we will come to order. the tears authorized to had to recess at any time. this is the federal reserve's that are annual monetary report. without objection, all members have five days in which to submit extraneous materials for inclusion in the record. i will note at the outset, we have a hard stop at 1:00 p.m. to the observed. i see chairman powell smile. that's three hours. i will know recognize myself

for the opening statement. in june of 2023, the conversation in washington's concerning inflation shifted significantly. not because of the lectionary fire has been extinguished. from the most recent data available, food cost is up 21% as president biden took office. energy costs are up more than 32%. shelter costs are of more than 19% and you will pay 37% more for a dozen eggs in america today. as we said in january, people are still paying more for the basics of life and the prices they are paying are still high. and they aren't happy about it, as you know, it is our colleagues know. but according to the biden administration, they should be thrilled. in an attempt to score

political points, many in washington have decided the best strategy is to tell people what they are feeling isn't actually accurate. they claim biden onyx has brought it down, and their so- called rescue plan put our economy back on the right track. of course, we know the opposite is true since inflation skyrocketed soon after the american rescue plan was an act. which was predicted by several former obama administration economic officials. instead of working to solve the issues causing high prices, the administration is playing the blame game. some democrats have even trained fire on you, chair powell, blaming interest rate hikes, which were necessitated by democrats bending for the high cost and brazenly calling you to make cuts prematurely. it's highly inappropriate for wall makers to attempt to influence military policy.

chair powell, i have faith that you will not allow politics to cloud your judgment and the right to tackle inflation. as i have always said, you are a steady hand, and i believe you are committed to the federal reserve, as i might. just as you rejected the outside ushers of politically motivated agendas, i hope you will be just as attuned to the threat of politicization when the calling is coming from inside the house. vice chair michael bars so- called holistic review of requirements represent a concerning trend artisan proposals taking priority over supervision. this has real-world impact, as we saw one year ago this month when the supervision and regulation arm of the said was late catching up to the effect of the acceleration of interest rates of the banking system. americans were understandably shaken by last year's turbulence

. as we continue to monitor potential instability, including bank exposure to commercial real estate, it is critical that the fed keep its eye on the ball. this does not include enacting new far-reaching and ultimately harmful regulatory policy, though. as you know, members on both sides of the aisle on this committee and in congress have made clear that the proposal would be catastrophic for families, communities, small business is. regulators should withdraw it and start over. i think that's the proper course for something is deeply flawed as the current proposal. additionally, given that another significant proposal will ultimately have to fit together, they cannot we proceed with them as separate modules or using a cut and paste approach. but most importantly, the proposal is discarded or altered, i strongly urge you and other regulators not to finalize a long-term debt

proposal. instead, i would encourage you to stick to the task at hand and all of the data. the stakes are way too high to be politics over some policy. with that, you'll back, and i will now recognize the ranking member of the work committee. >> think you very much, mr. chairman. good morning, everyone. welcome back, chair powell. while i am pleased with the progress the administration of made to tackle inflation, we are not out of the woods yet. in fact, even though her mother my republican colleagues refuse to acknowledge this fact, housing is still the number one driver of inflation. based on the latest data, housing costs continue to make up nearly 70% of overall price increases, outpacing modest wage gains. we address the underlying housing supply shortage and

americans will continue to pay an increasing share of their income on housing. the affordability prices will worsen, and inflation will remain too high. with that said, it's hard to understand why republicans feign concern about the economy. they are unwilling to address the key driver of an elation -- housing. in fact, republicans of only put forward legislation that makes things worse for millions of americans, including moving legislation to slash funding for federal housing programs, including in rural america. this abysmal record of housing is par for the course for republicans. they have convened only six hearings on housing. on top of launching baseless impeachment efforts, censoring members, and pushing our government to the brink of

multiple government shutdowns. it is clear that republicans are too focused on drama and chaos to deliver anything to the american people. that is not how democrats roll. when i was chair of committee during the 116th and 117th congress, not only did we hold 55 hearings on housing, but i and my fellow democrats enacted 12 critical housing bills into law in the last congress alone. they helped stymie addictions, foreclosures, and homelessness, keeping millions of people safely housed during and after the pandemic, unlike republicans. we don't just talk about the issues. democrats make law. as house republicans continue to support, committee democrats are offering evidence-based solutions. affordable housing agenda is a top i already.

that's 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 housing crisis response act, the ending homelessness act, and the down payment toward equity act. together, these bills would create nearly 1.4 million affordable, accessible, and resilient homes, reduce housing costs and homelessness, and revived the american dream of homeownership for all. so when my republican colleagues are ready to get serious about our economy and inflation, democrats are ready to work with you to pass bills into law. in fact, tomorrow at noon, i and democrats and more than 30 housing advocates joined together in a press conference to share just how merchant ending the affordable housing

crisis is to the state of our union. so i invite all of my republican colleagues who say they care about the decision to come and join us. i look forward to discussing this critical issue with chair powell today. mr. chairman, you'll back my time. >> welcome, chairman powell. runaway inflation and interest rates still have americans reeling. and while the recent price increases have come down, the overall level of prices remain high. the toothpaste is out of the tube, and the average american family still is paying about $15,000 more for the same busy service is that they were purchasing just three years ago. so americans have suffered years of eroding purchasing power in their paycheck.

and while that's resolved in getting inflation back under control, i'm not pleased by the numerous recent unjustified was supplied and under analyzed regulatory proposals. the fed needs to withdraw and re-propose the irredeemably lot proposal, especially given that 97% of public comments across the ideological vectra expressed disapproval of the proposal. chair powell, i urge you to listen to the american people. withdraw the proposal and tell us today with the feds lands are moving forward. i yields. >> the chair now recognizes mr. foster for 1 minute. >> thank you, chair powell, for being here today. i read the monetary policy work from cover to cover due to an airline delay. the thing i got again and again is that things are fairly well recovered from covid and getting back to normal. ordinary monetary policy and fiscal policy will allow us to

satisfy. today, unemployment stays near historic lows, down to 2% year- over-year compared to 6.5% in 2022. the stock indices are hovering around major highs. growth continues to beat expectations, and the u.s. economy has added more than 13 million jobs since president biden took office. the gdp is back on the trajectory it would've had pre- covid. they've added nearly 800,000 jobs, employ more workers than any time since 2008. there's also the physical response that we engaged in and was appropriately tailored and a soft landing with insight. thank you. i yield time. >> today we welcome the testimony of jerome powell of the board of governors. as you know, you will be recognized for five minutes of the summary of an oral

presentation. testimony without objection, the written testimony will be stated for the record. chair powell. >> chairman mchenry, ranking member. i appreciate the opportunity to present the federal reserve's semiannual monetary policy report. the reserve remains squarely focused on our dual mandate to promote maximum employment and stable prices for the american people. the economy has made considerable progress for these objectives over the past year. while inflation remains above the objective, 2% is eased substantially, and slowing and inflation has occurred without significant increase in unemployment. as a labor market tightens and inflation is continued, the risk to achieving our goals have been moving into better balance. even so, the committee remains highly attentive to inflation risks and is acutely aware that

high inflation is a significant hardship, especially on those least able to meet the higher cost of essentials like food, housing, and transportation. we are strongly committed to returning inflation to 2% objective, or serving place stability to achieve a sustained period of strong labor market conditions and benefit all. i will review the current economic situation before turning. economic activities expanded at a strong pace over the last year. for 2023 as a whole, the product increased 3.1%, hosted by solid consumer demand and improving supply conditions. activity in the housing sector was subdued over the past year, largely reflect. high interest rates also appear to been weighing on business fixed investments. the labor market remains relatively tight with ply and demand conditions continuing to come into better balance.

