1/2 hours.

>> thank you, the housing affairs committee will come to order. general powell, after your opening statement and you want to give it again, you can certainly do that. the fed has immense power in shaping the economy, your report is clear, stable prices and employment. the cost of living is too expensive for americans. the fed has one tool to fight the high prices, interest rates. that tool does nothing to takes the real cause. corporations price gouging to boost profits and make their shareholders richer. higher interest rates don't force corporations to lower their prices but high interest rates are raising housing costs, hindering wage growth, stifling small businesses, we all know that. now is the time for the fed to decide whether it will make good to their commitments to workers and families by lowering

interest rates and protecting our financial system from wall street executives who have used their wealth and power to influence economic policy and avoid accountability. keeping rates too high for too long strangles the economy. no one wants this and makes it harder for small businesses to expand and hire more workers. higher rates stifle overdue investments that are creating high quality, good paying jobs and that are necessary for us to remain the most competitive and innovative economy in the world. high interest rates are raising housing costs, higher and higher for families. families already facing a tough market with too few options and too high prices. i hear from so many ohioans who feel trapped, those who rent feel like they'll never afford to buy. those who own their homes feel like they'll never be able to

afford a larger one if they decide to grow their family. if they're fortunate enough to have a interest rate from a couple years ago don't want to give it up and limits their choices and the house. and by driving up construction costs, higher rates makes it harder to build new apartments and homes and have less apply at exactly the same time when it's harder to afford a mortgage. families are stuck delaying the purchase of their first home and renting for longer. that cycle drives rents up even further. americans pay a steep price for higher interest rates, continued high rates are not going to make life less expensive for their workers or families. we know why prices are high years after supply chains have improved at the same cause of our economy. corporations want bigger profits to award their executives in. in 2020 and 2022 at the peak of inflation, corporate profits soared to historic levels.

that's not hyperbole but corporate profits soared to higher levels. those profits went in the pockets of their top executives. that same year the largest multinational corporations gave out nearly $1.5 trillion in stock buybacks and dividends. americans today pay more for groceries than they have in 30 years. ohioans pay, every time you go to a grocery store, ohioans pay for corporate executives bonuses and stock buybacks. every time you go to the grocery store, grocery shoppers are paying for corporate executive bonuses and stock buybacks, the biggest corporations are always finding new ways to charge people more to increase their profits. fast food restaurants and big stores are experimenting with electronic price tags so they can change prices constantly, making it easier to sneak prices up little by little, making it harder for people to comparison shop and find a store with the lowest price. many companies increase their

profits by charging more for less. the media started calling it shrinkflation. mr. casey from pennsylvania has been a leader in pointing this out. your bottle of gatorade used to be 32 ounces and now is 28 ounces but the price hasn't gone down and if anything has gone up a bit. that's why i introduced legislation to stop that kind of deceptive corporate practice. it's the kind of solution we need to take on corporate price gouging and has nothing to do with higher interest rates. the fed doesn't only set monetary policy but you make the rules that keep our banking system safe and sound and consumer money safe. we've had positive development, mr. chair, since the last time you testified in june and like the update community reinvestment act. thank you for your work on this. this took years of listening carefully to all stakeholders. it was long overdue. we'll be watching to make sure you implement this quickly so banks are fulfilling the purpose of the community reinvestment

act. i spoke to ohio bankers yesterday, most of them small banks and they understand the importance of this. you issued an updated capital requirement proposal called basal3, the subject of much discussion of this committee and small capital companies is how we ensure investments pay off and shareholders are on the hook and not the tapes. too many in this country of taxpayers holding the bag for corporate misfeasance and malfeasance and greed. we need these guardrails in place and i urge you committed to protecting the public despite the amount of massive money the big banks and lobbyists are spending trying to kill these taxpayer protections. let's finish the job. let's finalize basal3. last year's bank failures demonstrate the dangers of letting the banks chip away at rules and oversight. it's entirely predictable. bankers desperate to increase the already massive profits and take big risks that undermine our economy. when things go wrong, bank

executives coming to the regulators with hands out accepting no responsibility. that's why congress must finish the job and pass our bipartisan recoop act. senator scott and i worked on it, 21-2 in this committee to hold senior bank executives accountable when they gamble with customers' money. when the biggest banks exercise special privilege, they do so at the peril of our broader economy. we've seen that too many times. we know that's a source of so much that's wrong in this country. big corporations using their power and influence to write the rules of our economy to benefit them and their executives and their investors to the detriment of everyone else. that's why i stand up for workers and why i stand up for their right to organize. that's why i stand up to take on railroads and drug companies and the biggest banks and corporations who time and time again try to rewrite the rules to increase their profit margins. chair powell, i look forward to hearing from you today. thank you, and how the fed will

work to promote a economy where everyone who wants a good job has the opportunity to find one. senator scott? senator scott: thank you for being here. march 10th will be the one year anniversary of the failure of the silicon bank. it was the third failure in u.s. bank history and the largest since the 2007-2008 financial crisis. i've said it many times before and will say it today, there are three opponents to s.b.b.'s failure. the bank was rife with mismanagement. second, there was a clear supervisory failure and our regulators were certainly asleep at the wheel. and third, president biden's reckless spending caused record high inflation which resulted in drastic interest rate hikes and tremendous loss. when you print and spend trillions of dollars at the end of covid, we should not be

surprised that we have record high inflation, record high inflation translates into today still 40% higher for gas for your car, 30% higher for your food, 20% higher for your energy costs. the devastation the average american is facing because of bidenomics is undeniable but certainly measurable. so i'm glad to spend some time talking about the state of our economy, an economy that's been ravaged as i've spoken about by inflation, suffering under the weight of an open border and millions of illegal immigrants and drowning in disastrous regulations. i hear from my constituents all the time that inflation and unsustainable cost of living continues to impact their families. for far too many, the american

dream seems further and further out of reach than ever before. and frankly, the past three years of this administration's failed policies have landed us right in that spot. in fact, last month, treasury secretary yellen sat before this committee and attempted to spin a narrative of how strong the economy is, how well off consumers are and how much people have in the bank thanks to bidenomics. but in the midst of this she also admitted many prices are not going down. in fact, she said, and i quote, we don't have to get these prices down. tell that to the mechanic working in south carolina. tell that to the teacher trying to put gas in the tank. it is simply unacceptable. because the truth is that americans are now spending more of their income on food than

they have in 30 years. the truth is that housing affordability remains at its lowest level in 40 years. but inflation isn't the only concern i'd like to raise. i'd also like to address the economic impacts of illegal immigration. during your recent interview on "60 minutes" you stated over time the u.s. economy has benefited from immigration. let's be clear, america is a nation of immigrants. no doubt. but when we talk about illegal immigration today, we must also face the dire reality that our towns and cities are suffering from the adverse impacts of illegal immigration facilitated by the biden administration's open, unsecure, and unsafe southern border. because of president biden's

