Welcome. Promoting Economic Growth remains are top priority for this committee and this congress. It is carefully and thoroughly evalwaiting current laws and regulations. There have been numerous developments that will impact Economic Growth legislation. Senator brown and i have so police sa solicited and more than 100 submissions have come in. They are listed on the committees were site. They issued their second report. The Treasury Department issued the First Department in it is finding ways to help our economies improve. Support for Bipartisan Legislation continues to build. Particular interest has been focused on finding bai partisan, change the threshold, exempt certain terms from stress testing and simplify small bank capital rules. These are just a few of many issues raised to the committee in recent months. Imposing enhanced standards design for the most complex system on institutions that are not systemic has real world implications. I regularly hear from idaho men and women who are concerned about access to Business Loans that would create jobs and promote a healthy committee. The threshold is an area which we would address. There are different ways enhanced standards one applied. All have questioned whether or not it is appropriate. The Federal Reserve governor powell acting controller, former Federal Reserve and former have all expressed support for changing the 50 billion threshold. In addition to the 50 billion threshold Federal Reserve shared specific areas where the feds believe some laws and regulations can be changed to alleviate including the stress tests and resolution plans among others. I look forward to working and welcome any additional color that you can provide on which congress may act together to further reduce burden. It is one of my key proi oiorit. The Current System is not in the best interest of consumers, taxpayers, investors, lenders or the broader economy. I was encouraged that Federal Reserve governor powell gave a speech. He also noted that as memories of the crisis fade the next few years may present our last best chance to finish these critical reforms. With respect to Monetary Policy the feds have raised Interest Rates four times since 2008. It maintains with a Balance Sheet that stands at 4. 5 trillion. Last month the open Market Committee opened an addendum and plans detailing how the fed will gradually reduce its assets. I welcome about the state of the economy and the path of Monetary Policy. It is to address many of these issues outlined here today. I look forward to working with the Federal Reserve and members of this committee, senator brown. Thank you for holding this hearing. Welcome back. Its wonderful to have you here and see you again. Thank you so much for your service. Since your last appearance the feds have increased the federal funds rate twice. Employers continue to create jobs although at a slightly slower pace than last year and wages have increased modestly. The feds continues to lay out securities that it purchased during the crisis. The biggest banks are making record profits, important to remember that. Biggest banks are making record profits just passed the feds 2017 stress tests. Too Many Americans continue to struggle to make ends meet. They boar ri their dhirn will not have Economic Security they once had. Life expectancy in many parts of the country is falling, something more or less unprecedented. It is than any zip code in the United States of america. I see the difficulty that people in my neighborhood and my zip code have been rebuilding their lives. Even though the wealth gap between white and black families have widened they want to let wall street gamble with the Financial Futures of working families once again. For working americans is back in style in parts of washington from the Treasury Departments report to the financial choice act to the houses financial apropuations bill. It is watchdogs who are of wall street, by wall street, for wall street. Ten years ago he sat in the seat that you occupy. After describing the Economic Conditions and housing and business sectors he told our committee he smoke abopoke abou mortgages but he concluded overall the u. S. Economy appears likely to expand at a moderate pace over the second half of 2007 with growth then strengthening a bit in 2008. We must not forget what actually happened next. A financial devastating financial crisis in maryland and arkansas and all over, working families across this country cant forget that. They are still digging out for can we forget it. I mention it not as a criticism. He had plenty of company and missing the signs of an impending crisis and collapse. Having passed the test once they want to make the test easier. Im sure every College Student you taught in your career would have wanted the same thing. They unlike our nations biggest banks would have been too embarrassed. It was caused in part by watchdogs who were busy focusing on bank profits. They were treating consumer fairly. Everyone on this can agree there are parts of wall street reform that can be improved. Of course there are. Our focus should be on growing a stronger economy from idaho to ohio and beyond and particularly in communities too often forgotten in this town. It means protecting consumers and improving the Economic Security of communities of color. It means strengthening the working and middle class families who felt the devastation of 2008s financial