of any developed country. We have planes that cannot land in our airports. We build planes and we cannot land them. Stephanie before we go Larry Summers sits on the board of lending club, lending club had their ipo, it made him a very rich man in the last couple of months. If he had gotten the fed chair see, what he had had to sell out his interest in the company . Yes. Stephanie then he is so happy he did not get that job, because that was a big payday for larry. Fed members are not allowed to have outside holdings. Matt afterwards, it is different difficult for a former fed chairman to get mortgages . Apparently. Stephanie thank you both so much. I am just saying it is a sexy place to go. Matt he has been leading the charge for an extension of the greek bailout. Erik schatzker sat down with greek the greek finance minister and we will show you that interview after the break. Stephanie we are coming down to the wire in washington. The battle over Homeland Security spending, and president obamas immigration policy. The question is, will Republican Leaders go along with the shutout . I hope not. Matt we are two days away from a budget dispute, shutting down the department of Homeland Security. If it happens. The issue, a spending bill that includes a provision rolling back president obamas executive action on immigration. The house passed a bill that did just that, the democrats blocked it in the senate. Here is john boehner this morning. The house has done its job to fund the department of Homeland Security and to stop the president overreach on immigration. We are waiting for the senate to do their job. Senate democrats have stood in the way for three weeks over a bill that should have been debated and passed. Until the senate does something we are in a wait and see mode. Matt peter cook is in miami where president obama will hold an immigration town hall later today. With the latest, theater, peter, another crisis in washington, will it be averted . This one will likely be a verdict, but maybe not until the beginning of next week. Averted. Even within republican ranks Mitch Mcconnell and john boehner have not spoken in two weeks. This is a real standoff john boehner cannot pull his tent and accept a clean funding bill because he is to worried about conservative republicans who will be very upset. He is taking to his guns and putting pressure on Mitch Mcconnell. Matt what is the white house hoping to get out of this town hall and is it a quincy events or is this a quintons a coincidence . I think not. This is time to try and embarrass republicans as best they can and to try to put republicans on the defensive not only over Homeland Security funding but the failure for congress to do anything on immigration reform. The president will say his executive actions or the right thing to do. He is coming to miami to a town hall audience, telemundo, it msnbc town hall on the campus of Florida International university, he will have in the audience some of the folks on the 5 million undocumented immigrants in this country who have benefited from his executive actions. One of them is has been covered by the earlier executive action and he is trying to get his family into this country, we asked him what he will get out of the session he will challenge the president. I want the president to say he will continue to work with republicans and democrats to work on immigration legislation and that he will not wait for the political games that cause delays and gridlock in our country. That is what i want the president to embrace his presidency, to take action in the face of obstruction. The president will be feeling it from both sides republicans as well as immigration activist here in miami, pushing the president to go further. It could be a chilly reception chillier reception that he expects. Matt is it really accurate will it really happen when the government shutdowns occur, people whose jobs are considered vital by law that would be most of Homeland Security, our continued as far as paying goes and as far as working goes. There are about 230,000 people that will be effective 200,000 what have to stay on the job without paychecks. 30,000 would be for load would be for load furload. This will be a big deal for the Homeland Security department. The Homeland Security has made a point repeatedly. This will be a controversial issue if it hits midnight without funding. Matt peter cook literally standing in the gulf of mexico. Stephanie no hes not. Stephanie i am going to say, the commercial came on this show is the only thing we are missing. It would be amazing. Matt it has been a pleasure spending time with you while erik spends his time with the greek fineness finance minister. Stephanie peter cook standing in miami as this guy, looks out at the ocean says, the gulf of mexico. Matt it looks socalled and smooth. He is in some harbor in miami. I do not spend a lot of time but i imagine south beach is a time you go to often. Let me remind you, greek finance minister Yanis Varoufakis is coming on with Erik Schatzker in a matter of minutes. Stay with us on bloomberg television. Stephanie thanks for watching. Time for on the markets. Lets take a quick look at the action on wall street. We are not seeing much of it, at least at you look at the broad market. Stocks hovering around the alltime highs after janet yellen signal that u. S. Increases are not imminent. She is being questioned before congress. A positive close for the dow and s p would mean and other record for each of those indexes. Joining me is kevin kelly, chief Investment Officer at recon capital partners. You have been looking at the fix vixx. Volatility is quieter. One of the reasons why is the volatility 30 days out right the s p 500 earnings the dollar has come down. Hewlettpackard took a big hit because of the dollar. If you look rather down the fix curve, they can see it going multiple months out. We could see volatility around 30, which is what happened back in september. You mention earnings. Lows, like home depot yesterday it did better than expected benefiting from the home renovation cycle. What kind of options activity are we seeing . Now that earnings have come out volatility actually in a lows is pretty suppressed. Around 20. Youre seeing two times the amount of calls being traded. That is a great reason why options are good. When volatility is low you can place bets into the future at a cheap rate. I am looking at the breakdown of the s p 500 groups and the worst performing groups is utilities. You have a trade for us that actually tries to play into that. You think there will continue to be a negative trend. Utilities are really rich. Theyre trading at 19 times earnings. Specifically looking at the xl u etf. It is forecasting in the utility sectors 5 earnings growth, but youre paying 19 times that forward earnings. You could actually go out to june and by the 45 put. It is relatively inexpensive and you can protect the run up. Or you can balance your portfolio. One of the reasons you want to do that, is you could get a comparable product or get into a senior loan if youre looking for yields. There are other products you can get into that have that are valuations. The xlu is trading a little above 45 by doing that, you are assuming not that it will fall but it will not go much anywhere. That that valuation will keep a cap. You are protecting yourself. If there is a down move out to june, if there is a cell in may, you are protecting your portfolio. You can put the shares of the etf at 45 so if it goes to 41, you are protected. Did to talk to you. Thats it for options and on the markets. Money clip is next. Welcome to money clip. I am pimm fox. Intech hp pledges, profits fall shorts and tens of thousands of jobs are going out the door. Around the world irelands finance minister tells greece take a page from his countrys debt busting labor. A nation god versus Abercrombie Fitch, christians, jews, buddhists and hindus, they are all united in the Supreme Court case against the teen retailer

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