thursday, japanese prime minister, will meet with president joe biden at the white house, and attend a state dinner in his visit to the u.s. that joint meeting begins 11:0a.m. thursday. this is part of the pre-mobile video app. look like on cspan .org. cspan, is your unfiltered view of government. tune in late-night for these television companies and more.

now, federal reserve chair jerome powell, looking at the policy report, testifying before the financial services committee. he says the economic activity expanded at a strong pace over the last year, with inflation lowering, unemployment at a 50 year low, and the u.s. economy performing better than other countries. he also touched on the status of interest rates. this is about three hours. we will come to order. the tears authorized to had to

recess at any time. this is the federal re we will come to order. without rejection, we will assess the time. hearing is the title of the federal reserve's monetary policy of reform. this is what we use semiannually here. without objection, we will share materials for the inclusion of icy chairman powell smile. three hours. i will recognize myself for four minutes. welcome back, chair powell. june 2023, this is shifted significantly. inflationary fire has been extinguished.

sheltered costs are more than up 19%. you will pay 37% more for a dozen eggs in america today. people are still paying more for the basics of life. families are unhappy about it. as our colleagues know. according to president joe biden demonstration, many of us should be thrilled. in an attempt to score political points, many have decided that the best strategy is to help people with what they are feeling. it isn't actually accurate. it has brought down costs, and the so-called american rescue plan, put our economy back on the right track. of course, we know the opposite is true. inflation skyrocketed soon after the american rescue plan was enacted. this was predicted by some --

former obama residential administration -- this includes high prices. the administration has played the blame game, looking at shrinking inflation. some democrats are firing on you, chair powell. blaming interest rate hikes, which were necessitated by democrats bending. for the high cost. calling you, making cuts prematurely. it is highly inappropriate for lawmakers to attempt to influence monetary policy. chair powell, i have faith that you will not allow politics to cloud your judgment in the fight to tackle inflation. as i have always had, you are a steady hand. you're committed to the federal reserve's independence, as am i. just as you have rejected to the outside pressures of clinically motivated agendas, i hope you will be just as attuned to the threats, when

the calling is coming from inside the house. the so-called holistic review of capital requirements, include and gain proposals. they represent a concerning trend of partisan proposals, taking priority over supervision. this has real world impacts, as we saw one year ago this month. the supervision regulation arm, was late catching up to acceleration from interest rates in the banking system. americans were understandably shaken by last year's banking turbulence. we are continuing to monitor potential instability. we are going to be exposed to commercial real estate. they will be keeping their eye on the ball. this is not acting towards new, harmful regulatory policies. on both sides of the aisle, it is going to clear.

they are going to withdraw and start over. this is additionally given. other proposals are going to have to fit together. they are using a cut and paste approach. this is part of the endgame proposal. it is discarded or altered. i strongly encourage you and other regulators not to finalize your long-term debt proposal. the stakes are too high to put politics out. with that, i go back. i recognize the ranking member of the full committee. >> thank you, mr. chairman. good morning, everyone.

welcome back, chair powell. looking at president joe biden said menstruation, tackling inflation. even though my republican colleagues refuse to acknowledge this fact, housing is still the number one driver of inflation. housing costs continue to make up nearly 70% of overall price increases. outpacing modest paste games. we are trying to address the underlying housing supply shortage. americans are going to continue to paint an increasing share of their income on housing. inflation will remain too high. with that said, i need to understand the republicans main concern about the economy. they are unwilling to address the key driver inflation.

housing. in fact, republicans will put forward legislation that makes things worse for aliens of americans, including moving legislation to slash funding. this includes america, or homelessness is rising. this abysmal record on housing, this part of the course for republicans. sending in the majority. pushing our government to the brink of multiple government shutdowns. it is clear. when i was chair of the committee, looking at the 117th congress, not only did we hold 55 years on housing, but i and

my fellow democrats, enacted 12 critical housing bills in the last congress alone. this is part of the evictions, foreclosures, and homelessness. millions of people have been looking to unlock republicans. we don't just talk about the issue. house republicans continue to disappoint. many democrats are offering the evidence-based solutions. keeping the fair and affordable housing agenda. the top priority in congress. that is why i and my democratic colleagues reintroduce three groundbreaking bills, to address the housing crisis, and bring down inflation once and for all. this includes the housing crisis response act. this includes the down payment towards equity act.

together, these bills would create 1.4 million affordable, accessible, resilient homes. we are going to look at the home ownership for all. they are ready to get serious about our nation's economy. democrats are ready to work with you, passing bills into law. in fact, tomorrow at noon, i, along with democrats and 30 other housing applicants, will join together in a press conference, to share just how important the affordable housing crisis is. this is what the state of our union. i invite all of my republican colleagues to say that they care about this issue. come on and join us. i look forward to discussing this critical issue with chair powell today mr. chairman, are you back my time.

>> financial institutions and monetary policy for one minute. >> welcome, chair powell. interest rates still have americans reeling. thanks to monetary tightening, the overall level of prices remain high. the toothpaste is out of the tube. the average american family is paying $15,000 more for the goods and services that they were purchasing just three years ago before president joe biden's administration. americans have purchasing power in their paychecks. i am pleased that the fed is resolved in getting inflation back under control, i'm looking at unjustified, politicized, and regular proposals. the defendants are going to look at the irredeemably flawed proposal. especially given that 97% of public comments across the ideological spectrum. this pressing disapproval of the proposal. i'm looking at the american

people. trying to draw the endgame proposal. tell us today what the feds plans are moving forward. i yield. >> thank you, chair powell, for being here today. i have this exceptionally long import delay. the feeling i got and again, things were fairly recovered from covid hurried they are back to normal. we are in the range were ordinary fiscal policy, will allow us to settle the dual mandate. this is down to 2.8% compared to 5.6% in 2022. these are hovering around record highs. they can choose to have expectations. the u.s. economy has netted more than 200 million jobs since president joe biden took

office. this is pretty much on the trajectory that would have been pre-covid. manufacturers alone have amounted to $80,000. this was appropriately tailored. this is all within sight. thank you. i yield back. >> today, we have to look at the testament of jerome powell. as you know, you will be recognized for five minutes for a summary and presentation. chair powell, i will recognize you for five minutes. >> members of the committee, i appreciate the opportunity to represent the federal reserve's semiannual policy report.

this includes stable prices for the american people. the economy has made considerable progress towards these objectives over the past year. this is above the objective of 2%. they have eased substantially. the slowing of inflation has occurred with the increase in unemployment. as tightness has eased, and progress on inflation has continued, the risks for the inflation goals, have been moving into better balance. the committee remains highly attentive. this places significant hardship on those placed with in the higher cost of essentials. this includes food, housing, and transportation. this is a sustained period of strong labor marketing conditions that benefit all.

i will review the current economic situation before turning to my presentation. economic productivity expanded over the last year. 2023 as a whole, gross and messy product increased 3.1%. also by a solid consumer demand for the improving supply conditions. activity in the housing sector was subdued over the past, reflecting in high interest rates. this works on business investments. the labor market remains relatively tight. supply and demand conditions have continued to come with her balance. since the middle of last year, they have averaged 239,000 jobs. the unemployment rate has looked near historic lows. 3.7%. strong job creation has increased company workers. particularly among individuals aged 25-54.

it continued strong immigrations. normal weight growth has been easy. the jobs to workers gap has narrowed. labor demand has looked at the supply of available workers. this is help to narrow long- standing disparities within the employment earnings across democratic groups. inflation has eased notably over the past year. it remains within the longer run goal of 2%. total consumption x manager prices rose 2.4% over the 12 months ending in january. excluding the food and energy categories. core pce prices rose 2.8%. a notable slowdown from 2022. it was widespread across goods and services. long-term inflation expectations, appeared to have well anchored, as well as

reflected by a broad range of households, businesses, and forecasters, as well as financial markets. this is since 2022. this is a restrictive stance of monetary policy. it is putting a downplay on inflation. we believe it is likely at its peak for this tightening cycle. if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year. this is not a short period producing policy restraint too soon or too much, can result in a reversal of progress that we

have seen within inflation. this is an even tighter policy getting back to 2%. at the same time, reducing policy restraint too late or little, will include economic activity and employment. considering adjustments to the target range for the policy, we will carefully assess the incoming data, looking at the balance of risks. the committee does not expect that it will be appropriate to reduce the target range, until it has gained confidence that inflation is moving sustainably towards 2%. we remain committed to bringing inflation back down. we are going to keep longer run inflation expectations well anchored. restoring price stability is essential to setting the stage for achieving maximum employment. to conclude, we understand that our actions affect communities, families, and businesses across the country. everything we do is in service to the public commission. we have the federal reserve will do everything we can to achieve our maximum employment and price stability goals. thank you.

>> thank you, chair powell. i should have said this with outset. this is your fifth testimony for the u.s. congress since being chair of the federal reserve. we thank you for your service and commitment to congressional oversight. very much appreciated. on that, i wrecked and asthma so for five minutes. let's begin with what is top of mind. regulatory policy. this is with them bar proposal. also, interest rates. we are in political year. the lens of a political year falls evidently on all government, on all parts of government. the past three years, it has been high inflation from the impact on american families. inflation is receding. this is speculation when the fed would cut rates. a lot of recoding this year.

what say you? >> i think it will depend on the economy. this is the incoming data. this is the outlook. these are the things we will be looking at. >> what point will they be forced to cut rates? what kind of data would you .2? do you have any updates? >> what we have said, the committee will likely see more data. it will make us more confident. inflation is moving sustainably down to 2%. headline inflation has moved down more than three full percentage points now. 2.4%, as i mentioned in my remarks. we want to see more data so that we can become confident,

and to take that step of beginning to reduce policy rates. it is a very important step. because of the strength of the labor market, we can approach that step carefully, thoughtfully, and with greater confidence. when we reach that confidence, the expectation is that we will do so sometime this year. we can begin dialing back the restriction policy. >> lets pivot to the regulatory policy. chair powell, as you know, there has been serious concern on both sides of the aisle across america, and industries. this is about the endgame proposal that the vice chair michael barr has proposed. the fed is taking this up. concern is on both process, meaning how the proposed rule was developed and analyzed. the general concern of a lack of economic justification for these actions are here. also, the substance. the proposal goes much further

than the committee recommended on these requirements. putting us at a great disadvantage internationally. my first question within substance, is the fed listening to these comments that have really been unanimous in opposition? is the fed listening to these comments that they will have on everyday americans? what is the status on rulemaking? >> you are right. we have received this in very other comments, as well as the qualitative impact that we put out. we got those responses in mid- january. we have asked for specific detailed based comments. i am glad to say that we did get that. we are just now reaching the stage where we can begin to make decisions. we haven't made any yet. i believe i can say a few

things. we hear the concerns. i expect that there will be broad, the material changes. i'm confident that the final product will be looking at broad support both at the fed, and within the more broad world. as far as process is concerned, we are not at the stage of making decisions about that. that is down the road a little bit. i will say the question we get, is re-proposal. i will say that we haven't made that decision. when we get to that point, if that turns out to be the appropriate thing, we won't hesitate to pull it. >> you would not rule that out at this stage of the game? >> not at all. it is a very possible option. these are how things lie at the top of that point. >> there's a lot of concern about different parts of the rule. if you change one, what is that analysis look like for the new

proposal? it is good to hear that you will be methodical for the traditional roles of building consensus around the subsequent changes. that is your intention? >> that is right. i said this will be a thoughtful, deliberative process. it is more important that we get this right, and that we do it fast. we understand that this is an important development. it is going to have potential applications for the economy. we are going to take our time, and do it right. >> thank you, chair powell. the ranking member is wrecked nice for five minutes. >> chair powell, i wanted to talk to you about housing. i'm trying to look at the issue of murders. last week, i had a letter, along with 15 democrats, to you. expressing my strong concern about the lack of progress that you have made in updating your bank merger review procedures.

this is critical now, that we just learned of another mega merger, involving capital one, and discover. this creates the six largest u.s. commercial bank major role, within the credit card market. they have raised the alarm that there was another process within the bank mergers, virtually looking at all applications that have been approved. part of the market, consolidation, poses great risk to consumers and entrepreneurs. what is the status of the updates to the merger review process? is there a big plan to convene public hearings on the capital one and discover merger? >> i believe we are in regular contact with the justice department on what is going on with their review of the merger practices. we are working with that, and

considering it. on the potential merger that you mentioned, we are trying to receive applications. there is really not much to say. when we do get that application, we are going to evaluate that merger as always. that is our commitment. >> do you believe bank merger procedures are doing the work that is necessary? is this a possible merger? >> i do. >> are you supportive of organizing community hearings on this merger? >> we haven't talked about that in front of anybody. we literally don't have an application for the merger.

