5d

we control from a regulatory or standpoint. in the longer term, companies are withdrawing from writing insurance in coastal 10 years from now how are we going to get hazard insurance? maybe the government will step in, but it's a continuing

issue. senator brown: senator advance of ohio -- senator vance ised. >> thank you for being here. these hearings are important and have an opportunity to provide over what is going on in the fevered that affects our constituents. i wanted torm focusn basal3 and there have been various proposals that draw them down to 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 about capital requirements on the banks and there is maybe an argument that they would bought long-term

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 forould fall under those regulations? >> this time around or earlier on? mr. powell: it's down to -- well there are four categories of banks and this through the fourth cat engineer. the proposal that's out there now does extend to as 3, 2 and 1. >> what is the management that you have"a proposed? mr. powell: $100 billion. >> there is some discussion about whether you apply them at

$700 billion and maybe walk me through that decision process at the fed where y 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 are category three and one of them is a two. but they have different taylor regulation and the question is we have to the question is we have to ask the question was the anything needs to be changed from a capital liquidity standpoint. there was tailoring all the way down and community banks is a different regime, this makes sense. we want a diverse banking sector that the benefit to the country and unusual for the economy, something we want to preserve.

>> to put this on the record a lot of the commercial and real estate lending, half of that is provided by regional banks, huntington my home state of 8v columbus, to your point, these are important benefits to our economy and a lot of people are have the same financial systems that dominated in western europe. curious, in the process of amending the basal have you made a decision where to set the threshold and where you expect to set the threshold? >> we haven't made any final decisions and a lot of comments as i'm sure you are aware we are chewing through those and digeust beginning to sit down and talk about changes that we will make

to the original proposal. >> when do you expect the usosal? >> it will take some time. it is more important to do it right than fast. my guess is we will get thr course of this year. it could be faster than that are slower. >> i'm wondering, i have ds left. would you be willing to say that in the process of amending thee the regional bank drawdown in the limit basal's application directly to the g 6 or $700 billion or above? >> i can't get t but we are clearly looking at the whole thing. >> i appreciate that. given what actually happened with first republic i encourage you guys not to apply a regulation that doesn't solve the underlying problem. i fear if you apply this you are doing just that so with that in mind, i will yield. >> thanks.

senator chester of montana is recognized. >> thank you for being here. a difficult situation but i think you've done a really good job so thank you. for the fed on your mandate for strong employment and stable prices is critical for small businesses on main street for farmers, ranchers, you follow all the metrics. from your perspective, where is the economy now and where is it going? >> the economy is growing at a healthy, sustainable, solid, strong pace. that's one thing.nd thing, the labor market is very strong and tight, 3. months, the longest period and 50 years and the third thing is inflation. inflation was too high. it's come down sharply since last year. if you look at the headline number it has come down from

the 5s down to 2.4, the core number is 2.8. these are big declines so we are in a different place, a healthy place, we will use our tools to keep that strong economy, that strong labor market and make progress on >> one of the areas there has been inflation and i don't know where it is now but food rose quite rapidly. i'm a farmer. we didn't get much of that. we didn't get any of that. prices now compared to what they were a year ago are off compared to six years ago they are up but compared to where they were a year ago they are down. my question to youly to deal with food costs? >> i'm telling a farmer his business but if you look at the food costs of the consumer, part of that is commodity cost and that was partly spiked because of ukraine, oil a that kind of thing but the rest of it is a lot of costs in the

supply chain from when it leaves the farm to get collected and processed and put on the shelves and stores. all of those costs are part of the general economy. as the labor market cools off from its overheated status two years ago you will see and have seen food inflation flattening out. the really high rates of inflation have come down. prices have not. >> i would say cattle is doing better. grain has dropped. i don't want to get into that debate because we probably agree. we've got other stuff to talk about. you have discussed inings the impacts of the pandemic shutdowns and supply-chain issues on economies globally. how does the us economy look today compared to our competitor nations particularly china?

>> start with the advanced economies, weof anybody. we have the strongest growth and lowest inflation. china is a whole different story, china is having significant difficulties with its economy right now and we are in a very different place. >> to repeat what i heard you say, the economy of the united states is in better shape than any other econod? yes. >> one of the other challenges is housing in communities all across this country. with your in montana or ohio, workforce housing in particular is a top priority, top commodities so to speak. plenty of folks, great organizations are working to address this. i meet them every appreciate the work they are doing but how do these housing supply issues show up in the data the fomc uses to make decisions?