policies, we've seen over seven million illegal immigrants cross our borders in just three years. by the time this election happens this year in november, the numbers suggest it could be as high as 10 million illegal immigrants coming into our country. so we cannot have an honest conversation about the benefits of legal immigration in our labor force without also addressing the elephant in the room. our country is strained. our economy is strained. under the weight of illegal immigration. in fact, recent reporting has highlighted that cities and states across our country are struggling to keep pace, and some have been forced to cut public services to americans in order to fund the cost of feeding and housing illegal immigrants. one clear example we saw in new york city where the poorest kids

in the city, minority kids in the city, were stuck at home because the city was using the schools to house illegal immigrants. another example, the city of denver recently announced that some of its employees may have their hours cut in order to how in the world is that fair to americans? it's not. we must get the illegal immigration crisis under control, because if we don't, our local economies will be crushed and opportunities will be stripped from our citizens and their families. finally, the impacts of illegal immigration were not enough, the

financial regulatory threaten economic opportunity. for months we have heard bipartisan criticism of the fed's proposal, which will restrict lending and access to credit for those who need it the most. i was surprised to hear about your thoughts on its future. 97% of the comments that you receive are negative. that's good news. good news for the american consumer. good news for entrepreneurs who would like to start a business who do not have access to capital and millennials who would like to be and opposition from basal3 from farmers, housing groups and heard opposition in this very room on

this very committee from democratic senators. i look forward to hearing your testimony and looking forward to asking some questions as well. mr. powell: and slowing in inflation has occurred without a significant increase in

unploilt. as labor market has eased, the risks to achieving our employment and inflation goals have been moving into better balance. the committee remains attentive and high inflation poses significant hardship especially on those least able to meet the higher costs like food, housing and transportation. we are returning. restoring price stability is essential to have strong market conditions that benefit all. i will review the current economic condition before turning to monetary policy. economic activity expanded at a strong pace over the past year for 2023 as a whole, gross domestic product inceased 1.3%.

activity in the housing sethor was subdued largely reflecting high mortgage rates. high interest rates appear have to be weighing on business fixed investment. the labor market is tight but supply and demand conditions have continued to come into balance. payroll job gains have averaged 235,000 jobs per month and unemployment is at 3.7%. strong job creation has been accompanied and increase in supply of workers in workers aged 25-54 and strong pace of immigration. job vacancies have declined. although the jobs to workers' gap has narrowed labor demand exceeded the supply of available workers. strong labor market over the past two years helped narrow

longstanding disparities in earnings across demographic groups. inflation has eased notably but remains above the longer run goal of 2%. total personal consumption or f.c.e. prices rose 2.4% excluding the volatile food and energy categories. core p.c.e. prices rose 2.8. it was widespread across goods and services. and expectations are well anchored as reflected by households, businesses and forecasters as well as measures from financial markets. and since early 2022 they remained the rate at 5.1/4.

and shrunk our balance sheet in a predictable manner. it is putting downward pressure on economic activity and inflation. we believe our policy rate is at its peak. if the economy evolves broadly as expected, it will be appropriate to dial back policy restraint this year. but the economic outlook is uncertain and ongoing process towards our objective is not assured. reducing policy restraint too soon or too much could result in reversal in progress and rerequire tighter policy to get inflation back to 2%. reducing policy restraint too late or too little could weaken activity and employment. in considering adjustments for

the policy rate, we will assess the incoming data, evolving outlook and balance of risks. the committee does not reduce the rate until it has gained confidence that inflation is moving towards 2%. we remain committed to bringing inflation to 2% goal and keeping expectations well anchored. restoring price stability is essential to set the stage for achieving maximum employment and stable prices. to conclude, we understand that our actions affect families, communities and businesses across the country. everything we do is in public service to our commission. we will do everything we achieve our price stability goals. mr. brown: you acknowledged that the fed to raise rates when prices shot up in 2021.

we can't make that expense. mr. powell: what we are seeing is continued strong growth and strong labor market and continued progress in bringing inflation down. if that happens, if the economy evolves over that path, we think the process of carefully removing policy will begin over the course of this year. senator brown: we have had this conversation publicly here that you know working people are hit the hardest with inflation and companies trying to lay off.

maximum employment is -- let me ask you about bank sprfertion. senator scott last year's bank failure and supervision didn't react. the fed in response a supervisory process to identify and address gaps to the speed of force and ability if that's the right word. explain what concrete steps the federal reserve has strengthened supervise and any specific areas that to make improvements is ongoing. mr. powell: many, many people in the system who are involved in supervision, thousands of them. and there is a rule book. there has been careful study and thought and a lot of listening to understand how we can meet those goals to be more

effective. if you look at silicon valley bank we weren't effective and working hard to develop a new rule and other set of practices which is still and earlier intersendingses and more effective ones and this is work that is ongoing and will be for some time. senator brown: the job of the fed is to serve the american people and not stock portfolios. i wrote to you last month asking you to identify substantive penalties for board officials who violate the trading rules. where is that in the process and where is it? mr. powell: inspector general gave us six things to work on. i read the list from beginning

to end. and i said we are going to do all of these. and done five of them and working on the sixth. is more and more companies combine competitive price information to engage in what they call dynamic pricing or surge pricing. corporate p.r. teams and another way for corporations to make it harder for consumers to seek out lower prices. are you concerned that these price gouging strategies?

mr. powell: same thing with the ride companies. i don't know the implily occasion for consumers. senator brown: you think this kind of surge pricing might lower prices overall? mr. powell: my understanding is that the idea is that in slow periods prices actually go down and higher -- busy periods they go up. senator brown: these are sophisticated economists working for these companies. mr. powell: as long as they are not fixing prices or failing to disclose the nature of the. senator brown: research hoop behind the inflation we have seen. the supply chain of autos have

been more resilient and more housing availability made your job easier? mr. powell: yes. big part of the inflation was and we saw it in 2023 when supply chain problems unwound and when the labor supply shot unwind as well. it came down quickly and it's also down to tight monetary policies playing a role as well. senator brown: which leads me to the plea with you to speak out about inflation and the contribution of corporate profits and greed to inflation.

>> the fact of the matter is that so often, if in fact. i don't know how they afford a downpayment for a home and take into consideration and looking at their financial future and fixing and repairing. happens for every homeowner in the country. i think the issue is far more complicated my first question is between the challenges of illegal immigration. it seems like every single week there is a story of another city

under water attempting to feed and house millions of illegal immigrants and american taxpayers are footing that bill. just recently in denver we saw city workers having their hours zeroed out so that the city could allocate resources for illegal immigrants. in san francisco, the average cost in oakland because of crime is almost $4 billion. coupled that with in new york, governor hochul bringing up a national guard and the state police to help reduce the impact of crime crime add mayor adams says he needs more money because the state of affairs of i will

he legal immigrants and reducing the opportunity for business as usual to return to york new york city. can you explain how our country can shoulder the burden and costs because of illegal immigration and what if any information do you have as it relate to the impact of this surge of crime in our cities on the economic outcomes of those cities. when you have more folks in the store, you have more shoppers. except for these days, when you have more folks in the store, sometimes they are there to steal. mr. powell: quoting my statement earlier and accurate quote. but i would say right before that and none of our business.