since the middle of last year, they've averaged 239,000 jobs per month. the unemployment rate has remained near his were closed at 3.7%. strong job creation has been a company fight and an increase in the supply of workers, particularly along individuals aged 25 to 54, and a strong continued case of immigration. nominal wage growth has been easing, although the jobs to workers gap has narrowed, labor demand still exceeds the amount of available workers. a strong labor market has also helped to narrow long-standing this verities in employment and earnings across demographic groups. inflation has eased notably in the past year but remains above the longer run goal, 2%. total personal consumption expenditure prices rose 2.4% over the 12 month ending in

january. excluding the food and energy categories, core pcu prices rose 2.8%. a notable slowing from 2022. it was widespread across both goods and services prices. long-term inflation expectations appear to have remained well anchored as reflected by a broad range of surveys, household, businesses, and forecasters, as well as financial markets. we have maintained the rate at 5 1/4 to 5.5% since the meeting last july. we've also continued to shrink our balance on the risk case. the restrictive stanza monitoring policy is putting downward pressure on economic midi and inflation. we believe that our policy rate is likely at its peak for this timing cycle. if the economy evolves broadly

as expected, it will be appropriate to begin dialing back restraint at this time this year. the economic out date is uncertain, and the ongoing progress to our objective is not short. reducing policy restraint too soon or too much could result in reversal of august we have and inflation and ultimately requires even tighter policy to get inflation back. reducing poly restraint too late or too little could unduly weaken economic activity and employment. considering any adjustments to the target range for the policy, we will carefully assess the incoming data, the evolving outlook, and the balance. committee does not expect that it will be appropriate to reduce the target range until it has created confidence that inflation is moving steadily towards 2%. we remain committed to ringing inflation down to our 2% goal in keeping our expectations well anchored.

restoring price and stable prices over the longer run. to conclude, we understand that our actions affect businesses in communities across the country. everything we do is in service to our public mission. we have the federal reserve will do everything we can twitch max ointment and price stability goals. thank you. >> thank you, chairman powell. i should know this at the outset, this is your 25th testimony before the congress as chair of the federal reserve. we thank you for your service and your commitment to congressional oversight. very much appreciate it. i will not recognize myself for 5 minutes for some questions. let's begin with what is top of mind. two issues that are top of mind with the fed. with the michael bart proposal on capital and interest rate.

the lens of a political year falls heavily on all government, all parts of government. there's a lot of debate about the past three years of high inflation and the impact on american families, and now that inflation is ruth leaving, there's been a great deal of speculation about when the fed would cut rates. some say there's going to be a lot of rate cutting this year. i would say not. what say you ? >> i say that really it will depend on the economy. our focus is on maximum employment and price stability, and those are the things we will be looking for. i can go further if you'd like. >> at what point will the fed be forced to cut rates? what kind of data was .2? do you have any updates there? >> what we said was that --

headline inflation has moved down more than three full percentage points down to 2.4%, as i mentioned in my remarks. we want to see a little bit more data so that we can become confident so that we can take that step of beginning to reduce policy rate. a very important step. because of the strength of the economy and the labor market and the progress we have made, we can approach that step carefully and thoughtfully and with rater confidence. when we reset confidence the expectation, as we will sometime this year, we can begin dialing back that restriction on our policy. >> lets pivot to regulatory policy. did you know there been serious concerns expressed on both sides of the aisle and across america and across the industries about the proposal that vice chair michael barr

has proposed and the fed is taking up. the concern is on both process being how that opposed rule was analyzed and developed. the general concern of the lack of economic justification for these actions, and -- but also on the substance. the proposal goes much further than the committee recommended on capital requirements, putting us at a great disadvantage internationally potentially. my first question is on substance. is the fed listening to these comments? they have been nearly unanimous in opposition. is the fed listening to these comments on everyday americans? and what is the status on rulemaking and what is the plan going forward ? >> you are right. we have received very substantive comments as well as

a quantitative impact study we put out. we got those responses in mid- january and we are carefully analyzing them. we had asked for very specific details, and i'm happy to say that we did get that. so we are just now reaching the stage where we can begin to make decisions. we haven't really made any decisions yet. but i think i can say a few things. first, we do hear the concerns. i do expect there will be broad material changes as we move along. i am confident that the final product will be one that does have broad support, both with the fed and in the broader world. as far as process is concerned, we are really not at the stage of making decisions about that. that's down the road. i will say, the question we get is re-proposal. and we haven't made that decision. if, when we get to that point,

that turns out to be the appropriate thing, we won't hesitate to do that. >> you would not rule that out at the stage of the game? >> not at all. i think it's a very plausible option. >> okay. and there's a lot of concern about the inter-way between different hearts of the world. if you change one, what does economic analysis look like for the new proposal? so it's good to hear that they will do a traditional role of building consensus around substantive changes. and that is your intention. >> that is right. i said this would be a thoughtful, deliberative process. it's more important that we give this right then doing it fast. we understand that. this is important rulemaking and this would have potential implications for the economy and people we serve. when you take the time and do it right. >> thank you. ms. waters is recognized for

five minutes. >> chair powell, i want to talk to you about housing. but before i get there, the issue of mergers. last week i delivered a letter to you and the doj expressing my strong concern about the lack of progress you have made in updating the bank merger review procedures. this is critical now, that we just learned of another mega merger involving capital one and discover, which would create the sixth-largest u.s. commercial bank in the credit card market. for far too long, experts have raised the law that there is a rubberstamping process of bank mergers and virtually all applications are approved. all the while, unbridled market consolidation poses great risk to consumers and entrepreneurs. what is the status of your

updates to the merger review process? and does the fed 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 merger practices. we are looking at that, and considering. i think on the potential merger that you mentioned, we haven't received an application. so there's not really much to say yet. when we do get that application, though, we are going to evaluate that merger as always under the factors laid out under the law, and that is our commitment. >> so you do believe that your bank procedures are ready to do the work that is necessary to evaluate this possible merger? >> i do.