>> we have seen steady increases. this is going to be a symptom of the chronic under supply of affordable housing. more renters and homeowners are looking at more income than ever on housing costs. this is a driver of inflation. they are emphasizing the role that housing has played. this is the inflation goal. this is without a fiscal policy response. how long will it take to get there? >> housing services and inflation are one of the key components that we look at that make up the core index. it has been coming down from a couple of years back.

it is part of the story. the overall story is the goods inflation. it has turned negative. housing, you can currently see them. as they turn over, the increases are going to be smaller from our forecast, and everyone's forecast. this is as inflation comes down. >> the terminology uses inflation costs. they imply that it is imperfect. they consider cost based on both old and new rent, including owner occupied housing on a month to month basis. families housing costs typically do not change unless they move for renewal. to address these imperfections, the housing cost indicators are looking at the created

improvement, based on new renting actions. this is the new tenant repeat index. the fed incorporated this new indicator into the economic assessment. they had a different level of housing inflation services. >> we were well aware of that. we were incorporating that into our thinking. this went in another formal action. this absolutely plays a role in it. >> thank you. >> the gentleman from arkansas. mr. hill, recognized for five minutes. >> i want to welcome chair powell to the committee.

i want to pick off where the german left off on his conversation. this is part of the endgame. they made a good point saying you are not taking the whole concept of reproposal off of the table as you review the analytics. if you were to reproposal the three endgame, this is the long- term debt proposal that is on the table. would you agree that the agencies should not finalize the long-term debt proposal for these other companies? until banks have another understanding for what this might be. >> we haven't made the first decision yet. that is a question that we would be asking ourselves. what would be the implication for other rules, including long- term debt? >> is the fed considering changes for regional banks

being required to issue long- term debt? right now, it is said to be issued at 6%. this is an abundance of caution, in case there needs to be a resolution. as i understand it, it is being required at the holding company level, and into the bank level. that seems redundant to me. are you aware of that? do you consider changing that in your discussions? >> the comment period and did a little while back. once again, we are in the process of evaluating the comments. this will be a thoughtful, delivered a process around that grade we welcome comments on these kinds of things. very important for the banks that have been affected. we want to understand so that we can evaluate what the final rule should look like. >> i'm going to turn to the monetary policy outlook. as the chairman noted, the consumer prices are 70% hired

for american households, since president joe biden was inaugurated. january 2021, in spite of the 70% increase of cost, it has actually fallen 2% over that period. there is no doubt that inflation is the biggest issue facing american households. in my view, there are three principal causes. we have a lot of disruptions. we have had unprecedented fiscal possibly, describing it in an interview as reasonably possible. we think the federal reserve, in my view, and many in this people's committee commented, the reduced -- produced the combination after the pandemic sooner. one of the things coincidently that i wanted to talk to you about, is that the announce this in august 2020. this is a flexible average of inflation being targeted in this framework. right in the middle of the pandemic. most of them, don't understand why the decision had been taken

in. this is along with 2%. saying the fed could allow inflation to rise above 2%, and to stay right there above that level for some time. they have had such challenges, getting the level to 2%. do you think in retrospect of what we witnessed over the past four years, that it was a mistake in hindsight to change that framework? is it under review? >> this is on a five-year basis. we are going to look towards the end of this year. i do think that the question you raise, is one of the questions that we looked at. the bigger question, that change in the approach, was really based on the fact that we had very low interest rates, and very low inflation for a long period of time. is is closely and effectively

found. there weren't any firepower actions for central banks. this is anchored at 2%, not having them slide down. the pandemic, may really have change that. we don't know that yet. this is the question we will be answering ourselves. this is going to be thought of in a different way now. we are going to look at the different notifications for the framework. we haven't begun the review yet. it will be at the end of this year. >> i yield back, mr. chair. >> will go to the gentleman from new york. mr. meeks, for five minutes. thank you, for being here. this includes 2020. the entire world, was looking at an unprecedented covid pandemic. is that correct? that changed a lot of things. not just the united states, but

for the entire world. economies, countries, just about plan. is that correct? i could remember many americans. this is toilet paper or paper towels. some of the basics. this is going to be supply and demand. >> therefore, the fed is right here. this is going to be through the pandemic. that is correct. now, we are at the point where we are about to go through this

pandemic. this is close to the pandemic. i think you are correct. by most accounts, our economy is doing well. this is part of the world. we say that correct? >> i would say part of the other countries are looking at it. this is a different place. thereafter. they have a labor market that is strong with unemployment rates. as you stated, inflation is also coming down faster than anyplace else on the planet. is that not correct? >> i think you also recognized this. this is going to be from the

field. they were touching on one of those within housing. this is going to be under control. we had some ideas on what they are doing. we are looking at the inflation rate. the other one is going to be the commodity market. that is something to get in control. let me just ask this. can you say that there is another example? this is going to be precious. this is going to go to the reason why. we are looking at the commodities. we are still higher. mr. chairman? >> certainly, the war in ukraine, is causing a sharp

decline. >> this is another urgent need for us. you are running out of time. we can do everything that is in our power. you can support ukraine. this is so that we can look at other strategic problems that we are going to help with the commodity. that should help lower the cost of some of these commodities. we have things that are going to be surprising to the united dates congress. >> i wouldn't have an opinion on ukrainian funding. >> if we had more grain that was coming through, it was right here. that would help bring the cost down. this is the disruption in the black sea. that would help bring the cost

down. that is not necessarily the policy near the united dates. this is what is going on in russia. we need to make sure that we can do something to prevent, if we are serious about bringing inflation down. is that not correct? >> we have isil -- full supply of grain. >> instead of us playing politics with this, and acting like it is your fault, or anyone else's fault that we had to go through what we did because of the unprecedented pandemic, we did was save the economy. we have some problems that we have now. we are recovering quicker and better than any other country on this planet. this is as a result of your policies, and the policies with president joe biden. >> the chair is now recognized for five minutes. >> chair powell, thank you for testifying. before this committee one year

ago, i cautioned the requirements on the derivatives that are agricultural energy producers produced to keep food and power stable for consumers. at the time, you said that was a very specific concern, and you weren't sure that the proposal would address any of these risks. any fairness? >> that was before it was officially published. >> fortunately, we now know that the proposal does impact everything. they are among the most penalized financial products that they offer. i very much appreciate your comments, and responses, to the chairman, about the nature of the overall proposal. congress, wanted users to be able to secure them without posting the margins. keeping the derivatives markets affordable. i have seen estimates that some of these types of transactions for users have faced 10 times

the capital requirement. chair powell? make me feel a little bit better. >> i'm trying to echo it. >> we are trying to include as less friction as possible. these are things that were done to increase capital requirements for derivative activities. this is a very close look at it. >> i was a member of the conference community. we had bipartisan support for look at the advantage and users. this had bad -- broad bipartisan support. unfortunately, the fed could undermine this long-standing work from congress.

i would like to look at a few liquors -- letters into the record. this is when we first joined the agricultural trade association. this included the national association, among seven others. this is the american gas association and four others. the letter from the american public power association, looking at the cooperative association. >> thank you, mr. chairman. >> chair powell, i would like to focus on how the proposal is set to significantly disincentive five banks from offering services. congress mandated central clearing as a way to reduce risk in the system. the number of clear derivatives from these users has reduced over time. making it harder for the users to find a bank to follow service. some estimates have the fed improving and reducing capital

by 80%. i'm worried this could be harder for users to find the bank for clearer edges. this comes at a time with the s.e.c., and our friends at at the security exchange commission, has finalized a rule that will increase clearing, and looking at the infringing markets, this will have a real impact on market access and liquidity. not just commodities, but the $26 trillion market that is in place within the world economy. will you work your to address this problem? >> again, we are aware of those concerns. we are comparing them with federal agencies, and making sure that we have capital proposal that is properly addressing them. >> the strength of central clarity is entirely dependent on the banks willingness to participate. problems will end game want a full reproposal. they give us time to appreciate

the consequences. there are real consequences, as you and i both know. mr. chairman? with that, mr. chairman, i get back the balance of my time. >> the gentleman from texas, asked for five minutes. >> thank you, mr. chairman. welcome again, mr. chair powell. it is an honor for us to have you here us before today. as you know, recession and inflation, these are buzzwords for the use in some circumstances, to cast a dim light on perhaps the fed and others that are working to end some of these troubling circumstances we are dealing

with. are you now at a point where you believe there will not be a recession? there was much talk about recession. many people worried that we would find ourselves having to negotiate our self out of a recession. what is your position currently on a recession? >> u.s. growth last year was in excess of 3%. what we are seeing this year is continuing solid growth. my expectation, and that of other forecasters and collect, is that we will continue to see growth at a solid pace. there is no evidence or reason to think that the u.s. economy is in some kind of short-term risk of falling into a recession. having said that, there's always a meaningful possibility. the economy will fall under a recession. i don't think that possibility is elevated at the current time.