we don't set immigration policy and don't comment on it. mr. scott: when you are going to tell a story please tell the whole story when it is 10 million folks coming into the country, and negative impacts on crime and americans living in the poorest parts of america face on a daily basis. mr. powell: i said over time. i was standing away from the current political context. and it's not appropriate for us. we are independent and like to remain that. and we stay out of political issues that we really aren't assigned. so the kind of issues you are talking about are very real but not for us.

mr. scott: the fed does not consider the costs associated nor do they consider the impact on states like new york, california or illinois where the devastation of crime has an impact? we don't take that into consideration? >> we do try to estimate population and the effect immigration legal or illegal on the size of the work force or g.d.p. we don't have a way -- we do look at the finances in the aggregate in state and local government. that's og we look at but we wouldn't do an assess meant like that. senator brown: senator menendez of new jersey is recognized.

mr. menendez: we have seen the first latino governor and first latino federal bank president. we are making progress on something that i have been at for quite some time to the leadership of our economic institutions. so i want to applaud that and mr. chairman, i hope that troughing can extend to the rest of the federal reserve staff.

it goes on to say economists say the surge was key to solving unprecedented gaps in the economy that threaten the country's ability to from prolonged shutdowns. mr. powell: there are adjectives and adverbs you wouldn't say in fed world. mr. menendez: take them out. mr. powell: it is that there was a very significant increase in the size of the work force last year and happening during the year and the answer was it was two things. labor force participation and it was immigration. and if you look at the

congressional budget office numbers, it makes sense because there is a lot of growth. wages were coming down and the economy is bigger and partly -- this is without making judgments on immigration policy. mr. menendez: the facts are we had 10 or 11 million jobs going unfulfilled in our economy and lacked the productivity for success economically. and part of that clearly immigration helped fuel part of our revival coming out of the pandemic. those were the people that were the essential workers when we were staying home. i agree we need to do what is necessary to have a regularized border but just to create the conflicts of immigration as a scourge is absolutely wrong. in my view, the sticky inflation

we have been seeing in the housing sector is due to the housing shortage. the fed's policy to restrictive zoning, higher interest rates and tighter regulation, i would say underfunding of h.u.d. programs that shore up and expand our supply. if the housing supply shortage continues to grow are we likely to see continued housing inflation? mr. powell: yes. mr. menendez: housing is becoming less and less. the 2023 out of reach report, a worker earning a minimum wage in new jersey would have to work two full-time jobs to afford a modest one bedroom home at fair market rent. do you agree that unaffordable housing is a problem for the

economy? mr. powell: long-term housing shortage and pandemic effects and the higher interest rates which are things that will pass through. when that passes through and rates are normized we will have the housing shortage and causing upward pressure. mr. menendez: the monetary policy report that mortgage lenders impose maximums on the ratio to the borrowers' income. i'm worried how it will interact with the capital requirements proposal which according to analysis from the urban institute would increase mortgages for black, hispanic and low and moderate income borrowers. if the capital rule is implemented without changes it could make it harder to disadvantage borrowers? mr. powell: there is a risk.

mr. menendez: are you mitigating it? mr. powell: yes. senator brown: senator rounds. senator rounds: i have pee an understanding to stay as neutral as possible with regard to the politics involved in an election year. basal end game proposal. and found that 97% were either opposing it or expressing substantial concerns. in the hearing last month on the monetary policy report you stated that it is a consensus organization and you said, i will do everything i can -- i will do everything i can possibly to bring people together in consensus and have a

capital framework that can be proudly supported. my question to that is do you believe there is a consensus on this capital framework? mr. powell: i'm fairly confident we will have such a consensus when we do move forward. senator rounds: you will probably not call a vote on the proposal until you believe there is a consensus? mr. powell: we are in the process of digesting the comments and making the appropriate changes. senator rounds: i have weighed in on the concerns i have with basal3. and negative effects on mortgage lending and home affordability by disincentivizing banks offering high to low volume loans that help low-income

borrowers. i'm concerned that buying a home will be harder and further down the road i fear it could disincentivize from the larnlest banks particularly with the secondary banks. would you be willing to withdraw the proposal or repropose what significant modifications particularly addressing the concerns that we have raised with regard to the impact and i'm thinking of freddie and fannie. what would you see the process involving those particular issues? mr. powell: we are well aware and focused on those issues. but we get it on those issues. in terms of process we are not in the stage of making that decision. if it turns out to be appropriate and we get to that point to repropose, we won't

hesitate to do so. senator rounds: thank you. i think there are serious if the basal will go into effect. sounds like it may include significant modifications if it were to be brought at all. mr. powell: significant and broad changes to the proposal before it comes back to the committee for a consideration. the board for consideration. senator rounds: with regard to the economy, limited level of price growth is believed to help facilitate economic expansion and reduce the risk of inflation. however, during the biden administration, inflation climbed to 13% and those prices are now the new norm. i know you make it a policy not

to comment on the administration's fiscal policy but well known that i really do believe that high inflation and high prices have been the direct result of president biden's policies. that the federal reserve has limited tools to address some of the policies that this problem created. supply side versus demand side on these costs. what have been the unintended raising the fed rate as rapidly as the chair and as the committee -- i know we talked about s.v.p. and their inability to look at treasuries and increasing interest rates, but can you talk about some of the things you have seen that were negative in trying to respond to those high inflation rates? mr. powell: high interest rates are hard for businesses and for

people. they are the tool that we have to use to bring inflation down and our job at this time with high inflation comes it is the fed's job to restore stability. you point to the losses in banks that was a substantial thing and the supervisors and that was us didn't get to that problem. we were aware of it but didn't appreciate it enough. we were able to get as far inflation down without seeing a big increase in unemployment. that is a great result. it is not consistent with the historical record but a positive thing. senator rounds: the only thing you had available was demand side tools.

litigate over the next eight or nine montes. i want to take my time less on monetary policy and we are never out of the woods on stability as we saw with the new york community bank. one area that i raised with you a year ago and reraise today and

that is nonbank leaping in terms to financial firms is exceeding regulated bank lending. nonbank financial sector has done productive things in our society over the years. but when folks like former fed president dudley and former. governor: said they had worries that it could lead overall. i guess what you think are the risks as we see this pushout effect of more and more lending going outside the perimeter to the nonbank sector. how much do we know about these

institutions? and they have very smart sophisticated investors who say we don't like the lending profile and don't make loans for the next six to nine months, do you think our system will pick up the slack? >> we have the regulated banking system and a lot of transparency, deposit insurance and access to the discount on all those things, regulation. they can't pull their money out and signed a contract and funded these deals. what you see now in the nonbank financial sethor it's that kind of thing and doesn't have the run risk. the bigger it grows and more diversity gets and it is happening outside the perimeter

and you worry when there is another crisis you will be surprised that there will be ways that that financial structure too can break down in ways we don't anticipate. we need to be smart about the way that it is moving out of the banks and in to nonbank financial institutions and we need to be thoughtful about where the risks are aledgerring. >> and that investor may say we don't you want you to leaped anymore but at that moment in crisis meaning but i got a little bit of explanation why the large regulated banks weren't complaining about in nonbank lending and i'm not criticizing on the nonbank lending but many of the