and are you supportive of an organized community hearing on this merger? >> i haven't talked about that with anybody. i will say this, that is not a conversation we have had yet. we literally don't even have an application for the merger. >> thank you. so turning to the national affordable housing and homelessness crisis. we see steady increases year after year in home prices and rent costs. indeed, more renters and homeowners are now spending more of their income than ever on housing costs. they continue to be a primary driver of inflation. do you think they have sufficiently emphasize the role that it plays in keeping us from you 2% inflation goal? you think it's reasonable that

policy can accomplish this goal without a fiscal policy response? if you do, how long will it take to get there? >> housing services inflation is one of the three components that we look at that make up the core piece ee index, then it has been coming down from a couple years back. i think the inflation and good prices are actually coming down a bit. housing services inflation, you can see currently entered into leases that turnover the increases in our forecast and everyone's forecast. i think services inflation comes down. >> is very methodology used to assess how the cost is an indicator of inflation is imperfect? namely because it considers cost based on both new and old

risks, including owner occupied housing. this results in sale data and housing costs typically do not change unless the lease is up for renewal. to address the imperfections, the bureau of labor statistics and cleveland fed stated an improvement based on new lease risks, referred to as new tenant rent index. as the fed incorporated this new indicator it was economic assessment? if not, why not? >> we are well aware of that, and as i started to mention, that's the reason that marcus rent are moving at a much slower pace. and that absolutely plays a

role. >> thank you. i yield back. >> the vice chair, mr. barr. >> ron vice chair. >> sorry. mr. hill is recognized. >> thank you, mr. chairman. i want to welcome you, chairman powell, and i want to pick up where chairman mchenry left off on his conversation. you made a good point saying you are not taking the whole concept of re-proposal off the table as you review the analytics. and you will discuss the interactivity of that rule with other rules. if you were to re-propose the in game, with the federal reserve delay the long-term debt proposal that is on the table? would you agree that the agency will not finalize this long- term debt proposal until banks have a better understanding of

what their capital obligations under basil three and game might be? >> we haven't made the first decision yet, so i couldn't say definitively. but that's a question we have been asking ourselves, is what would be the implication for long-term debt. >> is the fed considering changes to the requirement for regional banks to issue long- term debt? right now, it is slated to be issued at 6% of the risk awarded asset. an abundance of caution in case there needs to be a resolution. we know the logic for it. but as i understand it, the think required at the bank level -- that seems redundant to me. have you considered changing that in your discussions? >> that's another area where the comment period ended a little while back. so once again, we are in the process of evaluating the comments. there will be a thoughtful, deliberative process around

that. we welcome any comments on these types of things and they have very important invocations for the banks that are affected. we want to make sure we understand the rackley so that we can evaluate what a file rule should look like. >> let me turn to the monetary policy outlook. as the chairman noted, consumer prices are 17% higher for american households since president biden was inaugurated back in january of '21. in spite of that 17% increase in cost, real wages have actually fallen 2% over that period. so there's no doubt that inflation is the biggest issue facing american households. in my view, there's three principal calls. we have supplied disruptions, unprecedented fiscal policy. it was described in a recent interview as onset animal. but we also think the federal reserve, and many people on this committee commented,

should have produced accommodation after the pandemics tuner. one of the things coinciding with that, which is what i wanted to talk about, is that in august of 2020, a flexible average in nation targeting framework, right in the middle of a pandemic, which many of us don't understand why the fed would take the decision then, but it would give you flexibility on the two percent, saying that that could allow inflation to rise above 2% and stay there above that level for some time. because there are such challenges in getting the price level to 2%. that was a major shift in the approach. do you think in retrospect now what we witnessed over the past four years that i was a mistake in hindsight, to change that framework? is it under review? >> we said we would do a review on a five-year basis, and that means he will be starting that review toward the end of this year.

so we really haven't started yet. but the bigger question really is, that could change in the approach and it was really based on the fact that we had very low interest rate and very low inflation for a long period of time. policy is always really close to the affected lower boundary, so there wasn't any firepower for bank. it was a way to keep inflation expectations of 2% and not have them slide down. now we've entered a different period. the pandemic really may have changed that. we don't know that yet, but that's a big question we will be asking ourselves, is the effective lower bound to be thought of in a different way now? we know that has ramifications for our framework, but we haven't begun review yet. we will begin late this year and probably end next year. >> thank you. >> we now go to the gentleman from new york for 5 minutes.

>> thank you, mr. chairman. thank you, chairman powell, for being here. 2019-2020. the entire world was down with the covid pandemic, right? and that changed a lot of things, not just for the united states, but for the entire world. and it affected the economies of countries is that not also correct? and supply chains were disrupted? in fact, i can remember many americans and people around the world could not get toilet paper or paper towels and some of the basics. and so the cause of supply and demand skyrocketed, causing inflation. not only in the united states, but basically all over the world. is that correct? >> that's correct.

>> therefore, the feds had to do something. at that particular time, you could just go back and act like the pandemic wasn't there. you had to do something to make sure that we were able to get through the pandemic. is that not correct? >> yes. >> now we are at that point where we are about to get through this pandemic and we can look at the rest of the world, what they did or didn't do at that time, and what we did at that time. as a result of that, three years post the pandemic, when you look around the world, i think are correct in what you dated. that, by most accounts, our economy is doing well. in fact, i would say our economy is doing better than most of the other countries in the world. would you say that is correct? >> i would. >> i would say then that some of them may have looked at the policies that we put in place thereafter so that they could get out of it and they could have a labor market that is strong when the unemployment

rate is nearly 50 year low. as you stated, inflation is now also coming down faster than anyplace else on the planet. is that not correct? >> i think that is right, yeah. >> and i think that you also recognize a mismatch between the strength of the economy and the fields. i think ranking member warner touched on one of those issues of housing, which is now -- we are still trying to get that under control. i think that the ranking member has some ideas of how we can do that, and that may be something that you need to enter to get on the inflation rate. and the other would be the commodity market. because food is high. that is something else we need to get in control, is that not correct? and let me just ask this -- you say that there's a connection, for example, between other

areas of the world like russia's war against ukraine and the turmoil in the middle east, and the economic pressures that the united states feels. does that not also go into the reason why the commodity can still be higher? >> certainly, the war in ukraine causes commodity prices to move shortly. >> what would the connection lead you to believe that there is an urgent need, i would think -- and we are running out of time this for us to do everything in our power in congress to support ukraine so that we can make sure that that and other strategic partners, that we can help the commodities market, and bring in food prices down, and we can pass certain things this would help ukraine in the united states congress. is that correct?

>> is rickets outside of our jurisdiction. i wouldn't have an opinion on ukraine funding. >> but if we had more that was going through, that generally just helps bring the cost down. the cost is higher because of the disruption in the black sea that happened because of this war. that would help break the walls down. that is not necessary the policy just for the united states, but that's the policy and we need to make sure that we do something to prevent that. if we really are serious about bringing inflation down. is that not correct? >> a full supply of grain would help with commodity prices. >> instead of us playing politics with this and asking like it's your fault or anyone else's fault that we have to go and do what we did because something unprecedented happened in the pandemic. what we did was say the economy

then, knowing that the problems that we have now, and now we are recovering quicker and better than any other country on this when it is a result of your policies. >> the gentleman from oklahoma, mr. lucas is recognized for five minutes. >> thank you for testifying today. i cautioned against raising capital requirements to keep prices of food and power stable for tumors. at the time, you said that was a very specific concern and you weren't sure the proposal would even address this. and in fairness, that was before the proposal was officially published. unfortunately, we now know that the proposal does impact commodity. and in fact, they are among the most penalized financial product. i very much appreciate your

comments and responses to chairman mchenry about the nature of the overall proposal. congress wanted end-users to be able to secure their hedges without posting margin. it keeps derivative markets affordable. but some of these types of transactions, users will face 10 times the capital work wire meant. chairman powell, make me feel a little better. ease my concerns here. will the fed work to fix this? >> let me start by saying i want to echo the fact that our commodity markets in our capital markets are a huge national asset and have been functioning well and with as little friction as possible. i understand now that what you are referring to is things we did for increasing capital requirements for derivative activities. that's an area where we are aware of the can turn and are taking a very close look at.