>> thank you. i appreciate you saying this. at some point, we want to eliminate a great deal or fear associated with the term recession. the next point, the descender fomc predictions, showcase a slightly lower unemployment rate from june's predictions. a slightly higher gdp, suggesting that it remains likely. are you aware of a soft landing? >> i'm just saying, what we have seen so far, is the economy that is growing. we are seeing a labor market that is still tight and strong. the labor market is coming into better balance between supply and demand. this has become sharply since

last year. we are trying to use policies. this is achieving further progress on inflation. that is the goal. to ok place. difficult to identify. lace. we could possibly have a soft landing and ms. the point at which the landing took place. how do you define the soft landing, such that a member of the public would understand, we have indeed had a soft landing? >> we really think about it in the terms i just discussed,

which is, we want to keep the economy growing, the labor market to remain strong, three- point 7% near historic lows. we want inflation to continue nt to move down closer and closer to that 2% jet objective. we want to continue those conditions. i don't want to put the label on it, other people can do that. i will say, we are using our tools to keep a strong labor market and strong growth, while making further progress on getting inflation down to 2% to the benefit of the public. that is the economy we are trying to achieve. i think we are on a good path so far to be able to get there. >> well, i concur. i will ask this at last question, will there be some announcement at some point that we've had a soft landing? because, we have people who are continually indicating that we

are not having a soft landing, there is a possibility of a recession. will there ever be some official statement that will give some people comfort? >> i don't think by us, no. i think we are going to keep our heads down, do our jobs, try to deliver what the public is expecting from us. we will not be declaring victory like that. we met the gentlemen's time has expired. the gentleman from texas now recognized for 5 minutes. think you very much. chairman, welcome back. i think we enjoyed this, i hope you do too. i know there is some bit of trepidation about all the things that are available to us at you, the answer-- you know, i learned a long time ago on the campaign trail, every problem can be solved on a campaign, reality is a little bit different. welcome back, despite all that. looking at monetary policy report, march 21st, 2024. as i

review this i would like this on the terms that i would say, high prices are here to stay. because what i have heard you say today, and this report really go to is, you've got everything under control, but we are going to keep the high prices. i think high prices really take a toll on the american people, as you are hearing from our colleague, no matter whether they be republican or democrat. page 7 of your report, you don't have a go focus on it. it says, while current court service price inflation has slowing, it remains elevated, it does. labor cost, as you know, and energy costs are a driver to your monetary policy. the question that i have, because you began reference policy, two

weeks ago or so, the president announced that he was going to slow down the gifting opportunity in texas for natural gas to be able to continue the proration. this in texas is a trillion dollar answer rob them to us. it we do not constantly go find , through new find, but also through the permitting process, we are in trouble. we are also putting in trouble our contracts that we have germany and a lot of other countries. this is going to mean that business in america continues to have high prices, because as you know, wages are already high, and now energy is high. there is no resiliency to the this and see the american people win.

you talk about policy, what is your advice to apology about energy and what is the administration doing from a policy press active? >> we have broad, significant, - important risk civilities, but we are really not with possible to energy policy policy and we try to avoid commenting on it. but it has a huge impact on this report. it arbitrarily keeps prices high. it arbitrarily named that business is not in the while they are making money, and while household, people do buy that, it is diminishing their long-term advantages to make progress. i you are just going to leave that alone? >> really not appropriate for us to comment. if i am commenting on energy policy, i should comment on everything. we have a mandate, maximum price and flexibility. we take decision by the legislature and administration.

we are not in charge of guessing , just not our job >> say, we are not going to second-guess him, i will. i believe that the energy policy that this president and the democratic party have supported are causing a huge boom in prices saying hi high. they will not come down. a boom attacking the energy industry, jobs that are associated with it, our foreign policy as it relates to contracts that we have dined with foreign countries, giving up the natural gas market almost entirely on a world market. with our has a huge impact on whether we are going to keep prices high, or control these prices. it has a huge impact on, i think , your monetary reports about how many houses get built, how many jobs get built, whether we

have jobs in place whether we continue to have more jobs available than workers who are there. overregulation is having a lot to do with nervousness, not only on this panel, also by the american people. it would be my hope that you would pass some sort of memo and tell them, you have no opinion, but you want them to see what the impact is. i want to thank you for being here, thank you, mr. chairman. i yield back my time. >> thank you, mr. chairman. chairman powell, thanks for being with us here today. i have a question, but i want to start by acknowledging, not celebrating, but acknowledging what has been a really remarkable soft landing in our economy. and i am not celebrating because the american people, consumers, are still feeling the effects of high prices and wages have not caught up with high prices and some in his, but i think it would be fair too

say that observers would have never predicted the conduct of economy. you yourself said it in the press conference of 2023 you said, a very high proportion of forecasters predicted very >> growth or a recession. not only did that not happen, we actually had a very strong year. i want to acknowledge that and acknowledge your commitment to military monument policy. i am still burdened with the fact that truth matters. i want to point out, especially after listening to my good friend mr. sessions talk about truth matters. we are producing more natural gas and oil than any other country on the planet. we are the world number one energy producer. i can in my entire fight in sort of pointing out facts comes right out of the reports, the premise that inflation is joe biden's fault, his fiscal policy's fault is faulty because, half the stimulus that occurred in the days of the pandemic happened under the

radius president, donald trump, and it has faded, and this report make the case, and i quote, prices have been declining as supply bottlenecks and impaired-- import price in section. i don't want you to comment on that because it gets a little political, i want you to keep some foot on the plane of facts. i do want you to know, mr. chairman, because i always worry about, risks that we see and don't worry i want to use the remainder of my time to talk about a risk you are very conscious of, which is the overhang in the commercial real estate market and as you know, the financial estate counsel identifies commercial real estate as perhaps the most salient risk to the financial system, $6 trillion roughly in loans, half of that on bank balance sheets. in a 60 minutes interview a few

weeks ago, you commercialize the distress in the commercial real estate market as sizable, but manageable. you still feel like that risk is manageable? you feel like you have got the visibility, and transparency, and the tools to address it to mark it makes me nervous because this has echoes of 2008, 2009, when vacancy rates were declining relatively rapidly. we are not seeing that now, how do you feel, that risk continue to be manageable and do you have the tools to manage it? >> i would say, yes, it just for sometime what it is is a lot of downtown real estate where there is too much office- supply because of work from home, also the kind of downtown retail that no longer as profitable. things like that. what we have done is looked at tanks that have significant concentration

and we have been with-- in touch with them to make sure they have a plan to deal with that. there will be losses by some banks. it is not really big banks, it is medium, small size banks that have these higher concentrations.e it will be a problem we will work through i think for several years. the idea is you've got to have capital, liquidity, and a plan to take the losses you are probably going to take. that is what we are doing. we are very active in this space. >> let me ask you about that. sorry to interrupt. silicon valley bank, while their responsibility inside the bank, the egregious responsibility on the part of corporate treasurers with so much on deposit, the fed also had self-examination to do because the examiners and supervisors of the bank quite frankly went doing what they were supposed to be. forget, quite skeptical of claims of being on this, what has changed in the context of

silicon valley bank that gives you the confidence that be examiners will be on top of this? >> i see it with my own eyes. frankly, there is a risk that we would overreact to something as significant as that. not like we would react very strongly like with silicon valley bank, and we have. i know that our supervisors are out there and we are hearing back from media reports that we have been engaged with medium and low size banks on this. i am confident that we are doing the right thing there. and i do believe it is a manageable problem. if that changes, i will say so. >> thank you. thank you, mr. chairman, i yield back. >> just from missouri recogn for 5 minutes. i would like to associate my remarks, myself with mr. hill's remarks earlier with regards to tennessee proposed long-term debt requirements

based upon the assets. i think it is an ill thought out proposal, and hopefully your position, you will be able to guide them and advised them that this is going to be held up until we get a three rule. october 2023, the board issued a proposal to update david's interchange cap and regulation ii. this is very concerning, given the data from the geo and studies show reg ii has frequently harmed other banking services to the country's poorest citizens. is introduced a secure payment sector, which would introduce a final rulemaking, until the fed, and other things, set impact upon the rule, completes a contact analysis specifically as it relates to formal making i services for lower income americans, and reports those findings to congress. i understand you are acting because you feel you are a face obligation. i urge you to proceed with

extreme caution on any type of price proposals, especially since the first cleared harmful. knowing the hardship caused by this on low income consumers, does it give you any pause to continue down this road? >> as you know, this rule is out for comment. ua we extended the comment period to may 12th. we don't have all the comments left yet. we will evaluate them carefully and make an assessment. the law does find us a specific job, which is to assess whether an interchange should be received by a large debit issuer, processing a debit carda transaction is reasonable. this is the obligation that congress has stowed upon us, not something we thought we sought, but that is our obligation under the law and we don't know what else to do, other than keep doing it as long as that is our assignment. i think the be concerns raised will be things that we-- >> hopefully, you will study this and understand that from

the previous types of rules along this line, they were very detrimental to a lot of lower income folks. as you know, the price reductions promised, for instance, the prophets actually went to the largest retailers, other than to the consumers, as they were talked about. 98% was one of the studies that showed the retailers kept all of the money, instead of lowering prices, and they told us would happen. i am very concerned about that. so, what is the legal basis for updating regulation? you talked about there was something in the law that says you need to update all the time, or should you be studying before you actually propose a rule and make more appropriate? >> again, i think our reading of the law is different. you send something, you do it once and leave it there.

it is supposed to be reasonable and proportional to certainly issuer cost. the implication being caused change, then this should change. that is our reading. i think we do a lot of work. we waited a long time to change it. it has been many years since we changed it. we will review the comments and the data we get here >> one of the things i hope you consider is the fact that even though it is supposed to be $10 billion and up, it rolls downhill, as the last 30 showed, smaller banks, community banks are also feeling the effects of this. be sure to consider it when you start thinking and talking about this. i appreciate that. one of the things yesterday, i had two different foreign bankers, ceos in my office and one of them brought up the subject to me, very concerning, artificial intelligence, being able to impact social institutions in this country and our banking system. i told people, you know, think about this for a second. you find some individual who is

a well-known individual, dave lo ramsey, somebody who has got credibility, and suddenly, you see an artificially produced advertised or faced post, and this person says, looking, we have 100 banks that have got a problem today. that individual did not do this, it is our individual produced. you could not tell the difference between the individual and the real thing. we have just come through the silicon valley situation. if you have real-time payments where you can just transfer an money and you have both scared to death by some well-known individual through artificial intelligence situation, and i can tell you, china is watching this like a hawk. they are ready to pounce on the situation. to me, i have got some bills that would solve the problem. do you think there are issues we need to take a look at? >> i think we are very focused on ai, like government agencies and law enforcement agencies in particular.

it is very challenging. page 1 picture. >> jensen's time has expired. wood thank you. we will now go to the general woman from texas, ms. garcia. >> thank you mr. chairman, and chairman powell, thank you for being with us this morning. it is always a delight to have people for us. chairman powell, the budget report estimated that the u.s. economy would grow an estimated $7 trillion for the next decade, thanks in large part the surge in immigration, creating a larger labor force. immigration also increases demands for goods and services. i note you mentioned in your report that the growth sometime during covid was due to restrictions in covid and restrictions on immigration. can you detail how immigrants have been fueling our national

growth, and you can enter this report from the cbo in this current report? >> so, i am very familiar with the cbo report. i read the demographic projections and economic projections. i understand what they did. >> but you do agree with the $7 trillion growth in the next no decade? >> i have not tried to make a parallel . i am familiar with the assessment. what they are doing is saying, more people working, bigger economy. it makes the economy bigger, that is just arithmetic. if you add a couple million people to an economy, and a percentage of them will work, there will be more output, that is what they are showing. i just want to be very clear, we don't make immigration policy, we don't comment on immigration policy di directly or indirectly. >> i not asked you to do that

mr. chairman, i am some asked, if you agree that the immigration search has added to our strong labor force, which is necessary? said that we accept-- expect a continued growth and solid pace to be able to continue on a solid pace, then we need that labor force, wouldn't you agree? >> last year, we got big increase in workers, and it came from two sources. one was participation increased from people who were already here. and in addition, we got a significant increase in immigration. many of those people take part in the working economy. there was a big increase in labor supply that would have increased output, it would have made more people, will have all kinds of economic effect. i'm just reporting the facts. i am not saying anything needed for the future, or policy

directly or indirectly, it is just reporting the facts to say that immigration and labor rt force participation both contributed to the very strong economic output growth we had last year. >> is it possible for the fed to conduct a formal assessment into the positive impact immigrants have on our economy and report back to congress? >> not really. i think that is a job for the cbo. that is precisely what the congressional budget office does, not what we do. >> the other question it addresses, that you consider the cbo's ss that the growth in the next 10 years would be $7 trillion and about $1 trillion in added revenues? what that considered in this report? is that what the february reports, and this i believe is through february 29th. >> the answer to your question is 10 year growth projections by cbo do not have any applications really for the current dance of monetary