crisis. It means lowering the cost of health care. It means expanding Educational Opportunity and job training. Thats how you spur longterm Economic Growth that lifts up all americans. Weakening safeguards to boost bank profits. In crossing our fingers that wall street will invest we hope instead of just passing it along to their shareholders it will only hasten the next one. I look forward to hearing your answers to our questions. Thank you. Thank you senator brown. Welcome here. We proeshuate you being here today. My understanding is because my testimony is the same as the testimony you gave yesterday at the house that you requested to waive the reading of your testimony we agree with that. We will proceed directly to the questions. Very good. And we have five minutes each for questions. We will try our very best. We have a lot of time pressures today. We will try our very best to help you keep on course with your five minute question period. It is to change the system to attract large amounts of private capital and to identify and build upon areas of bipartisan agreement. Do you agree with these . Yes. I do. I would support the principals that governor powell put forward and say its something i Hope Congress will move to in the near future. And i know the answer to this but i would like to have you say it. Do you agree with the urgency that we expressed about the need for us to act . Yes. It has been almost a decade since they were moved in to receivership and the role of the government and the associated Systemic Risk remains, and i think its important to move forward with reforms. Go thank you. There appears to be growing consensus they should change the threshold and also changing the rule, exempting certain and reducing burdens on Community Banks and credit unions. Do you agree it would be appropriate for congress to act in each of those areas . I do. Thank you. Could you please give the committee after the hearing some additional suggestions or legislation they could reduce the burdens in these areas . We would be happy to do so. Thank you very much. At our hearing last month they said the Federal Reserve is reviewing the rule. He noted that there is room for eliminating or of regulation that dont directly bear on the rules main policy goals. Can you elaborate on the rule . We look forward to boricing with the other agencies that have a roll. It is a very complex rule partly reflecting the legislation, but i think we could find ways to reduce the burden and it should be a multiagency effort. And many of us are aware that the multiagency effort has been slowed down. Many of us believe because of the complexity of getting four or five agencies to all agree on the same thing. Thats true. Yes. What do you think about the idea of having a designated lead agency on this issue . I think its something the congress could certainly consider if one agency has a larger regulatory role with respect to those institutions. It might be natural for it to take the lead. Thank you and at our last hearing you told me we would like our Balance Sheet to again be primarily treasury securities. We have had holdings of Mortgage Backed securities. The fomcs plans to reduce the plan sheets include not reinvesting securities and 4 billion of Agency Securities per month. It is suggesting the feds may wind down more quickly than the Mortgage Backed security portfolio. Ultimately when the caps are fully phased in my guess is that they wont be binding and that well be running down Mortgage Backed securities at the rate that the principal is received on them. It will be a long process, i should say, to go back to the portfolio even after we have come to the point where our Balance Sheet has been reduced to as low a level as we expect to take it. Well still have substantial holdings of Mortgage Backed securities. So beyond that we will be running further and runningrefo with franklin roosevelt, 1965 Lyndon Johnson with medicare, that Congress Goes back to those issues bipartisanly and makes modest changes to fix them. Something weve been asking republicans to do with the Affordable Care act. The same with doddfrank. Instead weve seen a House Services committee that wants wholesale destruction. Of course we will work on making the kinds of changes that what ellen has spoken about in making those reforms. Madam chair, you recently stated you do not expect another financial crisis in our lifetimes. Setting aside the delicate question of your and my and all of our life expectancies, is that predicated on maintaining the strength of the current regulatory structure. Let me state what i think i should have stated originally when i made that comment. I believe we have done a great deal since the financial crisis to strengthen the Financial System and to make it more resilient. I think we can never be confident that there wont be another financial crisis, but we have acted in the aftermath of that crisis to put in place much stronger capital and liquidity requirements for systemic banking organizations in the Banking System where generally i think our stress testing regime is forcing banks to greatly improve their Risk Management and Capital Planning. Its giving us assurance that even if there is a very significant downtown in the economy, that they will be able to function and provide for the credit needs of the economy and weve greatly increased our monitoring of the Financial System for a broader