>> i appreciate that. i was a member of the don bree conference committee where there was bipartisan support to not disadvantage end-users -- farmers, ranchers, small businesses. this had broad bipartisan support than and still does today. unfortunately, the fed would undermine this long-standing work done by congress. i like to enter letters into the record, mr. chairman, that discuss the detrimental impact from the joint farm bureau federation, the national cattlemen's association, among seven others. next, the joint energy trade association for the american gas association and four others. and lastly, a number from the american association and cooperative association. >> without objection. >> thank you, mr. chairman. i would now like to focus on how the proposal is set to dis-

incentivize banks from offering services. they offer the clearing as a way to reduce risks in the system. the number of banks that can clear derivatives from end- users has reduced over time, making it harder for end-users to find a bank to offer their service. there are some estimates that the feds proposal will increase capital for this activity by 80%. i'm worried this will make it even harder for users to clear the benches. this also comes with the s.e.c., our friends at the securities exchange commission, has just finalized a ruling that will increase clearing and pressure markets. this will have a real impact on liquidity. not just in commodities. the $26 billion treasury market. will you work with the ftc to address this problem? >> again, i will say that we

are aware of those concerns, and also to make sure our capital proposal remains strong. >> the strength of central clearing is entirely dependent on banks willingness to participate, and problems with the boswell in game warrant full re-proposal. give us time to appreciate the consequences, and there are real consequence to that. and with that, mr. chair, i yield the rest of my time. >> the gentleman from texas, mr. green, is recognized for 5 minutes. >> thank you, mr. green. and welcome again, mr. powell. i always enjoy hearing your commentary. as you know, recession and inflation. these are buzzwords, and they

are used under circumstances to cast a dim light on perhaps the fed and others who are working to end these troubling circumstances we are dealing with. are you now at a point where you believe that there will not be a recession? there was much talk about recession, and many people worried that we would find ourselves having to negotiate our way 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 so far this year's continued solid growth. my expectation and that of other forecasters and colleagues is that we will see continued growth at a solid

pace. i will say, there's no evidence or reason to think that the u.s. economy is in some kind of short-term risk of falling into recession. having said that though, there is always a possibility -- in meaningful possibility that the economy will fall into recession. i don't think that possibility is elevated at the current time. >> i appreciate you saying this. at some point, we want to mitigate the great deal of fear associated with the term recession. next point, the december mc projections showcase a slightly lower unemployment rate and slightly higher gdp. it remains likely. are you of the opinion that we are headed to a soft landing?

>> let's just say that what we have seen so far is an economy that is growing at a solid pace. we are seeing a labor market that is still tight, still strong. but the labor market is coming into better balance between supply and demand, and inflation has come down sharply it's the middle of last year. those are the conditions we see. they are very attractive conditions and we are trying to use our policies to keep that growth going and that labor market strong while also achieving further progress on and laois and. that's our goal. and do i think there's a possibility we can achieve all of that while keeping the labor market strong and the economy growing? yes, i believe there is a possibility and need of what we are trying to achieve. >> a soft landing can be difficult to identify. we can possibly have a soft

landing and miss the point at which the landing took place. how do you define the soft landing as such that a layperson would understand that 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, we want the labor markets remain strong. 3.7% unemployment is pretty near historical lows. we want inflation to continue to move down closer and closer to the two percent objective. we made quite good progress on that over just the past year. we want to continue those conditions. and i don't want to put a label on it. other people can do that. but i would just say, we are using our tools to keep a strong labor market and strong growth while, you know, making further progress on getting inflation down to 2% for the benefit of the public. that's the economy we are

trying to achieve, and i think we want a good pass so far to be able to get there. >> i concur. but i would ask this, my last question. will there be some announcement at some point that we have had a soft landing? because to have people who are continually indicating that we are not having a soft landing, the possibility of a recession -- will there be some official statement that will give people some comfort? >> i don't think by us, no. we're just going to keep our heads down and do our jobs and try to deliver what the public is expecting from us. we wouldn't be declaring victory or anything. >> the gentleman's time has expired. >> the gentleman from texas is now recognized. >> chairman, welcome back. i think we enjoy this. i hope you do, too.

i know there's been some trepidation about all the things that are available to answer. i learned a long time ago on the campaign trail, every problem can be solved on the campaign. the reality is a bit different. welcome back, despite all that. looking at that monetary policy report, march 1st, 2024. as i review this, i'd like to focus on the term that i was say, high prices are here to stay because what i have heard you say today, and what this report really goes to, you got everything under control but we are going to keep the high prices. and i think the high prices really take a toll on the american people, as you are hearing from our colleagues. no matter whether that be republican or democrat. page seven of your report -- it says well current services --

core service price inflation has been slowing, but remains elevated. it does. labor costs, as you know, and the energy cost is, are a driver to your monetary policy. the question that i have is, because you began referencing policy. two weeks ago or so, the president announced he was going to slow down the gifting of opportunities in texas for natural gas to be able to continue. and this in texas is $1 trillion answer problem to us, because if we do not constantly go find through these new finds, but also through the permitting process, we are in trouble. but we are also putting in trouble our contract that we

have with germany and a lot of other countries. this is going to mean also 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 continue this and see the american people win. you talk about policy. what is your advice to policy about this and what the administration is doing? >> we have significant and important responsibilities, but we are really not responsible for energy policy and try to avoid commenting -- >> but it has a huge impact on this report. it arbitrarily keeps prices high. it arbitrarily means that business is not -- while they are making money, while households people do by that, it is diminishing their long-

term advantages to make progress. so you are just going to leave that alone? >> is really not appropriate for us to comment. if i am commenting on energy policy, i should comment on everything. we take suggestions by the legislature and by we are not in charge of second-guessing. it's just not our job. >> if you're not going to second-guess them, i will. i believe the energy policies that this president and the democratic party has warded are causing a huge boom in prices staying high. they will not come down. a boom in attacking the energy interest rate jobs that are associated with this, foreign policy as it relates to contract that we have signed with foreign countries, giving

up the natural gas market almost entirely to qatar. it has a huge impact on whether we are going to keep prices high or control these prices. it has a huge impact on your monetary report about how many houses we built, how many jobs we build, whether we have jobs in place, whether we continue to have more jobs available than workers that are there. because overregulation is having a lot to do with the nervousness, not only on this panel, but also by the american people. it would be my hope that you would pass some sort of memo. you have no opinion, but i want to see what the impact is. you for being here. i yield back my time. >> thank you, mr. chairman. chairman powell, thanks for being with us 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'm not celebrating because the american consumers are still feeling the effects of high prices. we just haven't caught up to prices in some and insist. i think it would be fair to say that observers would never have predicted the conduct of this economy. you yourself set it in the final press conference in 2023 when you said a very high proportion of forecasters predicted very weak growth or a recession. not only did that not happen, we actually had a very strong year. so i want to acknowledge that and acknowledge your commitment to independent monetary policy. because i am still burdened with this idea the truth and facts matter. i want to point out, especially having listened to my good friend mr. sessions talk about the energy market, impact matter. we are producing more oil and