policy. i will say that the immigration that we saw was a notable factor of the three and 2024 economic outcomes. of course, we are aware of that and in a row and we are thinking about it and the path for the economy. >> thank you for that. related to that, the last time you were here, you and i talked about diversity, and diversity inclusion efforts, both at the fed, and i applauded the president for his appointment of dr. huber. i expect her visit later this week. what other strategies and programs are you using in the fed, not only in here, but in all the branches to ensure that there is diversity and inclusion? >> in terms of an intake of people, when we go to hire, they knew with the preserve

bank go to higher a new president, those policies are focused on hiring a diverse s applicant. now, you see the effect of that more and more over the years. that happens. we don't have any role in the tens of governors, that is not our job. the administration does that. internally, we are very focused on having an open and inclusive place to work and also in hiring , we work hard to have diversity. the mac gentleman from michigan is now recognized for 5 minutes. mac chairman powell, good to see you in-prison. mr. chairman, i got to make a comment here. it is stunning to me that you waiting an underground economy, which is very different and not a healthy alternative to the regular economy. basing that on an illegal workforce that is not able to legally work ultimately will fail. that is

not a strategy to my colleagues on the other side. just ask any armor that will have somebody, a regulator, come in and find them to fo employing people who are not really-- legally allowed to be here in the country, that is the greatest fear. that is a fallacy of growth within this economy that is not to animal. chair powell, last fall i sit vice chairman bar a letter, eggs resting my concern over the impending impact pending rulemaking, goods and services will have on consumers. this morning, there has in a fair amount of time spent on basel three. among the agencies, fed, fcc, and that number of pending for final rules is friendly staggering. regulators finalized new rules for the community reinvestment act, the fed is also looking at reagan i i, in my opinion, would unintentionally undermine recent significant progress in wringing low and moderate income consumers the mainstreama banking system. just yesterday,

cfpb unveiled a rule that would cap late fees for banks. i just literally walked out of a thing with my credit union, who were very concerned about those things that may be in their future as well. i think it is critical we do not look at any of these rules in a vacuum and we need to consider the full impact and full scope. i will ask a question i have asked some of the other regulators. how much do you as the fed, andu you personally come out with other agencies, on their rulemaking agenda? do you coordinate mark do you talk? >> i don't lead that area of our business. i know there is a lot of talking. coordination, i'm not sure there is ordination. >> we are in government, there is always a lot of talking. let me ask this way, when a rule is finalized under another regulator, are you mandated, or have any kind of policy to go

back and look at your other pending rules under your purview and see if changes need to be made because of these other agencies' rulemaking? >> there is no mandate like that. i think where did made, we would do it. >> generally have some review? >> i don't think there is a formal review, no. >> i have heard about a enrollment over the annual stress test, what will you do to address that overlap? >> we are in the middle of just the beginning, actually, deciding what to do about three, and part of that may be the interaction with the stress test. i have not got in the any interaction are you today. i do want to touch on the bank years of last year very quickly. do you think that the banks that ultimately needed the government bail out like capital , or more on of a management

problem? >> with silicon valley bank, could they have used more capital? they were actually raising capital. it was a capital raise that they announce that triggered the run in everything. you can argue that it needs more capital, but i would not say that was the approximate cause. it was a ending structure that was all about too much concentration of-- >> many of us are-- i am asking a question, many of us are concerned that those failures are being used as an excuse to raise capital across the board. because the fcc just released its climate explosion rule this morning, and i touch on climate related question for you. the fsac chair has repeatedly said that climate change is quote, an ex-sensual threat, presuming that banks and oceans of all sizes, why then have

fsac member regulatory agencies , including the fed, limit their guidance on climate related, only to in large financial institutions? why not everybody? >> it is a new thing. we are not climate change policymakers. either it needs to be handled by elected representatives. we are starting this very carefully with large institutions, who are already doing it, by the way. they are doing this is to remain active internationally, they have to do it. we started with them, because they understand it. imposing on small banks, not something i am for. >> we will be following up real. the gentle lady from michigan is recognized. thank you chair, powell for being here. do you agree with the april federal reserve report that compensation incentives contributed to silicon valley's bank earlier? y.

>> i'm sorry? >> the april federal reserve report that that compensation incentives contributed to the silicon bank failure, do you agree with that? >> i would say at best tertiary factor. it probably had something to do with it. is that no? >> that is very well. okay, so it did. do you agree the appropriate rules on compensation could have reduced the likelihood of silicon valley's tell you, maybe? >> i don't think so. i don't think it is a first- order western for silicon valley . a lot went wrong there. mac they actually blamed you guys. they blamed the oversight even though they don't respond to your course on and his. do you think it also has something section 956 frame rule hasn't been finalized by you? mac no, i don't. you don't think it is the

reason? you don't think it is because people made money off the failure? you don't think money drove them to do what they did? >> i did not say that. >> so, they made money from it. it was a lottery thing, right? mac conversation arrangements were at the heart of the silicon valley bank failure, no. >> support robust for a bit of compensation, chairman? >> i know that-- i'm sorry? >> do you support robust rulemaking for executive compensation? do you believe in section 95? >> section 95 is the law, as i understand it, executives are looking at doing nothing. it has been 12 years, right? it has been hard to get it. i lived through the last. >> so, do you believe in a robust rulemaking office for executive compensation? >> i do. >> great, that is awesome.

will you commit to helping finalized section 956 this year? it has been 12 years, chairman. it played a role in the bank failure, chairman. >> if i can answer. >> you don't want to do it this year? i'm being serious, you are saying no. >> if the member will allow the witness to answer the question. we've had a good day today and the gentleman is trying to answer the question. >> i would like to understand dr the problem we are solving and i would like to see a proposal that addresses that problem. >> you believe people should profit off of bank failure? the executive that made those decisions? they should profit? >> i would think executives should not profit. >> they get to walk away based

on their failure with compensation? >> clawback and things like that, that is something i know you have been looking at for a long is an inappropriate thing to look at here's >> it will continue to happen, in my opinion, does not have to be yours. it sure as heck could have helped if they knew they were going to walk away with massive bonuses, the compensation. i mean, they made money, a significant amount of money for their bank failure. last question, do you believe the impact of climate change posed a risk? have you been talking about that more? >> i certainly believe i'm changing real poses a risk long- term. sure. >> there are some that say, higher interest rate actually makes it more difficult to bill out the renewable energy projects and other investments required to prevent climate impacts, you believe that to be true?

>> it is not-- i believe we need to do our job that you have assigned us, which is maximum employment, and we do it through interest rates. it is not our job to consider the impact of the change on that. i think any affect anof climate change on that would be kind of minuscule. >> last question, who do you see as the major winners and losers from high interest rates in terms of income groups, age groups, and racial, and other demographics? >> the point of high interest rates in the current environment is to bring inflation under control. the people hurt the most by inflation, as you know, our people on a fixed income, right away are in trouble when the cost of trent tatian, food, energy, when those things go up, they don't have the financial resources to deal with it. we are to provide price stability for the american people. those people benefit the most overtime from stable pricing.

we will go to the gentleman -- the lady from missouri for 5 minutes. >> thank you, chair powell for your service. i want to associate myself with the comments from my colleague, mr. hines i am concerned about real estate exposure. i do hope that the fed is doing everything it can to ensure that the exposure these bank have will continue to be, in your words, manageable. this is a lonely crisis out there with workplace changes and dynamics. chair powell, in the remarks on lobar, larry summers, former treasury secretary during the obama administration they did that, and i quote, it would be much more productive for our scheduled banks to be focused on the question of real estate portfolios in the banks they supervise, then quote, some of the more abstract, and politically driven argument about various kinds of capital charges on the largest banks.

do you agree, sir, it would be more productive for fed supervisors and regulators to keep their eye on the ball? in this case, commercial real estate and other real estate investments? >> i absolutely think we need to keep our eye on the ball with commercial real estate. i think we are doing that. >> i hope so. according to your semiannual report, the meeting of members on your monetary policy committee estimate that your target, overnight interest rate will average 4.1% in 2024. the that mean that the median number of members anticipate that you will be cutting interest rates sometime this year by as much, or more than a full percentage point? >> no, it does not mean that. actually, the summary of economic projections showed a median income of this is the december fomc, so this is now

three months old. that would be three quarters of one percentage point. you are quoting the next year's numbers, so you would add that on, that was through 2025, i believe. >> are you anticipating that there would more cuts coming mark >> the way i would say it is, we are making economic projections. we write down a path of growth, what is happening in the labor market come within nation, and what goes with those forecast is appropriate monetary policy, appropriate interest rates. we expect inflation to come down, the labor market to remain strong. if that is the case, it will be appropriate for interest rate co to come down significantly over the coming years. what would really happen, though, it is not a plant, what would happen is actually what the economy needs. the economy would do something different from that, that is what would actually happen. >> chairman, 15 members of congress, including myself,

ranking member barr, and ranking member foster sent a letter to the prudential regulators regarding the impact this would have on the u.s. capital market activities. the f letter highlights critical areas of our u.s. markets, including security, underwriting, securitization and derivative, that would be severely impacted by the proposal. this was also a common theme represented throughout the common bile on the proposal, over 95% of them. considering that 75% of financing in the u.s. is done through our capital market to me which are the deepest and most liquid in the world, why would he said continue to pursue this flawed proposal, instead of repurposing a rule that would not have such a drastic impact on the u.s. economy? >> well, in fact, the capital markets concerns you raised, are among those that i raised myself in our open board meeting when we put this out

for comment. met you said, you want to rot support. honestly there is among governors, fdic, others. how are we coming on this and how do we-- >> we are working our way through the comments. we are coming to the point where it would be appropriate for us to evaluate and i think those changes would be broad and ethereal. we haven't made any decisions yet. >> in my role as chairman of the subcommittee, i have seen those that have pushed the envelope in terms of rules and regulations that go beyond the mandate, encroaching on the jurisdiction of other financial regulators. what is the fed's response to another agency encroaching on its jurisdiction? >> we do not comment on other agencies' regulations, however, if they were to actually take this hypothetical at face value ,--

>> it is more than a hypothetical. >> and we would react. good, i hope you do. i yelled back. the lady from new york recognized for 5 minutes. >> thank you, mr. chairman, right here. thank you for being here, chairman powell. co property insurance rates are becoming prohibitively expensive, or inaccessible for homeowners and developers in my community. their annual report identifies property insurance rates as an increasing risk. and i recently raised this issue with secretary yellen. is the fed monitoring the rising cost of insurance and it impact on microeconomics? >> we will pause the clock

>> we will the clock and half staff take a look at the microphone. clock the frozen is out of wrist for ms. velazquez, or out of good luck, i'm not sure. we will get staff and just sustained for a moment. next we need to invest in infrastructure for this committee. >> we are trying to do electronic voting. it is hard enough just to get the microphone to work. madame clerk, thank you. so, all the photographers left.

any luck? we are getting a new mic any luck? we are getting a new mic. it may not be better, but it's a different one.

now this one is back. okay, great. it doesn't want to be replaced. we are going to start over and restore the clock. thanks to members' indulgence. ms. velazquez, you are recognized for 5 minutes. >> mr. chairman, i was asking you about the property insurance rates becoming prohibitively inexpensive-- expensive or inaccessible for homeowners and developers in our community. the annual report identifies property insurance rates of an increasing risk. i recently

raised issue with secretary yellen. is the fed entering the rising cost of insurance and its impact on microeconomics? >> so, yes, we are very much aware of increases in insurance, including property insurance. it has been adding meaningfully to inflation and it is not one thing we have any control or authority over. same is true for auto insurance, or just insurance generally, prices have gone up a lot. >> so, when we talk about the lack of affordability when it comes to housing, the insurance, the rising cost of insurance is an important factor that is affecting the availability of affordable housing in our community. and i hope that there is some discussion among the fed, because it is an increasing risk