>> prices don't go into the data. housing starts and renovations and things like that are jus activity and that shows up, but when it comes to inflation, we convert ownership into rent look at rent, that is how we look at all that so we are not directly affected by changes in housing prices but over time those will drive rents up. >> is it fair to ask either economic trends you see for housing? >> yes. two big things going on. we had this underlying shortage of housing and it is due to things like difficulty zoning. a lot of places that were already built, more difficult to get zoning, more difficult to get people and materials and all that. that's one thing and that's not going away. then because of the pandemic, inflation and higher rates in the short term are weighing on the housing market but as rates go down and that

goes throuace where we don't have enough housing. >> thank you for your work. very much appreciate it. >> senator kramer of nor dakota. >> good to see you. it has been an uneventful couple of days spent two days in this place. i'm not going to upsetiate your response earlier to senator scott about immigration, the fed hasn't been assigned that. i want t else you haven't been assigned to and that is the role of climate in your job and climate risk in banking. you've often said the most common statement was we should stick to our knitting, stay in our lane, similar to what you said to senator scott but that said, in occ,

fdic's issued climate guidance for management of covered institutions curious, congress somewhere along the line give the fed authority over climate policy as well as that another of those things that somebody justand i realize you're not the dictator of the fed, only the chairman but i would be interested. safety and soundness of banks, they understand and manage the risks. we said iat would do two and only two things. one of them was illustrative stress scenarios, climate scenarios, banks are already, large banks are ey're doing business internationally, they don't have a choice. we also said we would offer guid level of climate risk or anything like that, just on what you had to do to be in a position to assess and from my thinking

that's what we are doing, there are no new initiatives, we are not going to change capital requirements, i am really determined the we are not a climate policymaker. that is the business of elected officials. >> one other topic is central bank digital currency. a lot of my friends out there, there is some confusion. a lot of people get confused what is meant by the administration's admonitions of researching, experimenting, looking at a central bank digital currency. people back home look at that and go on my gosh, they are g now. could you differentiate a little bit what people think of in terms of bitcoin or digital currencies versus what a central in my view of should emulate cash,

still should be about the dollar, not a different thing. can you help people back home better understand? >> we are nowhere near recommending or adopting a central bank digital currency in any form but the idea is as technology has evolved, money has become digital the government doesn't issue digital money. it to digital, if you look at your bank account, people don't all those physical dollars. the thought was the government could create a digital form of money people could then transfer among themselves. that raises a concern that if that were a government are count, the government would see your transactions and that is something we would not stand for or do or propose in the united states. that is how it works in china for example but not, if we were to do something like this, and are a long way, the last

thing we would want would be to have individual accounts for all americans or any americans. only banks have accounts and that's the way we are going to do it. is a question of following technology as it evolves in a way that serves the public better. people don't need to worry about it. nothing like that is remotely close to happening. >> that was very helpful, thank you. mr. chairman. >> chairman powell great to see you again, thank you for work. i want to talk a little bit about commercial real estate and what's happening there. oversight council 2,023 identified commercial real estate as a financial risk and the fed monetary report also notedial real estate prices continue to decline especially in the office of the family sector. i'm especially concerned that caus the low levels of

transaction prices have not fully reflected the true you expand on the risks the federal reserve identified in commercial real estate, and can you discuss the compound risks identified in commercial real estate lending particularly at banks with large concentrations of uninsured deposits? >> there are very few transactions in commercial real estate particularly in troubled areas. it's not a question of prices still falling but you don't have that kind of price discovery. you assume prices are very low and come down a lot. on real estate we have a secular change in people working from home. that means in many cities the downtown office district is

it means the retail that was th building are under pressure and banks will have made loans to many of those buildings. not all of them but many. this we've known for some years. what do we do? we have identified the banks that have high commercial real estate concentrations particularly office and retail. we identify and we are in dialogue with them. do you have enough capital? enough liquidity, a plan? you will take losses here, are you being truthful with your self and your owners? we are working with them. for some time we've beenng this is a problem we are working on for years more i am sure there will be bank failures but this is not t big bank it is not a first-order issue for a large bank. it isorsmaller an we are getting through it.