range of risks. But let me say we can never be confident that there wont be another financial crisis, but it is important that we maintain the improvements that have been put in place that mitigate the risk and the potential damage. Thank you. I just want people listening not to read your answers from the chairman about moving on reform and moving that there is some urgency to that and we dont want changes. We want them to be modest. Let me sort of further paint that picture with this question in light of your comments to me that you may not expect another financial crisis in our lifetimes. But the importance of a good regulatory structure diminishes the chances dramatically. If so, the recommendations of the treasury report that youre familiar with that obviously the way it was written you didnt seem to have a lot of input. Weaken regulations on the largest banks, including fewer Consumer Protections. If those were adopted, would you continue to have that same level of confidence that you just repeated. So i wouldnt be in favor of reducing capital for the most systemic banks. And Consumer Protections . I think those are important as well. There are a lot of things in the treasury report that we agree with that mirror things that were doing on our own to tailor regulations. But for those banks its critically important to maintain the capital standards. If we were to adopt the treasury report recommendations, it would more likely result in a potential financial crisis. Well, some of them, yes. Okay. Last question i wanted to ask. I wanted to return to a topic i discussed several weeks ago with your colleague governor powell. The biggest banks Capital Requirements, quote, are still somewhere below where they should be. Contagion from one of these banks spreading to the rest of the Financial System. Is the fed on track to finish these changes . Were working very hard on those. Were awaiting further work by our staff. We hope to include those surcharges and make other adjustments and to better integrate the Capital Requirements relating to the stress test into our normal capital regime. Can you give us with assurance can you assure us those changes will be in place for next years stress test . It depends on the timing. We will need to go out with the proposal and i cant guarantee that it will be in place that quickly. But you dont see the fed heading in the direction of the treasury report recommendations instead . The treasury report is supportive of integrating a capital buffer relating to the stress tests into our regular risk based Capital Requirements. But probably is not supportive of including the surcharges. More than probably. Thank you, madam chair. Senator shelby. Thank you. Welcome again, chairman yellen. In the area of inflation calculations which you have to deal with and price stability, which is very important to all Central Banks and to us, current fed calculations show that inflation has fallen to 1. 4 , i believe. This statistic is puzzling to some economists as Interest Rates were recently raised in june. Some have suggested that the fed should not continue the practice of gradually raising Interest Rates, because inflation has not kept pace as with some of the things that you had talked about earlier. You said in recent testimony, it appears that the recent lower readings on inflation are partly the result of a few unusual reductions in certain categories of prices, your words. Yes. In addition to these few unusual reductions here, is it possible that certain aspects of foreign economies such as slow growth and soft prices in china are artificially lowering or influencing inflation in this country. Or what is it . Whats going on here . Do you know and if you know what do you believe . Well, with respect to the Global Economy, weve been through a period in which theres been a substantial appreciation of the dollar and that depressed for quite some time import prices. But that trend has now come to an end, and import prices are rising at a modest rate. So i dont see the Global Economy as at this point mainly responsible for the low inflation readings. I do think there are some special onetime transitory factors. These unusual changes reflecting the move to unlimited data plans for cell phones and large declines in some Prescription Drug prices. There may be more going on. And were watching inflation very carefully in light of low readings. I think its premature to conclude that the underlying inflation trend is falling well short of 2 . I havent reached such a conclusion. We are watching data very carefully. And i would say i regard the risk as being twosided with respect to inflation. On the one hand, we are seeing low Inflation Numbers for several months. On the other hand, we have quite a tight labor market and it continues to strengthen. And experience suggests that ultimately, although with a lag, were not seeing very substantial upward pressure on wages, but we may begin to see pressures on wages and prices as slack in the economy diminishes. So i see the risk with respect to inflation as being twosided. And with respect to have that policy, most of my colleagues and i, when we looked at this matter in june, even recognizing that weve had several months of low inflation readings and that we are focused on trying to understand it, have felt that it probably remains prudent to continue on a gradual path of rate increases. But its something we will watch