, and it is going to have a direct impact on our economy. chairman powell, i know you spoke with chairman mchenry on inflation. can you explain what evidence you are looking for before inflation has returned to 2%, and interest rates can be cut to mark >> sure. we are not looking for inflation to go all the way down to 2%. that is not what we are looking for. what we want is more evidence that would give us more confidence that inflation is on a path down to 2% sustainably. that will come in the form of inflation rates. just a bit more evidence so that we can be confident. we don't want to have a situation where as it turns out, six months of in elation data we had last, that did not turn out to be an accurate symbol of where inflation is weird we are

just being careful. because the economy is so strong and the labor market is so strong, we can-- we think we should and can be careful. >> when you say evidence, what evidence? >> just more. we would like to see more, relatively good, low inflation readings. we are not looking for lower inflation rates that we have had, we are just looking for more of them. what happens as we go forward with the 12 month inflation, it will continue to drop because it will be lower than early last year. >> thank you. mr. chairman, i would like to pick up where mistakenly left off and reiterate the importance of the rulemaking on section 956. this is an issue that i also raised with vice chair barr, chairman bloomer, acting controller soon, and i told them when they came to war this committee, that i would be

asking for this update on the rulemaking of every future hearing, because it is well past time, 12, 13, 14 years, if you are employed in a company and you are given a task, i would think that you would be fired if you don't get it done, and it has taken 12 long years. you are the chairman of the fed. how is the fed working with other agencies to propose the rule? >> there is a lot going on in regulation at the fed right now. my understanding 956 is that there have been discussions between regulatory agencies, and i think it is not three, more like six agencies that have to agree. i have not seen a proposal. i think something is under consideration, but it is not a thing that has gotten to me yet. >> i will ask the next time, and believe me, i will be here. thank you.

>> gentleman from kentucky, mr. barr is recognized for 5 minutes. >> mr. chairman, good to see you. you have said numerous times that the capital framework is about right and the banks are well capitalized, do you still believe this? >> i do. >> given that you believe that and given the fact that the endgame proposal dramatically increases capital requirements on banks, would a brief proposal that implemented causal three in a capital neutral way, could it do so without jeopardizing financial stability? >> it could, hypothetically, yeah. >> according to watkins, 93% of the comment letters either proposed, called for a he proposed, or expressed substantial concerns about the basel 3 proposal.

i would ask the chairman to include that report into the record. without objection, i would ask the chair to include. thank you. mr. chairman, did you see that report? >> i did. >> did that concern you that 97% of the comments were negative? >> we did not do our own account. i can't make an assessment. i would say it is unlike anything i have seen. >> basel iii comment period needed on the same day as the fed's data collection on the proposal, which is a non- process, data should have been collected far earlier, analyzed, and results should have been available for the public to comment on before the comment period ended. why did the federal reserve choose to do a quantitative impact study during the common period for the proposal, foreclosing inability by the public to comment on the results of the study? >> well, the movie is not over.

we are where we are. vice chair barr did commit to putting the qis out for comment . those comments will be taken into consideration as we think about the past ahead. >> speaking of process you got your expert general counsel right behind you. and i don't want to get into privilege here, but happy lawyers of the fed raised process concerns, or administrative or seizure act issues with the board? >> let say, we are committed to doing transparent, and reasonable, and databased rulemaking in compliance with the administrative procedures act. >> of course, giving the public the ability to comment on the quantitative data that has been provided obviously is consistent with good process. sir, governors bowman and waller, vice chair heel and director mark herman, all descended on the proposal. vice chair expressed concerns

during his statement. under your tenure as chair can you identify any of the regulatory proposal, which has elicited this much dissent? >> no. >> have you in the past acknowledged in front of this committee that you will not move out with proposals without consensus, or have you acknowledged that in the past, we appreciate that commitment to consensus. have you achieved consensus, yet , on the basel proposal? >> let me say, i am confident that we will. that is a process that mentioned , we are evaluating comments, just come to the place where we will start talking about the past ahead i am confident we will achieve very broad support on the board. >> mr. chairman, do you agree that the heterogeneity and business model diversity within the banking sector are contributes to systemwide

stability? >> i strongly do. >> and you agree that a concentrated business model in the banking sector would present a potential systemic risk? >> essentially, yes here's >> this is one of my major can turn with the proposal. by de facto appealing regulatory category three and four regional banks to one-size-fits- all standards that currently only apply to large pieces, restoring securitization, the private sector for dispersing risks, eliminating the internal risk models, transitioning the industry and regulators toward only a standardized framework actually would push the industry into a smaller, more concentrated licking industry, and as a result, mind you, would increase systemic risk and decrease market competition. do you share that concern? tech i think it is a relic of her. and again, i think it is out of what goes into my thinking

about the proposal and where it needs to. >> given all of these concerns, we hope you can recommit to proposing the basel iii endgame and we strongly encourage you to take that into consideration. gentleman from massachusetts, mr. lynch, is recognized for 5 and it. >> good morning, mr. chairman. welcome. good to see you again. i want to go deeper on the commercial real estate issue and the potential impact on regional banks. this morning, scott rick her, who is a member of the new york fed board of directors released a white paper on cnbc this morning, describing the trillions of dollars in commercial real estate loan that will come to over the next couple of years. he described it as quote, a slow moving train wreck. for our regional banks. he went on to predict that it will force a little over 500 banks to either fail or consolidate,

he also described what he termed as a dual look, similar to silicon valley bank, where people tools-- lose confidence in the bank and pull their money out and we end up in a bad situation. i don't believe everything that i read or hear, but in congress , we do tend to repeat it. i wanted to get a sense from you. i am seeing in my own city of austin, we have 20% vacancy rates and office base. rely on that for a lot of tech revenue for the city. i am wondering your thoughts on that issue. is there systemic concern here, or is this isolated? my lowering the interest rates help some of those banks? i hear from my believers in our area that no one is lending. a crack at it? >> sure, i have not seen that

report, so i can't comment on it . i can comment on commercial real estate. we have had a secular change in the economy, which has left office rentals in many places, office building, demand for is significantly lower, at least temporarily, and perhaps for a long time, and the same is true for downtown in some places downtown retail associated with office workers. it is a shock system. we have no this for some time. we have gone through the commercial banks in the united states and some of the other regulators who have done it jointly and the ones that have high concentration, and are going to need to deal with that. we have been in contact with those banks, talking to them about how they are going to do with this. how they will absorb the losses , do they have enough capital, liquidity, do they have a plan to do this, and is it consistent with their lending practices, that kind of thing.

it is going to be something we work through over a period of years. i do think it is slow moving. i do think a part of it is right. if you ask about 500 tanks, i have no idea about that number. certainly, some banks, probably smaller ones that have these high concentrations. it is not a very large thanks. it is a very manageable thing at a very large thanks. i think that is what it is going to be. it is a serious problem and more serious in some locations and jurisdictions and with some banks than others. it is something we will be working through and that is how i would think about it. silicon valley bank situation, the signature, the money moved so quickly in those cases, it was instantaneous. the velocity of money moving out of those banks really, i think, in the ways of their failures. are we looking at anything

technologically that we might be able to address some of that or mitigate it? >> sure, also after silicon valley bank, we got in contact with, and work with financial that had a high concentration of uninsured deposits. many of them have greatly improved their liquidity position. that is the thing we will work on. as you know, we are also working on some liquidity rules , which will strengthen our framework of liquidity rules, that is something we haven't proposed yet. >> let me ask something off- topic. we know that russia has about $300 billion in u.s.. we have frozen assets, russian assets of about $300 billion between the u.s. and european banks. do you want to comment on that? what i would like see is us give that to ukraine, to be honest with you. i know that is

a simplistic idea, but is there a historic example that we could look to if congress has to take necessary steps to redirect that money to ukraine, so they could feed their people and right that war? >> this whole area of sanctions and on assets, things like that, is really controlled and directed by the administration, by the elected branch of government. all we are is a technical seat in the back row to help. we don't make those decisions. i would not comment. >> i know you are big on history, i was wondering if there are examples that might provide guidance to us? >> gentlemen's time has expired. gentlemen is recognized now. back in texas, i am constantly hearing concerns around basel , we talked at length about that proposal. these concerns are not only coming from my banking industry, also farmers, small businesses, concerned about how

this proposal would impact capital access in the future and to all of us, did it not raise alarms? we heard about the 97% today public comments on this proposal and they all came out negative. americans across all sectors worried about disasters following the proposal, trying to make that known to banking regulators who continue to ignore them. it is time for federal regulator is to take this concern seriously, and quite frankly, i believe, start over. i urge you and your colleagues to rethink the misguided policy and do what is best for the american people, small business mainstream america, and withdraw the proposal. chairman powell, even the concerns about financial institutions, farmers, ranchers, et cetera, in other communities across the country, can you elaborate on how the federal reserve is addressing these comments that are mostly negative, and request modification, delay, or complete withdrawal of the proposal? >> yes, i will. we are in the process of reviewing the comments. they were quite voluminous, a lot of detail and analysis.

that is just what we wanted. we got this and it is a lot. hundreds of them. we are going through them, just at the point where we are about to begin, then turning to the question of what changes should we make to the proposal. we have not made any changes, have not gotten to that stage yet. we got the comments less than two months ago. we are looking at it. as i mentioned, my own view is that there will be material and broad changes to the proposal as we go forward, and we have not made decisions yet, it is a little early for that. >> i want to bring up the long- term debt proposal, which would require debt issuing of long- term proposals for capital losses. congress worked passed legislation requiring legislation to the size of the financial and attention. this is meant to protect banks of all sizes, allow for families and businesses in my district to have options to meet their lending needs.

the fed's long-term proposal would undo any sort of figuring that puts into place a new, long-term issuance requirement on regional banks, which would require these banks issued long- term at the county level and i.d. double. these recent face increased costs, when they are already facing regulatory burdens from this administration. those banks people do business with. mr. chairman, do you believe this proposal will go against the requirements of 55, the economic growth regulatory relief and consumer protection act, and will you commit to exploring this issue further with your colleagues? >> we are committed to implement 2155. we believe that regulatory supervision to their sizing and activity, and that is something we will be considering as we go forward with this. >> short time i have got left i by the biden administration.

kos continues to expand you know i am in the car business and inflation is just running rampant in my industry. the rescue plan forced by congress by democrats made inflation more of a problem. american families and businesses have been forced to deal with runaway inflation for three full years. which is causing major hardships. aarp injected $2 trillion in deficit spending already struggling with the economy. how is this inflated spending combine with economic headwinds, like supply change orders impacting the economy? does this reckless spending have fuel the pressures of inflation? >> i think there is a lot of causes of the inflation that we have seen. we saw this inflation everywhere in the world. the reopening of the economy with very strong demand and can strength you saw inflation and all the advanced economies.