it is manageable is the word i would use but it is a very active thing for us and other regulators and it will be for some time. >> thank you. concerns -- let me ask you this. as you talk with small and medium-sized banks because we know there's always something we've seen in the past. do you have concerns that this is going to impact the financial sector and prepared or trying to address that and prevent it from happening? >> we are trying to stay ahead of it. we reached out to banks with high concentrations of uninsured deposits and a lot of commercial real estate, so we are well aware of that issue and trying to stay ahead of it on a bank by bank basis so we have been able to do that. >> let me jump to another issue that has been on my radar, the federal housing finance agency's report on federal banks concluded

that the distinction between fhl bank after all and that of the federal reserve discount window has not been clear especially during times of market stress. during the 223 saw banks rely on advanced federal home loan banks and didn't have relationships with the federal government to use talked about this with senator warner but how is the federal reserve working with home loan banks to en borrow from the fed discount window prior to times of stress? >> we work federal home loan banks becaus in many cases banks were moving their loan from the federal home loan bank so we need to have smooth transfer, in good touch with them. more important than that is any bank in the united states needs to be in touch with the access it, be able to access, have appropriate collateral, control of that collateral, in

many cases it was incredibly inefficient and took a long time for banks to go through that function. the federal home loan banks are actually ahead of us in technology. we know we need to invest in technology to modernize the discoud w all of them in touch with it in a way to use it quickly should they need to do so. >> thank you. >> senator haggerty of tennessee is recognized. welcome, chairman powell. under your tenure, mister the 2% inflation target shouldn't be viewed as a snapshot in time but rather needs to be achieved sustainably. when inflation was running well above the 2% target in 2021 and early 2022 the fed was patient and blue target inflation that occurred in years prior. what strikes me as odd now,

while we are still well above target inflation and have been well above, markets seem to expect the fed to immediately cut even before we reached the 2% inflation threshold. my question if the inflation rate reaches 2%, would that be considered a return to the target rate on a susit still the case that inflation would need to overcorrect below 2% before the fed makes the rate c adjustments? >> it would take a while to get comfortable that it had settled in sustainably at 2%. that's not our test, interest rates are willing restrictive territory, well above neutral an we would not for inflation to get down to 2%. the monetary policy works with variable lags. we said for some years that we would start restoring the federal funds rate to a more normal neutral level. we are far from neutral now.

we do plan assuming the economy moves along the lines we expect, we plan on starting the process and dialing back. >> i know we allowed the inflation was high and we sort of made up for 5 years of low inflation, trying to square that with the fact that we didn't actually do that. >> we adopted a framework that said we would few months later we got almost an explosion of very high inflation. that's not what we were looking for. moderate -- modestly above 2%. this was not modestly above 2% and we reacted to. the mistake we made was we thought inflation would go away that was transitory, goes away quickly without effort. we found out that that was not the case and reacted. >> the same abrupt dynamic the other way. >> we are in the right place which is waiting to become more

confident. we are not far from it it will be appropriate to begin to dial back a little on restriction so we don't drive the economy into recession rather than normalizing policy as the economy gets back to normal. >> the balance sheet, let's talk about that. we've seen dramatic nsion of the balance sheet the past couple decades. in 2005, $800 billion, seven. $5 trillion a day, it has doubled since the pandemic was underway and through quantitative tapering attempting to reduce its the other hand government spending, continued to propagate. we are running now $1 trillion deficit every 100 days and we are flooding the market with treasury debt and putting up pressure on interest rates. what is lost on many of us here is the spending levels will only make your job harder when it comes to lowering interest rates not to mention the tacit

expectation the fed will step in once the markets can no longer absorb it. this is very serious problem that deserves more attention and we are at a point where your objectives may be at odds with thepolicy. am i missing something? or this increased net issuance by the treasury lead to higher rates?>> in principle more supplies should lead to higher rates but that's not going to affect what we do. that's not a problem for us. our balance sheet normalization is running very much as expected decreased the size of our holdings by almost one. $5 trillion. >> i hear you but it is troubling that we continue to put fiscal pressure by continuing to put de hundred days and issuances required to deal with that, more pressure on the fed. making your job harder, we need to take that into consideration. anotherf this topic, governor waller said he would like the shift of a

holding toward short-term treasuries. prior to the financial crisi third of the fed's holdings were billed, now they are 3% of total security holdings. can you share the goal with governor wallace how long would it take us t that's an issue in our fomc meeting in a couple weeks we are going to have our first with the balance sheet, that's one of the issues. i don't think we will deal with than in this meeting but over time you would love not to own a lot of mbs and i can see a case for shortening the majority but it's not something that would happen quickly. we are not looking at that. that's a longer-term aspiration. >> one final point and we talked about this before. we are in an election year, u' pressure from lawmakers to adjust rates. i'm not going to raise rates or lower rates but the credibility of the fed depends on you remaining data-driven. the credibly of our currency depends on that and i encourage you to continue with that process.