regulated banks and make money off of those relationships and that is an explanation of why they are not being more critical. i would like to come back to another thing we have talked about a lot. and that is the question of using the discount window. one of the original tools that the fed had, i know banks say we are concerned about the stigma and require mandatory use of the discount window and just the idea having the mechanics of the discount window open 24/7 they didn't know how to use it but two but use it in the nonbank. mr. powell: there is a lot of work and needs to be brought up in the modern age and need to do

more to eliminate the stigma problem and that banks are able to use it when they are able to use it. and that's a broad work program that we are on right now and it's very important. senator warner: i do think before starting a whole host of regulatory issues we ought to use -- senator brown: senator till is. >> time after the hearing and see him, he is a dog-f but thank you for being here. i want to get on the bmp mp as arch l3 proposal. we sent a letter indicating our

concerns but worth noting the number of other organizations groups that. national housing conference, nacc. and the list goes on who have concerns with the current proposal. here is my concern. i think we are trying to make the best of what was foundationally a bad proposal. i am imin the category of people that think it should be reproposed. one of the reasons why i did not support mr. barr's nomination, i felt we were going to be here. it was clear we would be here months and years later. here we are. and the industry felt the same way. some of them are on banking

trades and some are on the other side of the spectrum. i cast my vote or provide some weight to the idea that we should repropose it and talk about the reality of increasing capital or the prospect of increasing capital requirements doesn't concern me. prior supervisors had made comments that maybe we need to raise capital standards but what we heard in this proposal is let's talk about raising capital requirements and talk about reducing the cost of the regulatory burden today. there is no evidence of that in the current proposal and i think that that may produce a different set of comments that will be instructive to a final proposal that will increase in capital requirements. over what time horizon would you expect to see try to make the

best of this foundation or go back and take a look at a new foundation and repropose it? between inflation and chastising manufacturers for creating smaller portion sizes for potato

chips, i'll use that as one example. if you have rising input costs and you're not able to control that and you are in a marginal business to begin with and now you are saying you can't reduce the quantities how does business make that work? >> we see inflation at the aggregate level as a mismatch between supply and demand and it is very hot coming out of the pandemic. >> we saw food inflation between 2010 and 2021 at 8%. and now seen it at 21%. i think we have an industry that is trying to provide product that consumers want and now they are being chastised trying to make the numbers work.

it is confounding. i'm going to submit some for the record and stay on time. i have a question. i think the chair mentioned and i'm sure the chair will clarify. he suggested that buy-backs and dividends were a key factor. and is that one of the top five reasons we are experiencing in inflation right now? >> i see stock buy-backs and dividends. i wouldn't comment on anything that you may have said. i would like to avoid it. >> i'm not going to ask you about policy because you are consistent on that, i can't imagine and dividend payments have material effect on inflation and there are some

people but by inference, that could be helpful. i can't imagine it would be one of the things that would make your job easier. can you opine on that? >> that would be a change in our capital markets. shareholders going back to shareholders who have nothing to do with it. senator brown: well done. snore smith of minnesota is recognized. >> thank you chair pull pol. i appreciate your testimony and i'm going to focus my question on housing and housing affordability. overall prices have moderated considerably since the fed began raising rates and housing cots are high moving us no closer to addressing the affordability

crisis well before the pandemic. shortly before the fed you came before the committee how higher interest rates could exacerbate and making mortgages more expensive and at the time you argued we have excess housing demand during the pandemic and the fed's goal was to bring it closer in line to supply. the housing market is it your view it has cooled enough so housing supply and demand is better in balance and given the fed's limited tools understanding that, at what point you think you have done all you can to lower housing demand. we are well past time in

congress. but i'm interested in how you see this dynamic. mr. powell: we aren't focused on housing and housing inflation. we are focused on goods. the thing is, there are things in the housing sector that we didn't anticipate. people in very low interest rate homes with low rate mortgages aren't selling. so the quantity of homes is incredibly low and very little in the way of existing home sales and drives up sail prices. it is a longer run issue and factors associated with the pandemic and our response to it. overall inflation comes down, you will see the housing market start to heal and get better and

housing affordability will go up but longer term problem of supply. >> what i see in minnesota is that higher interest rates are driving up the cost of construction, driving up the cost of mortgage rates. people who aren't leaving a small house because they can't afford it. people are staying in their homes long area and double whammy of construction flowing at the same time there is a great need to address housing supply. one of the things that is happening, a recent analysis by zillo that the monthly mortgage payment a recent analysis found that the recent monthly mortgage on 333,000 assuming $10 downpayment is $2200.

the cost of owning a typical home is higher than 30% of median income which is the measure of affordability. we have a lot of issues of people being priced out of the housing market. from where i sit the cumulative issues of higher mortgage rates are a challenge and until we can get to the bottom of that, we are going to have a hard time addressing the housing affordability challenge we have. would you like to comment? mr. powell: home prices don't go into the calculation of it's really rents. the housing market is in a very, very difficult situation. the sooner we get back to price stability, the sooner it can start healing.

>> thank you, mr. chair. senator kennedy of louisiana is recognized. senator kennedy: i think i have said before, i believe you and your team probably saved the world economy during the pandemic economic meltdown and i thank you for that. you gave an interview, mr. chairman, on february 4 of this year to cbs, "60 minutes, i think." i ordered a transcipts of that transcript of that hearing. you are asked a question about

inflation. and you asked questions about prices declining. here was your response and i would like to quote you if that is okay. "so, the prices of some things were -- will decline and others will go up, but we don't expect to see a decline in the overall price level. that doesn't tend to happen in economies except in very negative circumstances. " and that i quote you accurately? >> i believe you did. >> okay. later in the interview, you are asked about the national debt and do you recall that? >> i don't, but i am sure that is right. >> okay. but according to the transcript, and your answer was, and again i am quoting you. "in the long run, the united

states is on an unsustainable fiscal path and the u.s. federal government is on an unsustainable fiscal path. that just means the debt is growing faster than the economy. so it is unsustainable." do you remember saying that? >> i have said that many times and i think that's not controversial. >> okay. later in the interview, and you said, "you know, i would just say this. integrity is priceless. and at the end, that is all you have. and we plan on keeping others." is that an accurate statement? >> yes, it is. >> okay. that is why i want to ask you about the fdic.