it was a little sharper here at the beginning. i think there is a role for monetary policy. there is a role for fiscal policy. there is a role for the pandemic. our job is to deal with it and that is what we have been doing. >> thank you for keeping small business in mainstream america in your calculations. with that, i yield back. >> the gentleman from california, mr. sherman, is recognized for five minutes. >> i want to thank you for recognizing the importance of immigrants in keeping costs down i want to thank you and the administration for what has been an excellent 2023 economic report. we have got 3.1% economic growth , by far the best in the developed world. inflation, too .4% and that is not a little blip. one month summer. that is for the whole of 2023 and compares favorably with the

pre-pandemic portion of the trump administration when we had inflation of 3.5%. my goal is to convince you to cut more and sooner. for a number of reasons. the first is that -- i know, if you asked a constituent they want zero inflation and your unemployment. you know that we cannot have that. and have concluded the economy works best with a 2% inflation rate target. i look at the history about 2% number and it seems to come from auckland, from the 1980s. there is a lot of argument that your target should be just a little higher. larry summers recently produced a study arguing that the cost of money is part of the cost of living. we have this weird paradox you

are trying to keep the cost of groceries down by raising interest rates but as the ranking member points out, the big issue is housing and and your measure of inflation seems to treat all americans as renters, even though two thirds are homeowners. when interest rates go up, that is an increase in the cost of living for anyone with an adjustable rate mortgage, anyone looking to buy a house, anyone with a home equity loan. obviously, we would cut interest rates a little sooner and a little more if your target was something closer to 2.3%. i will ask you, is there substantial economic analysis that argues that your target rate in the economy would work better if we had a slightly higher target than 2%? >> not really, no.

what has happened, you pointed out new zealand. what has happened is that 2% has become the global standard. it is a durable standard but we do not have any reason to think that it is a problem for the united states to get to 2%. we are 2.4% right now. >> i went asked to add to the transcript of his hearing, numerous articles that argue for something between 2.3% and even 3%. i'm not arguing for 3%. let us look at basel. if the standards are too high, we lose economic growth. if they are too low, we have bailouts and bankruptcies. i think everyone agrees the standard should be well- crafted. you have a system where everyone drafting this is well- dressed and focused on wall street. you have got basel rules that discriminate against main

street and wall street. i will give you examples. 65 -- it is 65% if you are a publicly traded company. you make a loan to calpers that are not publicly traded. and so, they are having a tougher time getting a loan. the local pizzeria will have a tougher time eating alone. you have god, in basel three, ignoring mortgage insurance but it obviously makes the loan more potentially sound for the bank ran and it is very necessary for first-time homebuyers. and you have got a system where if you make investments and long-term bonds on wall street, you put them in the maturity category and you do not have to recognize the losses and market to market. i hope you will look at these in terms of the competition

between wayne street and wall street for bank loans. finally, clean energy investment. can i count on you to look at the paradox where basel three treats clean energy tax credits much more harshly than low income housing tax credits for no ascertainable reason? >> yes. >> thank you. >> the gentleman from georgia, mr. latter mick -- loudermilk is recognized. >> thank you for being here today. concerned with the credit for businesses. as a former business owner for over 20 years, i can attest that the small dollar business credit becomes more expensive and less convenient, businesses will turn to credit cards and other alternative financing for business purchases. these, inevitably, result in higher cost which goes down to the consumer, which means they

will pay more for the services or products. in february of this year, total credit card debt reached a record of $1.7 trillion. according to the small business annual index report, average monthly credit card balances were 27% higher in 2023 than they were in 2019. what do you do as the driving force behind these levels of credit card debt? >> part of it would be growth in the economy. that will be part of it. it is a bigger economy and number. i am not sure what that is. as you know, people have lots of extra cash during the pandemic from savings. they have spent that down and now they are borrowing. i am not sure. >> if there was a rule to force banks to tighten lending, do you think the role would drive businesses and consumers to alternative forms of credit?

>> i do. if you raise lending cost for banks at the margin, that will make non-make lenders, they will get some of that business. if it becomes more complex and less give me a business will turn to these alternative forms. i can say that from experience. will you commit to an analysis of how bank capital proposals, like basel expect access and the small dollar lending before finalizing such proposals? let me look into that. i do not want to make a commitment on some big study. we will look at the issue. >> do you feel it is important that we have an understanding? >> the bloodline. >> i do agree.

>> okay. >> the chairman asked you for your thoughts on withdrawing or repurposing. have you specifically discussed with michael barr or the other governors? >> i do not want to get into our internal dealings but i will say i understand it is a live option. we are not in a stage of being able to have that discussion yet because we've got to decide what changes we think are appropriate. that will take a little time. when we get to that point, if a proposal is the right thing to do, were not to hesitate. >> all right. in the current environment we have in politics in this country, there is not a lot that you find a bipartisan agreement on. i think you can find some agreement in withdrawing that

proposal. can you explain the importance of broad consensus in like b3e. >> i think we are going to get to broad consensus with the fed. i think it's very important. this is been our culture that we try to find common ground and we've been able to do that in the regulatory space. i expect we will be here as well. i commit to that. >> could it be that we are seeing this level of disagreement because of extreme measures that are being taken now? total difference of opinion and understanding in philosophy regarding free-market economy? >> i will not speculate but i will point out that four of the seven governors during the open board meeting at which we for common express real concerns. specific concerns about the proposal. instead we would look at the

comments when they came in and that is what we are doing. >> do you feel they have validity in their concerns? >> yes. >> with the few moments, second i have remaining, there is a recent report of working with financial institutions to query legal purchases made by american citizens. has both federal reserve been instructed within the past few years by treasure or anything else to search americans legal transactions? >> not that i know of, no. >> thank you. i yield back. >> recognized for five minutes. >> thank you, mr. chair. thank you for being here. there is an emergency to get the 60 billion in military assistance to ukraine. separate from that, remains a longer-term need for reconstruction assistance to ukraine which the world estimates somewhere north of $400 million.

at the start of the russian invasion, the world froze roughly $300 billion in. primarily at european banks and financial institutions. the biden administration and many of our allies have recently taken the stance that those assets should be leveraged to provide reconstruction resources. i support this concept and i believe that additional action should be taken to ensure that we hold russia accountable but there are real concerns on the impact this might have on central banking system, the dollar, the euro, so on. my question is, have you seen the act of freezing these assets and not seizing them but simply freezing them? have you seen the effects on the dollar, the confidence in the central banking system? is there any visible downside

that is visible in the two years? >> i cannot point to any. >> that's an interesting observation. when we think of taking the additional step of seizing them, because to my mind, having them present is violent as seizing them out right. it is interesting that so far. >> in terms of, there is a frustration i've had over the fact that the effects are clear but the magnitude of effects are not. for example, if you talk about the effect on the prices seen by on increased capital environment, directionally, it's clear. other players will step in and take up part of the slack and

then increase and so on. is the data that you have collected enough for you to estimate the magnitude of these effects and simply the direction? >> i think it's really hard to get down to the microlevel and try to assess that because you are right. there would be multiple effects. you know the direction. >> that's right. if you can avoid financial crisis with a microscopic increase in prices seen by end- users, that is one thing. if it is a very large difference. the magnitude matters when you are doing the balance of these things. you need a model for how the different market players will react. is it really not going to be in the scope of the analysis that you anticipate? >> i believe we done some work

on that. the banks and other participants have done work as well and come up with a range of answers. there is an awful lot of variables in these equations so it is hard to say with any confidence. that's why it's hard. a precise level of appropriate capital is a hard one. we've had two major crisis. the lessons that you can learn now that i believe your testimony indicates that we are kind of approaching to normal now and seen in the crisis of 15 years ago, we saw what many people thought was a physical response. less of the output gap. we limited by political will to do things and you are limited by what you can do for most of

a decade. we have a long recovery. the comparison to the recent covid has been sharp and put us on that track. are there any lessons that you have drawn about the importance of getting the right balance of fiscal and monetary response to these trucks? >> we think about that a lot. have to start by saying it's too soon to tell because the answers you would give today, looks very different than a year ago. a year from now, will be looking back and saying we learned so much more. the pandemic is still writing the story of our economy right now and we should just be prepared to be surprised with the next chapter. >> as we were with 2023. the strong growth is a sharp decline in inflation while the labor market remain very strong. very few forecasters have that

but we can talk about. >> thank you, chairman. chairman powell, thank you for being here today. for your testimony. i would like to start off by completely echoing everything congressman barr said. a lot of us have talked about the endgame. i think now basalt thought process. the comments you've heard from here and so many others about the hazards with the current approach. i would also like to address one of the other practices by the federal reserve. the practice of paying interest on reserve balances. it is my strong belief that rewarding banks with returns for taking the market risk actually harms our economy. encourages find out financial institutions from lending money. instead, they pocketed the fed. this has little to no impact on

large corporations but can have a crippling impact on small and midmarket firms. we especially saw this in the long recovery as god frank has implemented in the obama years and in the trump years. we changed some of the mind-set with a lot of other policies but we saw its strong surging economy. our country wouldn't pay a price for this distortion for the fed in two ways. they are unable to obtain loans at competitive rates because the money sucked out of the market. frankly, a lot of them don't have access to lending except through bank capital. forces them into other forms of capital. second, they ultimately pay higher rates whenever they have these alternative means of capital. today, i have introduced a prohibition on the act which would prohibit the federal reserve from paying interest on excess reserves by. we can begin to reserve our economy for the economy it is

supposed to have. the alternative is you could simply raise requirements. we would see some of those hazards when you do it across the board approach like. what is your case for why you should keep paying interest on excess reserves? >> as you know, we don't see the downside that you are talking about. banks have a cost of funds and what they can earn. that is what really matters. the spread. >> if they wanted to do it, they could buy treasuries on their own and they could do that independently. i suppose they could independently keep it at the fed. they do not even have to put it on their own balance sheets in the same way. the immediate in. i do not see how that is different than what they can already do. >> what i was going to say was earned a much bigger spread by lending to corporate. their incentive to lend is the same as it always was. this does not affect that.

cost of funds and they have the ability to have reserves. they are not earning a profit on that. they can run a bigger profit by lending to. the federal reserve a corporate. you are supposed to pay for your operating costs off of positive cash flow. right now, the fed has negative cash flow. it is not entirely unrelated at the federal reserve is operated $133 billion loss on its balance sheet this year. it's not the right approach, i think to be paying that much out. . holding capital in the fed when he could be deploying it in the market. right now, the interest you are paying money market funds

exceeds you are getting on the $7.6 trillion balance sheet access that you have to the tune of $133 billion asset. the fed is operating at an operating loss. what is the path to cash flow positivity? >> as you know, for many years, we've contributed way over $1 trillion in good earnings to the bank, the treasury department. you cannot look without mentioning we've been giving $100 million a year in profits every year to the treasury department. you've decided that when we raise rates to do the job you have assigned us to get inflation under control, when we do that, we absorb paper losses. it has no effect on the way we operate with the fed. if we retained all the earnings we had, but we don't do that. we get the money to treasury.