>> senator warren of massachusetts. >> thank you. it has been a year since we had the second, third, and fourth largest bank failures in american history. greedy bank executives were part of the problem. the fed is 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 billio the banks that failed last march. in other words, you failed to do your job to keep big bank when these banks roll up you went into spend mode promising the fed would do better. after years of hemming and hawing you finally agreed to put in place basil 3 rules that would strengthen capital standards for the biggest banks. i mean tig these are the best proposed rules that would apply to only 37 of the nation's 4500 banks, only the banks that have one hundred billion dollars or more

in capital. when you testifiedefore the committee last june i asked you about taking responsibility for said, quote, the main responsibility i take is to learn the right lessons and undertake to address them so we don't have a this where we had unexpectedly a large bank phalange sprea part of learning those lessons you also said, quote that you agree with and support vice chair for supervision bar's recommendation for strengthening the fed's rules and supervisory practices for the big banks and, quote, confident they would lead to a stronger and more resilient banking system. i want to be clear. you haven't backed down from any of your comments from a year ago, have y

don't let this happen again, supporting vicebar's recommendation which includes stronger capital standards? standby all that? >> yes. glad to hear that. i understand those 37 big banks don't like higher capital rules because they are like insurance. they would make the bank safer but they cost a little money and would nip into the bank's profits these 37 banks are swinging their considerable weight around to try to weaken the capital rules. they've spent tens of millions of dollars running ads during sunday night football and millions more for an army of lobbyists to twist arms in congress. impressive spending, but who are they trying to impress? a man on the inside? deu last year when the banks failed, about supporting vice chair bar's recommendation to big banks, public

reporting now says that you are driving efforts to weaken the capital rule. you even told the house financial services committee representatives yesterday that you think it is, quote, very that you withdraw the rule. as one analyst put it, quote, i don't think they wille rule without power lab support suggesting the rules will have to be weakened, to appease powell. so chair powell, i'm having trouble reconciling the statements you made last year which you say you hold onto, 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 standards for giant banks and prevent more bank failures so let's give you a chance to clarify the record. are you committed to finalizing

the strongest version of the basil 3 capital rules this year? >> let me first say that we have taken and are taking many more steps to d reveal themselves at silicon valley bank around supervision, strong liquidity. >> i appreciate that but i'm asking about the basil 3 rules the one that you requifo years to put in place. >> basil 3 rules are not directly related the thing that's direcy te silicon valley bank. as you point out they are a longer run thing and i would say that we put them out for comment. anyone is free to read the comments. my view is it will be appropriate to make material and broad changes before we li i -- >> material and broad strange -- changes to strengthen the rule? >> we are talking about that will mean in the end. i did not say that we would withdraw the rule. there's a concept of re-proposal. i said we hadn't made aon on that but if that

turns out to be appropriate in the view of the board of governors, that something we would look at doing. >> everything ago about supporting the vice chair who is responsible for writing these rules? >> you and i had a long colloquy. >> yes we did. >> if you read it again, you will see that i am doing exactly what i said i would do. >> you said you wou vice chair bar to get us strong rules and now he is putting out rules -- >> the vice chair for supe the board, that has happened, but 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 and that is the way it works. it's not different from sharing >> you are the leader of the fed and last year you talk a lot about getting tougher on the banks but now the gianthat and you've got a week need on this. the american people need a leader at the fed with the

courage to stand up to these banks and protect our financial system. >> senator daines of montana is recognized.hairman powell, good to see you. i can tell you montanans are seeing the impact across the board from inflation brought on by the policies of this administration and my colleagues across the island i commend you for the job you have done in trying to reign in inflation and encourage you to continue the fight des cal pressures you may face. last time i checked, it was going to get political between now and november. i'm also encouraged contrary to my c there will be broad changes to the basil 3 proposal which as detriment of impacts to credit costs and availability to small businesses and lastly, i commend your answer yesterday