have you read the article in the wall street journal entitled "strip clubs, lewd photos and a boozy hotel, the toxic atmosphere and bank regulator fdic". >> i did read it a few months ago. >> did you read the article fdic lawyer state on paid leave for weeks after child arrest? 's >> i don't remember that one. >> did you read the article entitled in the wall street journal, fdic chair known for temper and ignored bad behavior and workplace? >> i read so much and i remember the whole broad story but not particular stories. >> did you read the article in which a former female employee of the fdic allegedly recalled her male colleagues saying,

women needed to use sex to get ahead at the fdic? >> i don't recall that one. no. >> did you read the article in which a female risk management examiner during a lunch with a male examiner said she had become friendly with that examiner. and he complained to her about his marriage allegedly telling her he wasn't hitting enough sex, and she allegedly -- and he allegedly said, obviously, if i walked into this office and you were naked, i would do that right here. >> i don't remember that and i think i would. >> two the article about mr. randall ditch, a supervisory examiner in denver who was allegedly demoted in 2014 to a

nonsupervisory position in tulsa after having sex twice with a subordinate female employee and a number of other of rule violations and in this article it says allegedly he urged the woman to not be a prissy and do whiskey during work hours and the record show? to remember that? >> i don't. >> here is mike question -- my question. >> your time is expired and you did five minutes and you consumed the whole five minutes with your monologue. >> you did six minutes. i timed it. >> senator kennedy, for months i have let you go way over the five minutes and you got your question. >> i chair this committee. a >> i understand.

check the record. >> you will be at six minutes and 15 seconds if you continue the argument. i did ask the question and i wanted the record to be clear. mr. chairman, in light of these allegations, if they are proven, how can the fdic lead this charge for basel iii endgame which will turn the banking community upside down? >> i don't know how would make the connection to that but it is deeply troubling things, obviously, but asher point was, if proven, and i think we have to decide basel on its merits and we are looking at the fdic to lead this but we are looking at the said to do what they think is right and they don't look to us to lead them. >> thank you. senator butler is recognized. >> thank you so much and it is

good to see you in person and thank you for the time to talk and i want to pick up a little bit where senator smith was in relationship to housing affordability. and hopefully draw on the point you are making about rent. it definitely is an important crisis in my state of california and i do know across the country where at least according to the california department of housing and urban development, renters in san diego are paying about 50% of -- spending more than 50% of what is considered affordable and statewide the majority of renters, more than 3 million households are spending more than 30% toward rent and nearly 1/3 and one in 5 million households pay 50% of their income toward rent. and the chicago fed president

even referred to housing as a missing piece of the puzzle in the feds path to lower inflation. so to the continued conversation, and they do know a point you have made about how inflation has a disproportionate impact on lower income households who are focused on spending more of their monthly budgets on housing. how is the fed's monetary policy impacting the supply of affordable rentals? >> i don't know if we are affecting the supply of affordable housing if you think about it as something connected to a government program and that's not our valley wick and it affects the affordability of housing. >> there was a key point you made in your reference and in your response to senator smith for the monetary policy and the calculation of rent and can you briefly just talk about that

and i do have one last issue i have before i run out of time. >> it is hard to talk about briefly and it's conceptually challenging to talk about housing inflation and you include the cost of financing and do you include the sale prices? the answer is we don't. we convert ownership into an imputed rent and that is two thirds of homes that are owned and we actually measure rent but lisa's turnover once a year so you look at market rent and what is happening with newly signed leases may be different from what is happening a year ago so it is complicated and the good thing is we do understand all that and we look through all that we look at housing services overall is one of the three important categories along with non- housing services and goods inflation. >> thank you for that. and in the line of affordability and housing, i can very generally think to the broad monetary policy and the state of our economy and unique

to california, and they do raise this with secretary yellen when she was here is the -- as well, the gaps presenting themselves due to the impact of climate change. and 1 and 5 residence in california live in the area of the risk flooding and all 58 counties have a history of flood damage. and we do see more and more insurance providers, home insurance providers withdrawing from the state and we both have talked a little bit about this in our preparation for today's conversation. can you talk to me about or share with us how it is that what you think the impact may be of this protection gap in insurance coverage and overall stability of financial institutions and in the broader economy?

>> it is clear that insurance of different kinds have been a significant source of inflation over the past few years and to do with 1 million different factors and nothing that we control from a regulatory or supervisory standpoint. in the longer term, companies are withdrawing from insurance in some coastal areas and 10 years from now how will they get insurance and maybe the government will have to step in but it is a significant issue. >> thank you, chair powell. >> senator vance? >> thank you and my gratitude for you for doing this hearing and thank you for being here

and it is good to see you again and i think these hearings are important and gives us an opportunity to provide oversight what is going on with the fed and understand some of the things that you are doing that affect their constituents. i want to refocus on the basel iii regulations and specifically the way there have been various proposals to draw them down to focus on the regional bank's. and to go back to one of the most significant crises in our sector is the collapse of first republic and svb and we spoke in private and in public but one of the concerns i have is when you talk about increasing capital requirements on the banks and if they were under higher capital requirements and the run up to the crisis there was an argument that maybe they would've gotten more long-term treasuries which would expose their balance sheet to even more treasury bond risk and that maybe would've hastened the collapse of it and i guess i do want to start here with when we talk about some of the

regulations of basel, what was the original intent? and in other words what was the original proposal for which banks would fall under those regulations? >> you mean this time around earlier on? >> this time around. >> it's the 37 largest banks down -- there are four categories including this down through the 4th category and the original proposal -- the one out there now extends to category 4 as well is three in two and one. >> what is the minimum you have proposed? >> 100 billion. >> so that it gets to my concern because i know there was some discussion about whether you apply them at 700 million or $100 billion and maybe you can walk me through that decision process of the fed where you guys are and what

would justify drawing down three $700 billion threshold to $100 billion? >> there are these unidentified and then there is one category in the big regionals and those tend to be well known big regional banks and they are category 3 and one is a 2 i guess but they have different tailored levels of regulation and then category 4 had significant tailoring and the question is can we have to ask since it was a category 4 we have to ask the question what, if anything needs to be changed in the way that they are regulated or supervise from the capital liquidity standpoint. there was tailoring down and below is the community bank and that is a different regime and this makes sense we want to have a diverse banking sector and that is a great and if it to our country and unusual for an advanced economy so what's something we want to preserve. >> i know but to put this on the record a lot of the

commercial lending and a lot of the consumer lending about half of that is provided by the regional banks and i believe huntington in my home state of columbus is the number one lender in the country so i think tear point provides benefits to our economy and you are a lot of people talk about the american economic miracle and i wonder if part of that is if we don't have the type of financial system that is dominated in western europe and other first world economies. i am curious in the process of amending the requirements, have you made a decision about where to set the threshold yet? and when do you expect to set that? >> we haven't made any final decisions and we put out proposals months ago and we had a lot of comments as i am sure you are aware and we are chewing through those and

digesting those and we are just beginning now to sit down and talk about the changes that we will make to the original proposal. >> when do you expect to issue a final proposal? >> i think it will take time. i think it is important to do right to do it fast and my guesses we will be done over the course of this year and it could be faster or slower. >> i am wondering and i have about 30 seconds left. would you be willing to commit to say that in the process of amending the fed will remove the regional bank drawdown and eliminate the application of basel for 700 million or above? >> i can't get that specific , you're looking at this whole issue. >> i do appreciate that and i get that at i repeat, given what happened with the banking sector, i encourage you guys not to apply a regulation that doesn't solve the underlying problem.