>> thank you. i encourage you to halt any effort to develop a central bank digital currency. it is not designed, developed, and established. i yield. >> the general from ohio, you are recognized for five minutes. >> thank you, mr. chairman. thank you to our ranking member and thank you, director jerome powell for being here. let me start by saying thank you for the monetary report. i have had a chance to try and. there are headings in there that say the labor market remains strong. you probably agree with that. i will say that as a yes. also, it talks about unemployment rates being low by historical standards. do you agree with that? also, it states the global pandemic played a huge role with the inflation rate. inflation rates are on the

decline. it is reported in several charts a year and also, substantiated by the federal reserve of new york, michigan surveys that are read. also, it talks about job gains and uses the word riposte jobs. i want to thank you for educating us on that and mr. chairman, i would like the record to show that all of this resulted during the biden- harris administration of making sure we hear in this committee and other committees about what the administration is not doing and what our economy and jobs look like. now, let me move on to something that is very dear to me. i want to thank our ranking member for bringing it up. this is the lack of affordable housing which is one of the primary things that i hear about. to try to explain what you do,

what we do. often times, what we don't do and why we have this. i know the interest rate hikes have successfully brought down the inflation, rising rates have also had an adverse effect on the pace of housing construction and cost. are you concerned about the effects that interest rate hikes are having with cost of financing new construction? in the second part, how do you expect to control for long-term housing inflation that might have a potential rate cut? how it might affect. >> our policy to bring inflation down is to raise interest rates. that works through several channels. one of them is the most important. within that, you have housing and things like that.

during the early days of the pandemic, the housing industry was about to go bankrupt. all of the facilities that you did really supported that industry through their credible time. when we are going in the other direction, housing is definitely affected. we understand that. it is not something that we want to have happen. the reality that housing will slow a lot when you raise interest rates. we have done that and we are doing it for the longer run benefit of the people we served to resort price stability. beyond value for people to have stability. but as higher rates, fewer sales. people who are locked into lower mortgages. we get all that. we are going to do this because it will benefit the country and people in the long run. >> i have a great appreciation for that but also, when i go back home to the district, but i hear a lot agencies and individuals who work with advocacy groups that the effects of interest rate hikes

are not equally to all american households. we hear that. there is no doubt that no income and minority communities are hit the highest or the hardest. these monetary policy changes. black households and business owners have historically faced challenges with homeownership and access to capital. they are disproportionately impacted by the rate hikes. the fed, do you have anything that you could help me with with this dilemma in how we can better achieve economic goals in a more precise and equitable matter? >> i think it is working. you see inflation coming down. that is why i do think it is likely sometime this year, if the economy receives along the path we expected, we will begin to reduce rates. that is really the path that we are on. i do hope it works out that

way. >> when you say economy, what is that mean? helping black people get more jobs, more money? >> our forecast is for continued, strong growth, continued labor market with wages going up and with inflation coming down. that kind of an economy. >> my time is up. thank you. >> the gentleman from tennessee is now recognized for five minutes. >> think, chairman and for holding the hearing. thank you for being with us today. i would like to start by discussing the independent automated teller machine owners who operate of the secrecy act examination manual. want to ensure that financial institutions will not be discouraged from providing banking services to the innocently owned atm industry. in 2021, you made it clear the industry is not automatically present a higher risk for

illicit finance. i would like to know what efforts have been made by the federal reserve to fully communicate that position to financial institutions across the country. >> i will have to get back to you on that one. >> all right, thank you. i might just add, listening to independent operators over the time that i have served in congress have come to understand that unfortunately, and it was in the bank examiners manual up until a couple years ago, these operators were identified as being risky and was causing them. i hope that you will take a look at how to make sure we are communicating to financial institutions and most importantly, to the regulars. >> tennessee is home to over 1000 foreign-based businesses that have chosen to invest in our state and create more than 160,000 jobs. these jobs are reliant upon cross-border financing provided by global banks including

foreign banking organizations. the federal reserve has long maintained the principles of national treatment in the quality of competitive opportunity when regulating foreign banks and assessing them based on their u.s. operations. are you still committed to these principles? >> yes. >> how will these be reflected as you move to finalize the endgame proposal? >> we have received a separate set of comments from the foreign banks and we will look at those very much in the spirit. >> thank you. joe powell, the endgame will incentivize firms to credit risks off their balance sheets. one avenue for such a transfer is synthetic securitization, the framework for which must be approved by the federal reserve. it is my understanding that there is a substantial backlog reviews and approvals of these

frameworks. it is concerning that the federal reserve is directed, directing the risk transfer, yet also impeding it in my view. can you commit to reviewing this approval process and taking steps to reduce the backlog of pending securitization applications? >> as i understand it, these transactions are becoming popular right now. we are not stopping them. we are being careful. there were similar things that happen about a credit risk transfer during the global financial crisis but didn't actually work out. we want to make sure that these structures durably transfer. we think that they do but we need to be careful because the last experience with these was difficult.

>> is it a lack of available resources to apply to the approval process or is it an intentional slow walk to make sure every eye is tarted in every t's crossed. >> what i was told is we are not stopping these but were going to be careful with them in the absolutely careful that the transfer in a durable, sustained way. that is the thing. the intention to close lower and have about long. i do not know what the staffing issue is. we will check. >> thank you. designed and in europe such as, has the federal reserve committee or financial stability committee had any discussions regarding the adoption of the risks and capital requirements? >> i don't know. >> has the meaning any of the

esd risks in capital requirements? >> i really don't know. it is not something we are considering but when you ask me any discussion, i don't know. >> it's not a priority. >> to put it mildly, yeah. >> yes thank you. i see my time is running out. i see your answers in any other light you could shut on those matters, i appreciate. i yield back. >> the gentleman from illinois, you are recognized for five minutes. >> thank you for being here today. i want to start with following up on the exchange. as you know, with concerns about specifically the clean energy tax equity protrusions. i appreciate your commitment to look at them. i wonder if a little bit of a sharper point on. can you look at that before the role is finalized in potentially issue some addendum to the rule? the number of banks who are little bit frozen are waiting for clarity on that.

>> i don't know. i think there is a proposal. we are well aware of the commentary and working to react appropriately. i don't know if we can put one thing out of line and deal with it but we are making good progress and i think we will be back reasonably soon with answers. >> time is of the essence. appreciate everything you do. the second thing, i want to follow up on your discussion with garcia. i really appreciated your comments in the 60 minutes interview last month when you mention immigration is a big part of the story. the labor market coming back into balance, generally, and correct me if i am wrong. more immigration is generally going to use inflation. is that a safe characterization? >> it is probably closer to neutral, actually. people come in, they also spend. it is not clear that immigrants

coming in. >> either were going to get economic growth and/or -- >> wages michael up a little bit less but at the same time, they are also spending. we have this conversation. it depends on what you assume but i think it's better to assume broadly mutual. mutual >> given as you are all using the census bureau data that is more conservative than the cbo data and while making estimates in the future, can you speak to whether your forward views on economic growth and inflation -- how sensitive are they to your assumptions about census versus cbo data on what the level? >> i think the cbo assumptions are meaningfully higher and what affect growth and part of the explanation on why growth

was strong. would be a reason to. it's not the main reason but would definitely growth this year. i would not say that we accept one version of the other. we study the numbers carefully. were trying to get to the right answer. i think the cbo shows stronger growth, higher growth. i don't know the per capita growth. >> the last question, i think there is a lot of good news in the monetary report that you issued around wage growth. we've seen minority groups start to close some of the gaps. but i didn't see, and i do not know if this was because you have not done it or i didn't reach close enough, if you have seen any gaps and originally within the u.s., other parts of the country better stronger

wage growth than others? >> there are. i do not have that off the top of my head. when i talked about immigration, i think the immigration story for last year was part of the positive supply shock and was part of the reason why inflation came down. i was really asking the question. and there, neutral. >> i appreciate that. i just want to close on this regional peace because the atlanta fed, the best i could find of licentious regions. as you look at which regions are consistently running above, new england and the west are consistently showing wage increase above average. the west south central texas oklahoma are consistent. going back to july of 2022, consistently seeing wage growth below average. i appreciate your not in a way into a political question here but those were all right to work states. it's harder to unionize,

organize. and what i'm wondering, without asking you with policy, have you all done any analysis that says gains in labor product activity, is more likely to accrue to workers in those states are for labor as opposed to capital. >> there's plenty of research around that area. we'll take a look and come back to you. >> thank you. >> the time is expired. gentleman from south carolina, recognized for five minutes. >> thank you for being here today. we continue to appreciate your work and the work of the federal reserve on the half of american people. in august of 2023, the federal reserve fdic, and released requiring of long-term debt for category 2, 3, and 4. my colleagues after the letter

expressing concerns regarding the lack of tailoring in the proposal and shortcomings an estimate of the actual cost of the proposed rules. i'm concerned that these will negatively impact landing in my district and combined with the other regulatory proposals, could cause further consolidation of the banking industry. it appears the federal reserve has primarily referred to the fdic concerning the proposal. could you shed light on the federal reserve's rule concerning long-term debt proposal and have you provided input regarding the proposals in her plague with the endgame? >> i think we are one of the proposers of the rule. just like the other agencies are. right now, we are looking at the comments. that comment. has closed. we are very much in reading those comments. >> fair to say, thank you. i'm concerned that long-term debt proposals, lack of tailoring contradicts the

requirements of the economic growth, regulatory relief, and consumer protection act. instead of principles, this proposal creates category financial institutions identically for the purposes of long-term. additionally, the proposal burdens category 2, 3,. the parent holding company and bank load, which actually could be reversed tailoring, considering are only required issued at the parent company level. what is the underlying rationale behind this requirement when such a mandate is not imposed on banks and do you believe that this represents a tailored approach as required by the statute? >> is one of the questions we will be asking ourselves as part of a review in the comments. >> thank you. it is my understanding that category 4 for not including the advanced notice of proposed rulemaking for the debt rule, released in the fall of 2022. is that your understanding as well? >> i do not catch that.

>> did the advanced notice that was released in the fall of 22 include category 4 banks? it is my understanding that it did not. >> i can confirm that. >> that is something that you should take into account because the category 2 and 3 banks have an additional year to foresee this challenge. category 4 banks are really behind the eight ball. my next question is do you believe regulatory agencies should provide smaller, regional banks longer than the three-year phasing. in any final long-term requirements? >> had a good question. that is one of the comments we have gotten. will be looking at that. >> if we are going to impose these regulations, giving everyone the same opportunity to comply is something worth considering. one final question. of these regularly changes had been in effect prior, do you believe the outcome would have

been different? honestly, i do not think anything would change. >> it is hypothetical. i'm tempted to say that if there were more, if there had been more long-term debt ready that was specifically there to absorb losses -- >> they were nowhere near. i guess that is something you should take into account. these proposed changes to our system that are designed to make it more resilient would have actually signature to have a different outcome because. it just seems that my colleagues across the aisle let new presses go to waste and these are changes that would prevent the calamity that they are justifying the changes based on. thank you for being here today and with that, i yield back. >> the gentleman yelled back. the gentleman from massachusetts, miss presley is recognized for five minutes. >> thank you. due to the fact aggressive interest rate hikes, mortgage

rates have processed 7%. rising to 20 year highs, leaving many homebuyers without a path to homeownership. this is a problem for everyone. it is an urban issue, suburban issue, a rule issue. chairman powell, i welcome the decision of the fed deposit rates at the end of last year but for families of my district and across the country, that is not enough. we need the fed to start cutting. like the rent, interest rates are two high. chairman powell, you previously indicated that the fed may cut rates this year. what would you expect the impact of lowering interest rates to be on the housing market specifically? including the rental purchase and construction market? >> we know that higher ranks have slowed down the rate of activity. at such time if we start to lower interest rates, the housing market will pick up

broadly across new-home construction and new-home sales. the number, as you know, many households are very low rate mortgages and they really cannot sell because they would have to a high rate mortgage, that will go away over time. ideally, the housing market would go back to a normal phase but one with lower inflation. >> right. to reiterate that, interest rate cuts would have a great benefit. just yesterday, i met with a number of representatives state housing finance agencies throughout the country. they were talking about the barriers to affordable housing projects in the current interest rate environment. obviously, higher interest rates have raised costs for developers and many of them have chosen to slow down or halt construction entirely. fewer homes are being built which means fewer people are being housed. given we already had a massive

shortage of affordable housing supply wire to the pandemic, when interest rates were below 2%, the current rate, 5.5% rate. the price of homes across the country remain stubbornly high. it is clear the current state of our housing market is contacting everyone in disproportionately hurting those who need stability the most. does this concern you? >> our job is to do price stability. we do not target the housing market and we are doing our jobs. that is what we are doing. it is not something that we want to see. this is the path to restoring -- >> but doesn't concern you? german chairman powell. >> this is the job we have taken on. >> it concerns me greatly. chairman powell, the fed interest rate hikes have not been sufficient at addressing housing inflation. you agree that we need a more

robust, physical response to increase the supply of affordable housing to lower costs nationwide? >> we don't take opinions, we do not express opinions on things like that. i will say there is a structural housing shortage in the united states and that is the longer run problem. the problem with high interest rate is the short run problem. the longer run problem is the lack of supply. >> that is why it is critical that congress passed legislation appropriation bills that will make the necessary investment in housing were all. giving the way that ranking member waters fought for $150 billion investment in housing and build back better, i know on the side of the aisle, my colleagues are waiting for the majority housing inflation seriously. housing affordability is the number one issue i am hearing about from my constituents, families in my district, and throughout this country. need relief now. i hope the fed will listen and

cut interest rates. thank you. i yield. >> the gentleman from south carolina is recognized for five minutes. >> thank you. i think other people have noted about the crisis in office building market across this country. that is a line of work where i can tell you it is real. i can tell you the buildings that are effectively vacant is going to have an effect on the taxes paid. it's going to have an effect on rents. as far as affordability and housing, rates are one thing but my good friends on the other side of the aisle do not realize that housing has got over 200 components to it. one of the biggest is gas prices. as long as we are buying gas from countries that hate america, i don't know how you define affordable anyway. it's going to continue a

downward slide. i am from the state of south carolina that people are moving in. we are not going to have the housing starts that we should have. trained to reckon this entire economy. regulation has a guard rail for credit card fees. how do you answer? how do you answer the charge that this should -- you're getting in the way of charging fees according to what the cost is. that is regulations -- >> is this a fed regulation were talking about? >> for my record, the federal reserve has finalized a routing and proposed tighter adjusting. the price gaps that currently exist.