that the fed is not a climate agency and considering the impact of cl in achieving your given mandate of maximum employment and stable prices. i recently joined my colleagues in writing to you about my concerns about the long-term debt proposal that wmandate regional banks issue new long-term debt. i'm concerned that this wimpact on smaller regional banks because they are required to hold long-term debt at both their parent and insured depository bank levels. could you explain how this aligns with the tailoring requirements set forth in the financial reform bill that we passed back in 2018, senate bill 2155. >> a longer term but proposal aligns with that, we have -- that has been out for comment

on that. when the com i don't want to say too much but the theory of in the first place was those banks are not subject to the living will process to the extent the g6 are and this is meant to be a middle step to make them more resolvable without imposing all the burdens that we imposed on the a gs to have elaborate resolu that was the thinking on the calibration of it and all that we have voluminous comments and we are making assessments and move forward as appropriate. >> our smaller regional banks will be happy t hear that thoughtful deliberation, mr. chairman. understandably you had to raise interest rates to fight the inflation brought by reckless democrat b major side effect of that is the impact rising rates are having on the cost of servicing the out-of-control national debt.

senator haggerty alluded to that in his questioning. looking at cbo reports intereour debt will increase 32% this year and will now exceed spending for the entire defense department. i have concerns many do in washington, many americans do that we eventually reach a and monetary policy converge meaning that the fed would ultimately have to worry about the impact ratesetting would have on government debt for the potential risk of a default.i know fiscal policy is not in your purview but could you ever foresee a situation where fiscal irresponsibility snowballs to a point the third would have to factor this into decisionmaking. >> we are a long way from that. that's a terrible place to be? where

themselves over the years. it is unlikely but i do think it is not our business but others have said we need to get back to that discussion about fiscal sustainability iboth sides need together, the kinds of things that have to happen can only be done on a bipartisan basis so i hope we go back to a place where those discussions are happening again. >> new ultra short-term liquidity requirements. as with any policy decision establishing the facts matters. important that financial regulators have a complete, thorough understanding of financial requirement before releasing a half-baked proposal rule or guidance. the question is what do you time period that would allow your

agency to calibrate new, sound and reasonable liquidity requirements? >> that is a great question that we are struggling with particularly with the other things that are going on. this is in response to silicon valley, we are looking at liquidity innovations and asking ourselves which format should take and that sort of thg. we are not ready to do that but that's the question we are asking. >> the follow-on question. will you confirm that prior to the federal reserve issuing new liquidity requirements it will first conductllections that would allow for meaningful analysis of potential policy options? >> please keep your answers short. >> maybe.very short, thank you. >> we can talk about this more but i don't want to make a specific commitment like that to people who are carefully in touch with this but that is the right thought. >> thank you.

senator federman from pennsylvania is reco >> he got here last. senator warnock sits down in the next 5 seconds, he is next. are you ready or do you want to go -- your also generous with eathch o senator federman is recognized. >> okay. you're recognized, from georgia. >> thank you very much. bank spending on buybacks is rising again and -- has sharply increased. interest rates are high, the interest being paid to depositors ordinary working familiesorking people with

bank accounts. not are not of money in wall street accounts remains low. powell. i'm concerned that when banks don't increase the interest rates on bank accounts, families are losing out on dollars that could be in their pockets. they don't have the portfolios other folks in this room would have. is that good for the economy and are you concerned banks under your supervision are doing that? >> not paying sufficient -- that's a question i haven't heard. they have the option of bringing their money and money market funds, banks compete with each other but i will be happy to look into that. >> it is worth king a look at many lower income individuals and families, they don't have the sophisticated products that are available but we saw high interest rates and that's not

being reflected in what depositors are able to benefit from. could those individuals and families benefit from high interest rates? >> sure. for a long time we had a lot of mail from people at the fed saying yst rates but we because we are not getting anything on our checking account. >> i don't think we are asking for that but given the reality the monetary policy as well, demand for housing h strong labor market kept prices high. that matches what i've been olks can't afford a home. mortgage rates were averaging around 7% last month.buyers. increases the percentage point to the difference between owning a home or not which are you concerned about this interplay between lower demand