i fear if you apply this to banks 100 million or above you are doing just that. with that in mind, i will yield and thank you. >> the senators recognized. >> thank you and thank you for being here, chair powell. we appreciate that you are in a difficult situation. i think you have done a really good job and thank you. success at the fed on your mandate for stable prices is critical for small businesses on main street, farmers, ranchers and montana families and you follow all of the metrics and from your perspective, where is the economy at now and where is it going? >> it is growing at a healthy and sustainable, solid, strong case and that is one thing and the second thing i would say the labor market is very strong and quite tight with 2.7% unemployment for the last 24 months which is the longest period since 50 years.

and the third thing is inflation and it was too high and it is come down sharply since the beginning of last year and if you look at the 12 month number or the headline number it has come down down to 2.4 and the core number is 2.8 and i think it was 4.9 a year ago. these are big decline so we are in a different and healthy place and we will use our tools to keep that strong economy and labor market while we continue to make progress on inflation. >> one of the areas where there has been inflation, and i don't exactly know where it is set but food rose rapidly. by the way, i am a farmer and we didn't get much of that and we didn't get any of it. prices now compared to what they were a year ago are off compared to where they were six years ago where they were up but compared to a year ago they were down. my question to you is, is there anything you can do specifically to deal with food

costs? >> i am telling a farmer his business but if you look at the food costs to the consumer, part of that is commodity costs which was partly spiked because of ukraine and grain and oil and that kind of thing but the rest of it is a lot of costs in the supply chain from when it leaves the farm to get collected and processed and trucked around and put on the shelves and in the stores. all of those costs are part of the general economy. as the labor market cools off from its overheated status two years ago, you will see, and you have seen, food inflation flattening out. the really high rates of inflation have come down in the prices, of course, have not. >> correct. i would say cattle is doing better and grain has dropped in price at the farm gate and i will get into that debate with you at all because you probably

agree it would take too long and too much time and we have other stuff to talk about. but you have discussed in previous hearings the impact of the pandemic and the shutdowns and supply chain issues that it had on economies globally. how does the was economy look today compared to our competitor nations? particularly china? >> i start with the advanced economies. we are doing the best of anybody and we have the strongest growth and lowest inflation of an economy and china is a different story. they are having significant difficulties with its economy right now and they are in a very different place than we are. >> and to repeat that, what i heard you say is the economy in the united states is basically in better shape than any other economy in the world? >> any other major economy, yes. >> look, one of the other challenges is housing and in communities across this country whether you are in montana or in the city or in ohio,

workforce housing in particular is a top priority and top commodity, so to speak. plenty of folks in great organizations are working to address this and i meet them every day and appreciate the work they do. but how do these housing supply issues show up in the data that they used to make decisions? >> housing prices don't go into the data but housing starts and renovations and things like that adjust business activity and that shows up, but when it comes to inflation, we convert ownership into an imputed rent and we look at rents so that is how we look at all of that. we are not directly affected by changes in housing prices but over time those do drive the rent up. >> is it fair to ask, the economic trends you see for housing? >> yes. there are two big things going on and one is we have this

underlying shortage of housing and due to difficulties of zoning and a lot of these are places that are already built so more difficult to get zoning and more difficult to get people and materials and all of that and that is one thing and that isn't going away and there are a lot of things happening because of the pandemic and inflation and higher rates and those are in the short term waiting on the housing market but as rates come down and that goes through the economy, we will be back to a place where we don't have enough housing. >> once again, thank you for your work and i do appreciate it. >> thank you, senator. >> thank you and good to see you, chairman powell and it's been an uneventful couple of days considering how you spend a few days in his place. and i won't upset that, just so you know. i did appreciate your response earlier to senator scott when he asked about immigration and

you said the fed has not been assigned to that. i do want to bring something else and we have talked about it over the years is climate and the role of climate in your job and the role of the risk in banking and you have often said and i think the most common statement was we should stick to our knitting is one of yours or stay in our lane and similar to what you said to senator scott. but with that said, in october, the fed and fdic issued climate guidance, as you know for management of covered institutions. i am kind of curious, did congress somewhere along the line give the fed authority over climate policy, or is that another one of those things that somebody took on x and i realize you are the did tater of the fed but just the chairman but i would be interested in that answer. >> our assignment is the safety and soundness of banks and if they can understand and manage

the risks they face and that is our assignment. we said in the climate world we would also do two things. one of them was to do an illustrative stress scenario -- climate scenarios not stress scenarios but banks are already doing this and large banks are already doing it because they are doing business internationally and they don't have a choice. so we said we would do that and we said we would offer guidance on not on the level of risk but just on what you had to do to be in a position to assist. from my thinking, that is it and that is what we are doing. we are not -- we won't change capital requirements or new initiatives to reflect climate risk or anything like that but i am determined we are not the climate policy maker and that's the business of elected officials. >> thank you. i will bring up another topic

and that is the central bank digital currency and i think from a lot of my friends out there i know there is some confusion and i am easily confused but a lot of people are getting confused about what is meant by the administrations admonition to continue researching and experimenting and looking at some sort of central bank digital currency and i think people back home look at that and think, oh my gosh, they will control this now. could you maybe differentiate a bit what people think of in terms of the coin or their held digital currencies versus central bank digital currency who in my view should emulate cash and it still should be about a dollar not about some different currency but can you help people back home better understand why they shouldn't be frightened. >> first of all we are nowhere near recommending or let alone adopting a central bank digital currency in any form but the idea is as technology has evolved, money has become

digital but the government doesn't issue digital money and it's digital if you look at your bank account and people don't hold physical dollars and they are digital so the thought was the government could create a digital form of money that people could transfer among themselves. of course that raises a concern that if that were a government account, the government would see your transactions. that is something we wouldn't stand for or do or propose and that is how it works in china for example and if we were ever to do something like this and we are a long way from doing that, we would do that through the banking system but the last thing we would want would be to have individual accounts for all americans or any and only banks have accounts and that is how we keep it. it is really a question of following technology as it evolves and in a way that

serves the public better people don't need to worry about digital currency and nothing like that is remotely close to happening soon. >> that was helpful. thank you. >> great to see you and thank you for all of your work and i do want to talk a little bit about the commercial real estate and what is happening and the financial stability 2023 report identified commercial real estate is a financial risk and the fed's monetary report noticed real estate prices continue to decline especially in the office retail and family sectors and i am concerned because of the low levels of transactions the office sector prices haven't reflected the true decline in the value. can you expand on the emerging risk they have identified? and then can you discuss the

compound risk identified particularly at banks with large concentrations and high fractions of uninsured deposits? >> i think there are very few transactions in commercial real estate especially in troubled areas so it's not a question of prices falling but the question of you don't have the kind of price discovery and they are low and have come down a lot. and we have a secular change from people working from home and this is a big part of it and this means in many cities the downtown office district is underpopulated and there are empty buildings in many major and minor cities and it means all the retail that was there to service the thousands of people who work in those buildings, they are under pressure as well and banks have made loans to those and not all

but many but this we have known for some years. what do we do? we have identified the bank that have identified high commercial real estate concentrations particularly office and retail and other ones affected and we identified them and we are in a dialogue with them with do you have your arms around this problem and do you have enough capital or liquidity or a plan and would you take losses here and are you being truthful? we are working with them. for some time we have been doing that. this is a problem we are working on for years more and there will be bank failures but this isn't the big banks and if you look at the big ones it isn't a first order issue for any of the large banks but more smaller and medium-sized that have these issues and we are working with them and getting