natural gas today than anyone else on the planet. i could bend my entire five minutes sort of acting out fact. the fact i want to point out here, and this comes right out of the room words, is the premise that inflection is joy biden's fault, first is faulty because half the fiscal stimulus that occurred in the face of the pandemic happened under the devious president, donald trump. and it has faded. this report makes the case and more goods prices have been declining as supply bottlenecks ease and import price inflation falls. mr. chairman, i don't want you to comment on that because it gets a little bit lyrical, but i think it's important that we keep some foot on that. i do want to ask you a question, though, mr. chairman, because i always worry about risks that we see and risks that we don't see. and i want to see the remainder of my time to talk about risk

you are very conscious of, which is the overhang in the commercial real is a market. you know the financial stability oversight council identified those commercial rules as perhaps the most salient risk to the identified real estate as, perhaps, most salient risk to the financial system, x trillion dollars roughly in loans, half on bank balance sheets. in a 60 minutes interview, you characterize distress as sizable but manageable. do you still feel that risk is manageable? do you feel like you have the visibility and the transparency and tools to address it? it makes me nervous because this has echoes of 2008/2009 when vacancy rate were declined relatively rapidly. we are not saying that right now. how do you feel? does that risk continue to be

manageable and do you have the tools to manage it? >> i would say yes to that. i think it is manageable and we have been working hard to manage it for some time now. what it really is is a lot of downtown real estate, where there is too much office-supply because a work from home. and also the downtown retail that is no longer as profitable. things like that are at the heart of it we have looked at banks that have significant concentrations and we have been 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 the big banks, it is medium and small sized banks that have these higher concentrations we will work through this for several years. the idea is you have to have enough capital and liquidity and a plan to take the losses that you are probably going to take. that is what we are

doing. we are very active in this space with -- >> let me ask you about that. sorry to interrupt. he asked about that, silicon valley wink, agreed is irresponsibly who put so much on deposit. the fat also had some self- examination because the examiners and the supervisors, quite frankly, were not doing what they should have been. we might be forgiven of being skeptical of claims of being on this. what has changed in the context of silicon valley bank that gives you the confidence the supervisor and the examiners will be on top of this? >> i see it with my own eyes. frankly, there is a risk we would overreact to something as significant as that. it is not likely would not have reacted very strongly 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 small sized banks, principally, on this. i am confident that we are doing the right things there. and i do believe it is a manageable problem. if that changes, i will say so. >> thank you, mr. chairman. >> the gentleman from missouri is recognized. >> thank you for being here today. i like to associate my remarks with mr. hill's remarks with regards to the fdic long-term debt requirements but are based on assets. i think it is a thought out proposal and hopefully your position can be able to advise them and guide them this will be held up until we actually get a rule. in october 23 three the boat -- were issued a proposal for regulation ii. this is concerning. given the data from both the geo a and fed said that it has

harmed access to free checking and other baking service for the countries poor citizens but yesterday and it is the secure payment which prohibit a rulemaking until the fatah, does impact of the rule and complete the quantitative impact analysis specifically as it relates to making services for low income americans and reports those findings to congress. understand the fat acted because you feel you have a fiscal obligation but i urge the board to exceed with extreme caution with price control proposals especially since the first iteration was harmful. chairman powell, knowing of the hardship -- does it give you any pause to continue down this road? >> this rule is out for comment. we extend the, period to may 12th. we will evaluate them carefully. and make an assessment. the law does assign as a

specific job, which is to assess whether an interchange fee received by an issuer for processing a transaction is reasonable and proportional to issuer cost ? this is the obligation that congress has bestowed upon us. not something we thought we thought. that is our obligation under the law and we do not know what else to do except to keep doing it for as long as that is our excitement. i think the concerns that have been raised will be things -- >> hopefully, you will study this and understand from the previous types of rules along this line, they were very detrimental to a lot of low income folks. as you know the price reductions that were promised, the prophets went to the largest retailers rather than go to the consumers, as they were talked about 98% was one of the studies that show the retailers kept all of the money as they were telling us it would happen. i am very concerned about that.

what is the legal basis for updating regulations? you believe there is something in the law that says you need to be doing this updating all the time or should you study it before you propose a rule and make all of these things more appropriate? >> i think a reading of the law it is not something you do once and leave it there. it is supposed to be reasonable and proportional to certain identified issued or cause. the implication being there if the cost changes, 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. we do quite a bit of work and we will review the comments and the data that we get. >> one of the things i hope you consider is that even though it is supposed to be $10 million

and up, the stuff rolls downhill. the smaller banks, community banks are also filling effects of this. be sure and consider that when you start thinking about this. i appreciate that. one of the things that i had two different foreign bankers in my office. one of them brought up the subject to me, which is concerning with regards to artificial intelligence and impacting financial institutions and this country and our braking system. i said, think about this for a second. you find some individual who is a well-known individual, perhaps david ramsey, lou berg, someone has credibility. and suddenly see artificially produced advertisement or facebook post and this person says, we have 100 banks and may have a problem today. the individual did not do this. it is artificially produced. i've seen commercials where you cannot tell the difference between the individual and the real thing. we have come through the silicon valley situation. if you have real-time payments

are transferring money and you have people scared to death by some well-known individual artificial intelligence that i can tell you, china is watching this like a hawk. they are ready to pounce on the situation i have bills that would solve the problem. do think there is issues here we need to look at ? >> i think we are very focused on a.i. , like many government agencies and law-enforcement agencies in particular. it is very challenging. you paint one picture. >> the gentleman's time has expired. >> thank you. >> we will now go to the gentleman from texas, ms. garcia . >> thank you, mr. chairman. chairman powell, thank you for being with us this morning. it is always a delight to have you. the february congressional budget office report estimated that the u.s. economy will grow an estimated $7 trillion over

the next decade, thanks to the surge in immigration, creating a larger labor force. immigration also increases demand for goods and services. i know you mentioned in your report that the growth during covid was held down due to restrictions in covid and restrictions of immigration. can you detail how immigrants have been fueling our national growth? did you consider this report from the cbo in this current report? >> i am very familiar with the cbo report. i have read the demographic projections and economic projections. i do understand what they did. >> you do agree with a $7 trillion growth in the next decade? >> i have no judgment on that. i have not tried to make a parallel assessment but i am familiar with the assessment. they are saying more people

working, bigger economy. it makes the economy bigger. it is just arithmetic. if you say that you had a couple million people to an economy and a percentage of them will work and they will be more output. that is what they are showing. i just want to be very clear. we do not make immigration policy. we don't comment on immigration policy, indirectly or directly. >> i am not asking you to do that. i am simply asking if you agree that the immigration surge has added to our strong labor force ? which is necessary. i think you said that we expect a continued growth and solid pace rain to be able to continue on a solid pace, then we need that labor force, would you not agree earmark >> last year, we got a big increase in workers. it came from two sources.