is that not right? >> it may well be right. >> if you could look at that. i know other credit unions and banks. >> i will come back to you on that. >> i appreciate it. >> will come back to you. >> thank you. for those of us who have been involved for a long time, the regulations of having a clear set of standards that we abide by and nowhere to put the money to. when should we have regulations out that we can read about what's going to be acceptable and what is not? >> i did not get your question. >> the regulations. the changes in regulations. >> one of the regulations going to be out? the banks will know what is acceptable. the cra was not acceptable. >> the final rule we are working on. there is a lot of work to do. the requirements do not really

kicking. i think working on the follow- up relations. >> that is really important. they want to make sure that they qualify where the dollars are spent. they need to make sure that it's going to the right spot because the credits will not be applied unless that is it. the fed, where the federal reserve launched is operating this now. what has the participation rate going with that? >> slow. they are network effects. they go slow until they don't. it was the same way back in the day. we are fewer than 500 banks. we are working our way added. we expect it will take some time. we think it will be beneficial to build it. as you know.

>> there is a pricing below cost? >> i do not believe so. a long-run cost. >> okay. >> the gentleman from nevada, recognized for five minutes. >> the ranking member for this hearing for appearing before the committee to discuss the recently published monetary policy report. as you continue the report on american people, you have to keep in mind that our mission is to grow the economy from the bottom up and the middle out. it seems as though there has been a constant series of shocks to the economy. both both domestically and globally. we can all see how resilient the labor market has been as it has maintained strength. with the robust gain, the january numbers are a continuation of the trend that

democrats in congress delivered through historic investments in our workforce, putting people over politics. in light of this relative, economic strength, i really want to implore the federal reserve to take stock. the holistic economic picture before making decisions on military monetary policy. to pay particular attention to those communities that a been historically left behind during times of accelerated recovery. i want to add to the questions from my colleague congresswoman. at a time where it is becoming increasingly difficult for working people and people of color to purchase a home, i worry that mortgage rates will put working families even further behind on accessing the wealth and equity that a home provides. what actions, if any, is the federal reserve considering to

better understand and mitigate the impacts that your proposal may have on minority borrowers who disproportionately rely on mortgages due to the generational wealth gap that persist. >> we've received comments including many on the changes. we will announce them when we have. >> are you concerned that these shifts will reinforce the decade-long retreat of banks from the market mortgage market and push to non-bank institutions? >> that is a question that people are raising and it's something that we take very seriously and will be taking that into consideration as we decide about that change. >> could you discuss why you feel it is necessary to include in requirements around

operational risk in light of recent claims that will significantly increase the cost of or prevent from offering all the other necessary services such as underwriting investment advisory or insurance? >> that is one of the concerns that is been articulated. proposed changes to operating risk. we take those seriously. as i mentioned, we are in the middle of looking at these things and we will soon be in the process of turning to the question of what changes to make. >> i would underscore a sense of urgency. the longer uncertainty in the market, it creates really negative effects which are all of our constituents who are looking to see these costs come down. let me shift. this congress under the leadership of ranking and former chair choice, i have made it a focus of my efforts to educate my colleagues and

the public at large on the benefits of increased diversity in the workplace and our boardrooms and in society as a whole. despite the efforts by some on the other side to take away the very tools of economic opportunity that create inclusive work environment and improve performance, there's been a misguided assault on everything from diversity equity to other programs following the aftermath of the ruling on affirmative action. chairman powell, as you know, your office of minority has a focus on this. as we anticipate the upcoming release of your annual report on inclusion, would you be able to speak to the necessity of collecting this data that minority and women owned businesses are included in the board's contracting and acquisition opportunities? >> i do believe we collect that data.

we monitor that very carefully. >> why is it important? >> i think diversity in the workplace is an important thing. you do not how you are doing a must measure it. >> is the mckenzie institute release, companies that have more diverse management teams outperform companies that don't. goes to the bottom line of our economy and i wish my colleagues on the other side stop there assault on diversity, equity, and inclusion and work with us to grow the economy. >> the gentleman from wisconsin is now recognized for five minutes. you are navigating a difficult situation where we have had simulated economic policies from the biden administration, spending, infrastructure. that is also restricting economic growth. we have heard a lot about the

endgame which you have a cherub in your opening remarks. you noted that high interest rates are impacting business investigation. high interest rates are negatively impacting the housing markets. as we look at, i've heard from a wide array of stakeholders from those that are commenting on capital standards, the negative impact that would have on the housing market as well as the business community. the fact effect that it would have to invest in capital infrastructure and employment. does the broad diversity of voices who hold concerns concern you? >> i would say that i have articulated concerns and we are reading this comments. we are very much in the process of assessing what we need to do to address them. >> thank you. i appreciate your time on that. shifting gears lightly. the commission held an open meeting today to approve the final climate change rule. it is a significant regulation

that would have a significant impact on the economy. can you comment on what the fed thinks about the economic impact of this new regulation and their impact on inflation and employment? >> we do not comment on other agencies, sorry. >> we will review that if it is important place or you will review the data come forward? >> were not in the business of. >> they will look and make a careful assessment of budgetary impacts and that kind of thing. >> one of your two mandates is to maximize employment in addition to maintaining price stability. as you know, government hiring is accounted for a large share of total job creation. more than 600,000 public sector jobs were created last year. nearly 3 million workers. when you are examining employment data, how does the fed view the impact of the

public sector employment growth relative to private sector economic growth? in other words, how did the two data points factor into your assessment of how the broader economy is performing? >> jobs are jobs. we tend to look at private sector jobs to gain a better assessment. job creation is a better indicator of the private sector momentum in the economy. >> does the dramatic increase in the private sector number of jobs give you any pause or concern? >> i'm sorry if i misspoke. the public sector. >> the truth is the public sector was unable to hire at the beginning because wages went up a lot in the private sector at the beginning of the pandemic. the public sector cannot respond. there is some catch up hiring going on now that things are settling down and all. i'm not sure it is an issue that we were concerned about.

>> i will shift gears in my final minute just to talk a little bit to get your perspective on the macroeconomic development. they are having an impact on monetary policy, specifically as we think of a productivity boom, the data is too early to tell whether or not we are having a true productivity bill. how does the fed view the adoption of some of these new technologies, particularly ai as it relates to labor? >> everyone is looking at ai for that question and it's hard to say, actually. we've had a really nice productivity in the last year or so but is probably still very much affected by a post- pandemic factor that we are seeing. i think we need to see more to understand whether there is a longer-term. ai has the capacity to augment labor or replace labor. that is the key question. we really do not know which of the two it will do.

tons of money is being invested in it. it's likely to drive significant productivity. right now in technology but also, higher-level labor motility. a lot of people start companies during the pandemic. those are the kinds of things that add up to higher productivity over time. there is hope we will see productivity out of this. >> i yield back. >> will go to the last question are of the day. the gentleman from new york on mr. torres for five minutes. >> thank you, mr. chair. i have several questions about the complaint that i've heard about. i have an open mind on the subject. i want to hear your response to some of the argument that a been against it. first, the fed has repeatedly reassured the public that the banking system is capitalized. if the fed is advancing on the assumption that the banking system is undercapitalized.

how do you reconcile about a capitalized banking system? the assumption of an undercapitalized banking system. the purpose is to align us banks with the banking peers elsewhere in the world, by his the fed imposing requirements that are more stringent than those prescribed? why is the fed? the third question is how do you reconcile recommendation for standardization with statutory requirement for tailoring. standardization would seem to be in conflict or intention with regulatory tailoring. the fourth and final question, do you think could have the unintended consequence of reinforcing the trend towards shadow banking? which would mean less regulation, not more. is there a sense in which we are transferring risks on the regulated sector of the financial system to the

deregulated sector. i have bartered you with questions and i will give you the time you enter them. >> i'm good have a hard time reading my handwriting. i will start with the guests of the fourth one. i will give you that one. we've seen intermediation activity moving out of the related system. this has the risk of doing more than that. >> you testified and repeat reassurances. i address this in my remarks of the open board meeting. higher capital is always going to add to. there is a cost. identifying the right level is very, very difficult. hard to do it objectively. i have said for years that i thought that the level of capital in the u.s. banking system. i voted for all these increases. i think it is a very fair

question. the second one -- the concern about goldplating. >> gold plate. i said this my public remarks. we are exceeding the minimums with this proposal and we also exceeded what the other big jurisdictions are doing. that is the question. i will agree. >> the third is -- i think you more or less -- on standardization. >> standardization. >> congress passed a statute requiring. >> i addressed that in my comments too. i think you are right. we do need to take on of silicon valley bank as it relates to the smaller and large banks but we don't need to throw away all the tailing letters required by the law but also appropriate if were going to have a diverse banking system.

>> the collapse was largely a story about liquidity risk and interest rate risk. the focal points are credit risk, market rating risk and operational risk. what is your response to the criticism that the fed should focus its energies on addressing the forms of risk that were responsible for the bank failure rather than focusing on forms of risk that were largely unrelated? >> i agree with that. i would say we are working on a package of liquidity measures which is directly -- directly addresses the silicon valley bank situation. we've also taken a lot of supervisory actions with other medium and small sized banks that had deposit and a lot of real estate risk and things like that. we've been doing a lot on the supervisory section. >> as you know, the crippling cost of housing accounts for a third of inflation. one of the most powerful tools for producing and progressing affordable housing which is

financed for units of affordable housing. the banking system accounts for 85% of investments in there is a concern in its present swarm would diminish the availability and amount of affordable housing development. i'm curious. is that on your radar? >> yes. >> with that, i will leave it at that. thank you. >> gentlemen, healed that. that is the final question of the day. the chair would be done with a hard stop at 1 p.m. it is nice when we can honor our commitments. i would like to think chair powell for his testimony today. in which to submit additional written questions for the witness to the chair. the questions will be forwarded to the witness for his response. i ask chair powell, please respond as promptly. with that, this hearing is adjourned.