yet stubbornly high prices and what it means for folks trying to buy a home and what is >> the housing market is in a challenging situation. you have the longer run housing shortage but at the same time you've got a bunch of things that have to do with the pandemic and the inflation and our response tcut rates. you have a shortage of homes available for sale because many people are living in homes with a low rate mortgage they can't afford to refinance, the supply of regular existing homes for sale is historically low and very low transaction. that pushes up prices of other existing homes and new homes because there's not enough supply. the builders are busy but running into all kinds of supply issues around zoning and workers and things like that.'s quite challenging and rates are high so people who are buying, a lot of the buyers are cash buyers, able to pay

without a mortgage because mortgages are too expensive. the first problem, supplies a longer run problem. the other problems associated with low rate mortgages entire rates and all that, those will debate as the economy normalizes and rates normalize but we will still be left with housing market nationally where there's a housing shortage. >> the supply issue and prices, lack of supply disproportionately impacts some communities more than others. the monetary policy report, the employment rate for the black prime age labor force, 25 to 54 years of age reached historical peak in 2023. black and white prime age year low of 3%. a 3% gap is significant. would you agree that is focusing on narrowing the gap so what

tools does the federal reserve have? >> it's very important and the best thing we can do is get prices under control, get inflation under control so we can have a long expansion that really gives significant benefits to people at the low the labor market is tight and inflation is low and they benefit more than anybody. that is where we were before the pandemic and we would like to get back to that. >> thank you. there are other legislative tools congress could use and i'm happy to work with the chair to improve that rate. >> thank you.wyoming is recognized. >> welcome. nice to see you, mr. powell. my first question is about cbcs. there's been chatter on socia

media that people are concerned about the fed creating a cbc without legislative authorization. you and i have discussed that before and as you know there are other means, that could use digital assets to create a secure and instant payment system. so the question is this. do you still agree that the federal reserve cannot introduce us central bank digital currency without congressional authorization? >> yes i do. >> thank you. that columns people's fears, the people who are concerned that we could end up like the digital you on that used as a means of surveillance so that will calm some of those discussions down. thank you so much. my next question is about your

core cpe. as you know, there's a disconnect between how you measure inflation and how the american people see the american people are spending their money on gasoline, food, and rent. and they hear about these improvements in the economy but they are not seeing in their ev lives so can you explain what measures you use to evaluate inflation and explain to the american people why you don't factor in the things they spend money on every day like food and gasoline? >> actually we do. our statutory target is inflation, not core inflation. you look at headline inflationt 12 months, that is our goal, 2.4%. core inflation is higher than that, 2.8%. the reason is some energy and

food prices have come down and those don't count in core. our overall legal target is headline inflation which is our best effort to capture the cost of living that people face. make all kinds of judgments. i mentioned housing earlier, how do you measure housing inflation but that is what we target. the reason we look at core, headline inflation tends to be more volatile and pushed around by commodity prices which don't relate to the overall state of the economy. core tends to be a better predictor of overall inflation than overall inflation. it's complicated but ultimately our target is headline inflation which does include food and energy. >> mr. chairman, i would to include a letter in the record that senator tillis and i and two democrats on this committee

have submitted with regard to basal 3. >> without objection. >> thank you. my question is of 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, or will lending migrate outside the banking system because it is opaque. >> i didn't get your question. >> with regard to basal 3, there are more constraints on lending activity. apt to be the consequence of that, that it is harder for consumers to buy a house or a small business to get a loan, or that lending migrates outside the traditional banking system? >> if there were anything that

restricted credit in the banking system, they -- there would be fewer loans, but non-bank lenders make that one. >> i have a chicken and egg question here. starting with t.a.r.p. in 2008 there's been a very aggressive printing of us dollars up until today and particularly went on hyperdrive during that 22 period of covid. my question is which first, congress spending more and you respond by printing more money, or are they separate considerations? >> hard to get my mind around that question. we don't print money to fund the deficit.