one was participation increased from people who are already here . in addition we got a certificate increase in immigration. many of those people take part in the working economy. there was a big increase in labor supply that will have increased output. it will have made more people -- will have all kinds of economic effects. i'm just reporting the facts. i will not say anything is needed for the future or policy indirectly or directly. it is reporting the facts to say that immigration and labor force participation both contributed to the very strong economic output that 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. that is a job for the cbo. that is precisely what the congressional budget office does. >> the other question, did you

consider that cbo's assessment that if it rose in the next 10 years would be $7 trillion and about $1 trillion in added revenue. with that considered in this report? that was the february report. and this is through every 29th. >> the answer to your question, tenure growth protections by cbo do not have big implications or any implications for the current stance of monetary policy. i will say that the immigration that we saw was a notable factor of the 2023 and 2024 economic outcomes. of course, we are aware of that. it plays a role in thing about the policy and economy. >> related to that, i know the last time you were here, you and i talked about diversity -- diversity and inclusion efforts

both at the fed and i applauded you and the president for his appointment the doctor. i expect to visit with her this week. what other strategies and programs are you using in the fed, not only here but in all the branches to ensure that there is diversity and inclusion? >> in terms of intake of people, when we go to hire a new -- when reserves banks go to hire a new president, those processes are focus on having diverse applicant pool. you see the results of that more and more over the years. we do not have any role in appointment of governors. that is not our job. the administration does that. >> internally, we are focused on having an open and inclusive place to work and also in hiring we work hard to have diversity. >> the gentleman for michigan,

mr. huizenga, is now recognized for five minutes. >> chairman powell, good to see you in person. i have to make a comment here. it is stunning to me that equating 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 legally able to work ultimately, it will fail. that is not a strategy, to my colleagues on the other side. just ask any farmer who will have a regulator come in and find them for employing people who are not legally allowed to be here in the country. that is one of our greatest fears. that is a fallacy of growth with in this economy that is not sustainable. chair powell, last fall i sent vice chairman barr a letter over my concern with the governing products and services that will have on consumers

printed this morning, there has been a fair amount of time spent on this. the number of pending or final rules is just staggering. regulators finalize new rules from community rest investment acts, the fed is looking at reg ii, which would unintentionally undermine recent significant progress in bringing low and moderate income consumers into the mainstream banking system. yesterday, the cfpb unveiled a rule that would cap late fees for banks. i just literally walked out of a meeting with my credit unions, who are 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 roles in a vacuum we need to consider the total impact and full scope. i will ask you a question that i have asked some other regulators.

how much do you, as the fed, consult with other agencies on their own rulemaking agenda ? you coordinate or talk? >> i do not leave that area of our business. i know there is a lot of talking. coordination, i'm not sure there is coordination. >> we are in government, there is a lot of talking. let me ask it this way. when a rule is finalized under another regulator, are you mandated or have any 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 it makes sense to do that. >> we generally have some sort of review of that >> i don't think there is a formal review. >> i have heard that elements overlap with the federal annual stress test. what are you going to do to address that overlap?

>> we are in the middle of the beginning of designing what to do about basel three. part of that may be the interaction with the stress test. i don't have anything on that today. that is an issue. i do want to touch on the bank failures of last year quickly. do you think that the banks that needed the government bail out lacks sufficient capital or was it more of a management problem? >> with silicon valley bank it was not really -- could they abuse more q market they were raising capital. it was a capital raise that they announce that trigger the run. you could argue they need more capital. i would not say that is the proximate cause. it was a funding structure that was all about too much concentration. >> i'm asking the questions that many are very concerned

these failures are being used as an excuse to lay the capital standards across the board. because the s.e.c. just released is climate disclosure rule this morning, i will touch on the climate related question for you. fsoc chair has stated that climate change is an ex- attentional fred presumably a threat that is x essential facts, banks and financial institutions of all sizes, why has fsoc agencies, including the fatah, limited their guidance on climate related risk only two large financial institutions? why not everybody? >> well, it is a new thing. >> it is a heck of a new thing >> we are not climate change policy makers. >> minor is the s.e.c. >> we are starting this very carefully.

institutions are already doing it by the way. they are doing and remain active internationally, they have to be doing it. we started with them because they understand it. imposing it on smaller banks is not something i am for. >> the time has expired. the lady for michigan is recognized for five minutes. >> thank you, mr. chairman. thank you, chairman powell for being here. you girth the federal reserve report that compensation incentives contributed to silicon valley's bank failure? >> i'm sorry. >> the april federal reserve report, it said that compensation incentives contributed to the silicon valley bank's failure. do you agree vacuum >> it is the best her teary factor but it probably has something to do with it. that is no? >> that is very small. >> so, it did. you really appropriate rules on incentive compensation could have reduce the likelihood of the failure? maybe? if they did not take all --

>> i do not think so. i don't think it is a first order question for silicon valley. a lot went wrong barbara >> they actually blame you guys. they blame the oversight, even though they did not respond to your correspondences. we took our medicine. >> do you think it has something to the fact that section 956 of the dodd frank rule has not been finalized by you? >> no, i don't renew you don't make it is the reason?, you know, i don't. >> you don't think it is because you will make money off of the failure? you don't make money drove them to do what they dated? >> i did not say that there is lots of -- >> they made money from it. it was a lottery for them? >> incentive compensation arrangements were at the heart of silicon valley bank failer, note. >> do support rulemaking for executive compensation? >> i know that the --

>> you don't? >> i am sorry? >> you support robust rulemaking for executive compensation? do you believe in section 956? >> section 956 is the law. the agencies are looking at doing something it has been 12 or 13 years. it has been hard -- i lived through the last episodes. >> do you believe in a robust rulemaking process for executive compensation? >> i do. >> great. that is awesome. will you commit to helping finalize the dodd frank section of 956 this year? >> i would not say that. >> it has been 12 years. you played a role in the bank failure. >> if i can answer. >> you don't want to do it this year? i am being serious. you are saying, no. >> if the member will allow the witness to answer the question. we have had a good day and the gentleman is trying to answer

the question >> i would like to understand the problem we are solving and see a proposal that addresses that problem. >> okay. do you believe people should profit off of bank failure? the executives that made those decisions? >> no. >> they should not profit? >> executives who are responsible for a failed bank should not profit from the failure, absolutely not. >> they get to walk away with compensation based on their failure? it is true, it happened. you make you are asking about a different rule. that is something i know you have been looking at for a while. that is certainly an appropriate thing to look at. >> it will continue to happen. it does not have to be yours but sure the heck could have helped here if they knew they were going to walk away -- if they could walk away with not the bonuses, the compensation been they made money, a significant amount of money for their bank failure.

last question, do you leave the impacts of climate change pose a risk? have you been talking about that more? >> i certainly believe that climate change is real and poses risk over the long-term. >> there have been some that say higher interest rates actually makes it more difficult to build out the renewable energy projects and other investments required to prevent climate impacts. do you believe that to be true? >> i believe that we need to do our job that you have assigned us, which is maximum of limit and price stability. we do it their interest rates. it is not our job to consider the effect on climate change. any effect on climate change would be minuscule >> last question, who do you see as the major winners and losers from high interest rate in terms of income groups, age groups, and racial or other demographics?