through it and i think it is manageable is the word i would use and it is a very active thing for us and other regulators and it will be for some time. >> do you have concerns -- let me ask you this. as you talk with these small and medium-sized banks because we know there will be a contingent that we have seen in the past. do you have concerns that if they fail it will impact the financial sector? are you prepared are trying to address and prevent that happening? >> we did also reach out to banks that had high concentrations of uninsured deposits and particularly a lot of commercial real estate in the office sector so we are well aware of that issue and trying to stay ahead on a bank by bank basis and overall. so far we are doing that. >> let me jump to another issue that has been on my radar. the federal housing finance agency's report on the federal home loan bank included or

concluded that the distinction between the f hl banks role and that of the discount window is the lender of last resort has not been cleared especially times during market stress and during the 2023 banking turmoil we saw them rely on advances from the federal home loan banks and didn't have relationships with the federal reserve to use the discount window. i know you talked a little bit about this with senator warner, but how are they working with the federal home loan banks to ensure that banks establish protocols to borrow from the discount window prior to times of stress? >> we work with those because in many cases banks were moving their loan to the fed so we needed to have a smooth and a good touch with them and even more important than that was that any bank in the united states needs to be in touch with the discount window and knows how to be able to access

it and be able to access it and have appropriate collateral and control of that and in many cases it was incredibly inefficient and took a long time for banks to actually go through that function and the federal home loan banks are actually ahead of us in technology. we do know we need to really invest in technology to modernize this discount window and also we need to do more to get our banks, all of them in touch with the discount window and away they can use it quickly should they need to do so. >> thank you. >> thank you. welcome. under your tenure, mr. chairman, the fed has taken a stance that the 2% inflation target should be viewed as a snapshot in time but rather needs to be achieved sustainably and when inflation

was running above the target back in 2021 and early 2022, they were patient and allowed rates to offset the below target that occurred years prior and this strikes me as odd that while we are well above target inflation and have been for the prior year, the market seems to expect the fed to immediately cut before we reach the 2% inflation threshold. my question is, if the inflation rate reaches 2%, would that be considered a return to the target rate on a sustainable basis? or is it still the case that inflation would need two more or less over correct well below 2% before the fed makes the rate cut adjustments? >> it would take us a while to get comfortable that inflation has settled in sustainably at 2% but that isn't her test for changing interest rates. interest rates are well into

restricted territory and above neutral and we said we wouldn't wait for it to get down because monetary policy works with flags. so for some years we have said that we would start restoring the federal funding rate to a more neutral level and we are far from that now. we do plan -- assuming the economy moves along the way we expect. >> i am trying to look for the symmetry and i know we kind of allowed the economy to overshoot when inflation was high. and we made it for prior years of low inflation and trying to square that with the fact -- >> we didn't do that. we adopted a framework that said we could do that but then we suddenly got a few months later almost an explosion of very high inflation and that isn't what we were looking to do. we said moderate lee above 2% and this wasn't above that. we reacted and we thought that

the mistake we made is that we thought that inflation would go away and transitory which means it goes away quickly without effort by us and we figured out that that wasn't the case and we acted. >> you don't see that same abrupt dynamic? >> i think we are in the right place which is we are waiting to become more confident that inflation is moving sustainably at 2% and when we get that and we aren't far from it, it will be appropriate to dialback the level of restriction so we don't drive the economy into a recession rather than normalizing policy as the economy gets to normal. >> let's go to the balance sheet and talk about that. we have seen a dramatic expansion over the past two decades and a 2005 it was $800 billion and now it is at 7.5 trillion today and doubled since the pandemic was underway. and through quantitative tapering the fed is attempting to reduce its footprint and the concern i have is on the other

hand government spending tends to profit and we are running now $1 trillion deficit every 100 days and flooding that and putting up the pressure as a result and what i think is lost on us is the spending levels make your job harder when it comes to lowering interest rates not to mention there is expectation that they will step in once the markets can't absorb it and i think it's a serious problem and deserves more attention and i think we are at a point where your objectives may be very much at odds with the behavior of our physical policy and am i missing something? or does increased net issuance by the treasury lead to higher rates? >> and principal more supply should lead to modestly higher rates but that doesn't affect what we do and that's not a problem and our normalization is running as expect did and we

decreased the size of our holdings by $1.5 trillion. >> i hear you but i think it's troubling but we run a deficit of $1 trillion and the issuance that required to deal with that will put more pressure on the fed and making your job harder. and another component of this topic is your colleague, governor waller said he would like the fed to shift holdings to a larger share of short-term holdings and bout one third were in bills and now they are 3% of your total securities holding and you share the goal with the governor and how long will it take us to get there? >> it will take a while and that's an issue we are working through in a few weeks and we will have the first deep dive on what to do with the balance sheet which is one of the issues and i don't think we will deal with that at this meeting but over time you would love not to own a lot of that

and i see a case for shortening this but it's not something that would happen quickly and we aren't looking at that and that is longer-term aspirations. >> one final point and we talked about this. we are in an election year and you're getting pressure from lawmakers to adjust rates and i am not telling you to roller -- lower or raise them but this depends on the credibility of our currency is the reserve currency in the world depends on that and i encourage you to maintain that posture. >> thank you. >> so it has been a year since we had the second, third and fourth largest bank failures in american history and greedy bank executives were part of the problem and the fed is the chief regulator was part of the problem and under your leadership and direction the fed weakened rules for the biggest billionaire banks and exactly the banks that failed

last march and another words, you failed to do your job to keep these big banks in line. when these banks blew up, you went into a spin mode promising the fed would do better and after years of hemming and hauling you agreed to put in place basel iii rules that would strengthen capital standards for the biggest banks and i mean the biggest banks. these are the proposed rules that would apply to only 37 of the nation's 4500 banks and only the banks that have $100 billion or more in capital. now, chair powell, when you testified last june before this committee, i asked you that taking responsibility for bank failures. you said, "the main responsibility i take is to learn the right lessons from this and undertake to address them so we don't have a situation like this where we

had unexpectedly a large bank sale and spread contagion into the banking system. and as part of learning those lessons, you also said, "that you agree with and support" vice chair for supervision bars recommendations for strengthening the fed's rules this is for the big banks. and that you are confident they will lead to a stronger and more resilient inking system. so i do just want to be clear. you have not backed down from any of your comments from a year ago, have you? right lessons, don't let this happen again and the supporting the recommendations which include stronger capital standards? you still stand by all that? >> yes. good. i'm glad to hear that. i understand those 37 big banks

don't like higher capital rules because they are like insurance. you know. they make the banks safer, but they cost a little money and would go into the bank's profits. these 37 banks are swinging their very considerable weight around to try to weaken the capital rules and they spent tens of millions of dollars running advertisements during sunday night football and millions more for an army of lobbyists to twist arms here in congress. impressive spending, but how exactly are they trying to impress? a man on the inside? despite all you said last year when the banks failed about supporting the recommendations to strengthen rules for big banks, public reporting now says you are driving efforts inside of the fed to weaken the capital and you even told the