that's not what happens. when theorrows, the government borrows to fund deficits is what happens. >> so that would indicate to me that y do respond, because we in spending and deficit spending are creating demand or to borrow. >> we are not making loans, not lending money to the government. >> there's no chicken and egg relationship? >> there is not. i would this, the where the plumbing why don't we continue this? >> i would love to and your thoughts earlier about sustainability and how we work with you and bipartisan maybe next year to address these issues. when you say things you have to be careful because wha ripple effect

outside of this building but it would be nice to sit down with you on a bipartisan have those discussions in a frank way. >> senator federman of pennsylvania is recognized. senator van holland. >> let me start by thanking senator federman. good to see you. real wages are up, right? that's the good news. >> yes othver e last couple years. wages are going up. >> that means more families haer in the budget, right? >> yes. >> worker productivity is up. corporate profits are up. >> i believe so. >> productivity, worker productivity is rising faster an corporate profits, right? >> i don't know the answer to that. >> the charts i show suggest

that. that would indicate unless corporations decide to pocket this profit, 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? >> yes. >> it is important that people recognize these corporations are doiner and they are deciding now to essentially return the gains made through their wor which is going up, to shareholders. shareholders are going to get a profit, the whether or not workers share in that. we've seen a great gap between rising worker productivity, real wages.

would that be good for a more inclusive economy tracking if you include the benefits that's a part of the gap. >> generally speaking people's compensation should be over time equal to productivity. >> i appreciate that. there are record profits, we will not see that. listening to a little exchange with the chairman earlier, and your answer was people will charge what consumers will pay but it should be known that these corporations are reaping

larger profits than they were. i'm not superfocused on individual profits. corporate profits, i gather. they are charging consumers, the grocery stores 8 a lot of money, the other would be if they are not sharing the product of labor productivity so i think because we heard a lot of claims by our republican colleagues about price increases and it is very important that american consumers recognize that corporations are choosing to charge them more at the grocery store and engaging in things

like shrink inflation rather in order to have more in their pockets. let me turn to a letter sent to the vice chair of supervision and other regulators in january regarding the vbasel iii requirements. we raised concerns about a specific issue which is the harmful impact on clean energy tax credit investments at all vice chair said they recognized this as a significant issue and hope to address it. >> thank you. >> senator federman, pennsylvania is recognized. all right. >> great to be here today.

maybe some people in america talking about a cookie that is $18 and i was alarmed and hope we investigate a cookie the cost $18. do you believe an anecdote on twitter about a cookie that cost $18 is that reflective of our economy or not? i don't do much shopping these days but that sounds like a pretty expensive cookie. >> i believe the american economy is the envy of the world after everything right now. >> we are performing well compared to our group. >> pretty great. >> is it fair to say stock marketose. >> inflation has been effectively addressed, right?iddle of last year. we've got a ways to go on that.

>> corporate profits are pretty robust. is that fair? >> i believe it is. >> we can agree. i don't understand why more people are talking about cookie that cost $18 that seems to be against the given that now, since things are pretty great and we are in really greate second, place, but now i am concerned and there's rumors going around, that basel-iii are going to change, reduce the capital. i guess i am concerned about that because i don't know -- cord to reflect, you are much smarter than i am but i would be concerned that things are in a really great place, i would be concerned to change something like that because i wouldn't want something like

what happened with want to get your take on that. >> us banks are well-capitalized and generally speaking quite well-capitalized, not talking about reducing current capital levels at all. in capital may well go up. we are talking about whether the proposal by the bank including the fed which is the subject of quite a lot of comment, what changes will be appropriate to that is what we are talking about, reducing existing capital requirements. >> i want to playoff of a comment by my colleague from tennessee. he is concerned about the deficit, one trillion dollars for every one hundred eggs. if the federal government had added $3.5 trillion to the deficit by extending the trump tax cuts, would that increase at >> i'm going to fall back on

our long-time rean comment on fiscal policy. we take fiscal policy decisions as they are and conduct monetary policy toieve 2% inflation but cbo does that, not something we do --those tax cuts. and inflame inflation. >> broadly speaking, we need to get to a place where revenues and spending are bter aligned. everybody knows that. that was a special thing, it would be great to get back to that on a bipartisan basis. >> i want to go on the record

you've done a great job. i think our economy, i do agree that it is the envy of the world. i am confused more people are talking about cookirength of this too. i want to thank you for your service. >> thank you, that's the last question and thanks for your generosity in yielding to colleagues who got here before. thank you, chair powell, for joining us today. every six months i look forward to working with you. to strengthen our economy, senators who wish to submit questions are due one week from today, march 14th. chair powell please submit a response thank you again for >> thank you, mr. chairman.

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