>> the point of high interest rates in the current environment is to bring inflation under control. the people who are hurt the most by inflation, as you know, are people who are on a fixed income. they are in trouble when the cost of transportation, food, and energy. when those things go up they do not have financial research to deal with it. we are accountable to provide price stability to the american people. those people benefit the most overtime from stable prices. >> we will go to the gentle lady from missouri, ms. wagner. >> thank you, mr. chairman. i thank you, chair powell, for your service. i want to associate myself with the comments from my colleague mr. himes. i am concerned that real estate exposure . i do hope that the fed is doing everything he can to ensure the exposure that these banks have will continue to be, in your words, manageable. this is a looming crisis given

the workplace changes and dynamics. chair powell, in remarks on bloomberg, larry summers, former treasury secretary during the obama administration stated -- i quote, it would be much more productive for our central bank 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 arguments about various kinds of capital charges on the largest banks. do you agree that 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 on commercial real estate. i think we are doing that. >> i hope so according to your semiannual report the median members on your monetary policy committee estimate that your target overnight interest rate

will average 4.1 in 2024. does 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. economic projections show a medium -- this is in the december this is now three months old. it showed three rate cuts this year. that would be 75 basis points. three quarters of one percentage point for you recording next year's numbers. that was through 2025, i believe. >> are you anticipating that there would be more cuts coming gimmick >> the way i would say it, we are making economic projections. we write down a path of growth, what happened in labor market and inflation. what is going is the appropriate

monetary policy. appropriate interest rates. we expect inflation to come down on economy to greek -- to keep going. it will be appropriate for interest rates to come down significantly over the coming years. what will happen -- it is not a plan. what will happen is actually what the economy needs. it will do something different from matt. that is what actually will happen. >> 15 members of congress, including myself, rating member sherman, chairman barr sent a letter to the regulators regarding the impact that bosa will have printed the letters highlight critical areas of our u.s. market including securities underwriting, and derivatives that will be severely impacted by the basel proposal. this was also a common theme represented throughout the, to file on the basel proposal,

over 95% of them. considering that 75% of financing in the u.s. is done through our capital markets, which are the deepest and most liquid in the world, why would the fed continue to pursue this flawed proposal instead of repurposing a rule that would not have such a drastic impact on the u.s. economy? >> in fact, the capital market concerns you raised are among those that i have raise myself in our open board meeting we put this up for comment. >> you said you wanted broad support. there is dissent among some of your governors, the fdic and others. how are we coming on this? >> we are working our way through the comments. we are coming to the point where it will be appropriate to begin to evaluate what changes are appropriate. i think those changes will be brought and material. that is where that is. we have not made any decisions

yet. >> in my role as chairman of the subcommittee i have seen s.e.c. chair gansler push the envelope with regulations that go well be on an even encroaching on the jurisdiction of other regulators. what is the the fed response to another agency encroaching on his jurisdiction >> we do not comment on other agency regulations. however, if they were to take a hypothetical at face value, if they would come into her jurisdiction -- >> what is more than hypothetical? >> we would react. >> good. i hope you do. i yield back. >> the lady from new york, ms. velazquez is recognized. >> thank you, mr. chairman. thank you for being here, chairman powell. property insurance rates are becoming prohibitively expensive or inaccessible for homeowners, developers in my community. the fsoc's 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 its impact on macroeconomics? >> we will pause the clock and have staff take a look at the microphone. the clock being frozen is out of respect for ms. velazquez. we will get staff to look at this and suspended for a moment. >> we need to invest in infrastructure for this committee. >> were trying to do electronic voting.

it is hard not to just get the microphones to work. thank you. all the photographers have left so the awkward photos will be less awkward. any luck?

we are getting a new mic. it may not be better but it is a different one.

>> does not want to be replaced. okay. >> we will start over and restore the clock. thanks for your indulgence. >> mr. chairman, i was asking you about the property insurance rates that are becoming prohibitively expensive or inaccessible for homeowners and developers in our community. fsoc's annual report identifies rates as an increasing risk. i recently raised this issue with secretary yellen. is the fed monetary investment monitoring the rising cross of insurance and its impact on macroeconomics? >> yes, we are very much aware of the increases in insurance including property insurance. it has been adding meaningfully to inflation. it is not something we have any control or authority over. the same is true of auto insurance. insurance, generally, have gone up a lot. >> when we talk about the lack

of affordability when it comes to housing, the insurance, the rising cost of insurance is an important factor but is affecting the availability of affordable housing in our communities. i hope that there is some discussions among the fed because it is an increasing risk it is going to have an impact on our economy. chairman powell, i know you spoke with chairman mchenry a little bit on inflation. can you explain what evidence you are looking for before inflation has returned to 2% and interest rates can be cut? >> we are not looking for

inflation to go all the way down to 2%. what we want is just more evidence that will give us more confidence that inflation is a path down to 2%, sustainably print that will come in the form in good inflation ratings. want to see just a bit more evidence that we can be confident that we do not want to have a situation where it turns out that the six months of good inflation data we had last year that did not turn out to be an accurate signal of underlying inflation. we are just being careful because the economy is strong and the labor market is strong, we think we can and should be careful with that decision. >> when you say evidence, what evidence? >> we would like to see more, good relatively low inflation readings. we are not looking for better readings than we have had but we are just looking for more of them. as we go forward, the 12 month inflation will continue to drop.

it will be lower than last year. >> mr. chairman, i would like to pick up on what was left off and reiterate the importance of rulemaking on section 956. this is an issue that i also raised with vice chair barr, german groomer -- and i told them when they became before this committee, i would be asking for a status update on the rulemaking at every future hearing. it is well past time, 12 or 13 years, if you are employed in a company you are given a task, i would think that you would be fired if you do not 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 rules? >> there is a lot going on regulation at the fed right now but my understanding on 956 is that there has been discussions between the regulatory agencies. 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 something that has gotten to me yet. >> i will ask the next time. believe me, i will be here. thank you >> the gentleman from kentucky, mr. barr is now recognized for five minutes. >> mr. chairman, good to see you. you have said that the capital framework is about right is that banks are well-capitalized produced a believe this? >> i do. >> given that you believe that and given the fact that the basel three endgame proposal increases capital requirements on banks, what a re-proposal that implemented basel three

in a neutral way, could it do so without jeopardizing financial stability? >> hypothetically, yeah. >> according to walk-ins, 97% of the comment letters either opposed, called for a re- proposal or expressed substantial concerns about the basel three endgame proposal. those comments came from across the ideological spectrum and for various interests. i would ask of the chair to include that report into the record. i will ask the chair to include that we >> without objection. >> mr. chairman, did you see that report? >> i did. >> does that concern you that 97% of the comments were negative? >> we did not do our own count so i cannot make an assessment. i would say it is unlike anything i have seen. >> the basel three comment

period ended on the same day as the data collection on the proposal. which is an odd process of the data should have been collected far earlier, analyze and the results should have been available to public comment before the period ended. why did the federal reserve choose to do a quantitative impact study during the comment period for the proposal, foreclosing anybody by the public to comment on the results of the study? >> the movie is not over. we are where we are. vice chair barr did commit to putting the qsi out for comment. those comments will be taken into consideration as we think about the path ahead. >> speaking of process, you have your general counsel right behind you. i do not want to get into privilege chair. have the lawyers at the fed raised any process concerns or administrative procedure act issues with the board ? >> let me say that we are

committed to doing transparent and reasonable and databased rulemaking in compliance with the administrative procedure. >> giving the public the ability to comment on the quantitative data that has been provided, obviously, it is consistent with good process. governors bowman and waller, vice chair hill and director all dissented on the proposal. vice chair jefferson expressed concerns with his statement. under your tenure as chair, can you identify any other precatory proposal which has elicited this much dissent ? >> no. >> have you, in the past, acknowledged in front of this committee that you will not move forward with proposals without consensus or you have acknowledged that in the past. we appreciate that commitment to consensus. have you achieved consensus yet

on the basel proposal? >> i am confident that we will but that is a process, as i mentioned, we are evaluating the comments. we are just coming to the place where we talk about the path ahead. i am confident we will achieve very broad support on the board. >> mr. chairman, do we hear about the heterogeneity and business model of diversity within the banking sector contributes to systemwide financial stability? >> i strongly do. >> do you agree that a concentrated business model in the sector would present a potentially systemic risk? >> potentially. >> this is one of my major concerns with the proposal, mr. chairman. by defective repealing regulatory tailoring subjecting category three and four banks to one-size-fits-all standards that only apply to large. it is the private sector solution for the pursing -- dispersing risk.

it transitions the industry and regulators toward only a standardized framework. it actually would push the industry into a smaller and more concentrated looking industry and as a result would actually increase systemic risk and decrease competition can do you share that concern ? >> i think it is a real concern. i think that is part of what goes into my thinking about the proposal and what needs to go. >> given all of these concerns, we hope you can commit to repurposing the basel three endgame. we strongly urge you to take that into consideration. with that -- >> the gentleman from massachusetts is wrecking eyes for five minutes. >> good morning, good to see you again but i want to go deeper onto the commercial real estate issue and the potential impact on regional banks. this morning, scott rector, 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 laws that will come to fruition over the years but he described it as a, quote, slow moving train work -- train wreck. 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 doom loop. similar to silicon valley bank when people lose confidence when depositors lose confidence in the bank, they pull their money out and we end up in a bad situation. i do not believe everything that i read or hear but in

congress, we do tend to repeat it. i just wanted to get a sense from you -- i am sitting in my own city of boston with 20% vacancy rate and office space. we rely on that for a lot of the tax revenues of the city. i am wondering, your thoughts on that issue? is there a systemic concern here or is this isolated? might lowering the interest rate help some of the banks? i hear from my developers in our area that no one is lending. take a crack at it cumin >> i have not seen that report so i cannot comment on it. i can comment on commercial real estate. we have had a secular change in the economy. it has left office rentals in many places, office buildings. demand is lower, at least temporarily and perhaps for a long time and also the same is true for downtown in some places it is associated with office workers. it is a shock to the system.

we have known this for some time. we have gone through the commercial banks in the united states and so have the other regulators who have done it jointly. identify the ones who have a high concentration and are going to need to deal with that. we have been in contact with those banks and talking to them about how they will deal less desperate how they will absorb the losses for do they have enough capital? you have the liquidity? do they have a plan to do this? is it consistent with their lending practices and 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 think that part of it is right. you asked about 500 banks, i have no idea about that number. certainly, it would be some banks, probably smaller ones, that have these high concentrations. it is not the large banks. it is a manageable thing at the large banks. i think that is what it is going to be. it is a problem.

more serious than some locations and jurisdictions than with some banks than others. it is one we are working through. that is how i would think about it. >> does the silicon valley bank situation -- the money move so quickly in those cases. it was instantaneous. the velocity of money moving out of those banks, i think contributed to their failures. are we looking at anything technologically that might be able to address some of that or mitigated? >> after silicon valley bank, we got in contact with and worked with financial institutions that have high concentrations of uninsured deposits many of them have greatly improved their liquidity positions. as you know, we are also working on some liquidity rules, which will strengthen

our framework of liquidity rules. that is something we have not proposed yet. >> let me ask you 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 u.s. and european banks. you want to comment on that? what i would like to see is us give that to ukraine, to be honest. i know that is a simplistic idea. is there any historic example that we could look to if congress has to take the necessary steps to redirect that money so they can feed their people and fight the war? >> this whole area of sanctions and foreign assets is really controlled and directed by the administration and the elected branch of government. all we are is just the technical in the back row to help. we do not make those decisions.

>> i know you are big on history. i wondered if there was any examples that might provide guidance. >> pajamas time has expired the gentleman from texas, mr. williams is now recognized. >> when i am back in texas, i am hearing concerns surrounding the flawed basel three. we have talked about length with that endgame proposal. these concerns are coming from the banging into super but from farmers, ranchers, small business owners who are concerned about how this proposal will impact the ability to access capital in the future and did it not raise alarms what we've heard about the 97% today of the comments? and they all came out negative. americans worry about the disasters implications of this proposal. they have tried to make that known to banging regulators who continue to ignore them. it is time for federal regulators to take this seriously. i believe, start over. urge colleagues to rethink the policy and do what is best for

the american people and withdraw the basel three proposal. chairman powell, given the concerns raised by financial institutions and farmers, ranchers, et cetera and others communities across the country can you elaborate how the federal reserve is addressing these comments that are mostly negative and request modification, delay or complete withdrawal of the proposal? >> we are in the process of reviewing the comments that were quite voluminous. they were detailed. a lot of data and analysis. we have got those. now it is a lot. it is hundreds of them. we are going through them and we are just at the point where we are about to begin turning to the question of what changes we make to the proposal. we have not made any decisions. we have not gotten to the stage yet. we only have the comments less than two months ago. we are just at that stage. as i mentioned, my own view is that there will be material and

brought changes to the proposal as we go forward. we have not made decisions yet. it is just a little bit early for that. >> we are glad you are looking at every >> i want to bring up the lawn term debt proposal. is there enough to cover capital losses? congress work to pass legislation requiring regulations to the size of financial institutions. this is meant to protect banks of all sizes to allow for families and businesses, in my district, to have options to meet their lending needs? the long-term debt proposal under any tailoring puts it into place a new long-term debt issuance requires on banks which require these banks to issue long-term debt both at the parent holding coming level and idi level. these banks will face increased cost when they already facing regulatory burdens with this administration. mr. chairman, do you believe that this proposal goes against requirements of as 2155, the economic growth protection act?

will you commit to exporting this issue further with your colleagues? >> we are committed to implement in 2155. we believe that the regulatory supervision of banks needs to reflect their size and activities. and that is something we will consider as we go forward with this >> americans continue to feel the pain from inflation created 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.