house financial services committee representatives yesterday that it is very plausible that you withdraw the rule and as one analyst put it, i don't think they were pacifying the rule without powell support suggesting that the rules would have to be weekend -- made to be weak by chair powell. i am having trouble reconciling the statement you made last year which you say you hold onto and statements you made when the headlines were all about three giant bank failures and now your reported efforts to quietly weaken the rules that would have standards for bank and prevent more failures. let me give you a chance to clarify the record. are you committed to finalizing these strongest versions of the basel iii capital rules this year? >> let me first say we have taken and are taking many more

steps to deal with the problems that reveal themselves with silicon valley bank's around supervision and strong liquidity. >> am just asking about the basel iii rules that you have been required for years to put in place and drag your feet on. >> they aren't directly related and they aren't the thing directly related to silicon valley bank and they are a longer run thing and i would just say that we put them out for comment and we got the comments and anybody is free to read them. my view is it would be appropriate to make material and broad changes to that before we finalize it and -- >> material in broad changes to strengthen the rules? >> material and broad changes in we talk about what that means in the end. i didn't say we would withdraw the rule and i said there is a

concept every proposal. i said we had not made a decision yet but if that does turn out to be appropriate in the view of the board of governors, and that is something we would look at. >> everything you said a year ago about supporting the vice chair, who is responsible for writing these rules -- >> we had a long conversation and if you read it again on your website, you will see i am doing exact we what i said i would do. >> you said you would support vice chair bar to get a strong rules and now he is putting out rules. >> the vice chair for supervision has every right to bring proposals to the board and that happened and as i made clear in our colloquy, this isn't the comptroller of the currency and when i do monetary policy, i have one vote and there are 11 other voters and that is the way it works. >> you are the leader of the fed and when the heat was on last year you talked a lot about getting tougher on the banks but now the giant tanks are unhappy about that and you

have gone week need on this and the american people need a leader at the fed who has the courage to stand up to these banks and protect our financial system. thank you, sir chairman. >> chairman powell, thank you for being here and good to see you. i can tell you that those in montana see the impact across the board from inflation that has been brought on by the policies of this administration and by my colleagues across the aisle. i do commend you for the job you have done in trying to rein in inflation and i encourage you to continue to fight despite political pressures that you may face. in the last time i checked it will get more political between now and november around here. i am also encouraged contrary to my colleague from massachusetts but i am encouraged by your comments yesterday that there will be

broad changes to the basel iii proposal, which as it is currently proposed, would have significant detrimental impacts to credit costs and availability to small businesses. lastly, i do commend your answer yesterday that the fed isn't a climate agency and considering the impact of climate change isn't a factor in achieving your given mandate and congressional mandate of maximum employment and stable prices. >> i recently joined in writing to you about my concerns on the long-term debt proposal that mandates regional banks and issue new long-term debt and i am concerned that this will have a disproportionate impact on the smaller regional banks because they are required to hold long-term debt at both the parent holding company and ensure the bank levels. could you explain how this aligns with the tailoring requirements set forth in the

financial reform bill that we passed back in 2018 in senate bill 2155? >> i have a longer-term proposal with that and that has been out for comment and on that one the comments are in and we are reviewing it. i don't want to say too much. but the theory of it in the first place was those banks are not subject to the living will process to the extent that the g sibs are and this was intended to be middle step to make them more resolvable without imposing all of the burdens that we impose on the ag sibs to have elaborate resolution plan so that was the thinking i think on the calibration of all of that and we have comments and we will make an assessment and move forward. >> i know that the smaller regional banks will be happy to hear that the liberation. an understandable you had to

raise interest rates and a major side effect of that is the impact that the rising rates are having on the cost of servicing the out of control national debt and senator haggerty alluded to this. looking at these reports and interest payments will increase 32% this year and exceed spending for the entire defense department and i have significant concerns and many do in washington and many americans do that we reach a point where the fiscal policy and monetary policy converge and this would ultimately have to worry about the impact rate setting would have on debt or even potentially the risk of a default. i do know fiscal policy isn't in your purview, but could you ever foresee a situation where

fiscal responsibility snowballs to appoint that the fed would have to factor this into its decision-making? >> i think we are along way from that. that is a terrible place to be and that's a place where some poor emerging-market countries have found themselves over the years and for the u.s. to get that way is unlikely. i do think, and it isn't our business and we should stay out of this fiscal business but i will say what other fed chairs have said, we really need to get back to that discussion about fiscal sustainability and both sides need to get together and the kind of things that have to happen can only be done on a bipartisan basis. so, i do really hope we go back to a place where those discussions are happening again. >> i have heard from a number of stakeholders out upcoming changes to liquidity ranks including a new ultrashort term

liquidity requirement. and as with any policy decision establishing the facts matters and it is important that financial regulators have a complete and thorough understanding of the financial environment before releasing this half ached proposal rule for guidance in my question is what you believe is a sufficient time period that would allow your agency to accurately calibrate new sound and reasonable liquidity requirements? >> a great question and one we struggle with particularly with all the things going on and we are looking at -- and this is in response to silicon valley bank and we are looking at liquidity innovations and asking ourselves what form should it take and how long should be up for comment and we aren't ready to do that but that is the question. >> the following question and then i am finished, you confirm that prior to the federal reserve issuing any new liquidity requirements that it will first conduct all

necessary data collection that allows for meaningful analysis of all potential policy options? >> lease keep your answer short. >> maybe. >> that is very short. >> we can talk about this more but i don't want to make a commitment like that before talking to the people who are carefully in touch with that but that is the right thought. >> thank you. >> he did get here last. although if senator warnock sits down, he is next. are you ready or do you want to go? >> you are also generous with each other. >> senator fetterman is recognized. >> all right.

senator warnock. >> thank you, very much and spending on buybacks is rising again and the banking revenue has sharply increased and interest rates are high and interest is being paid to depositors and ordinary working families, working people with bank accounts. and not a lot of money in wall street and the accounts remain low. and i am concerned that if the banks don't increase interest rates on bank accounts, families are losing out on dollars that could be in their pockets and, again they don't have the portfolios that some of the folks would have in this room. is that good for the economy, and are you concerned that banks under your supervision

are doing this? >> are not paying sufficient -- >> that is correct. >> course they have the option of putting their money in money market funds and banks compete with each other but i would be happy to look into that and i had not heard that concern. >> i think it is worse taking a look at and many lower income individuals and families don't have some of the sophisticated products of money markets that are available but we did see high interest rates and that not being reflected in what depositors are able to benefit from. could those individuals and families benefit from a higher interest rate on their deposits? >> sure. for a long time we did have a lot of mail from people saying you should raise interest rates because we aren't getting

anything on her checking accounts. so we did solve that problem. >> i don't think we asked for that but given the reality. but let me have it and here it states it well the demand for housing is falling and the strong labor market is kept prices high and that matches what i have seen in georgia with too many folks not being able to afford a home and according to the monetary policy report, mortgage rates were averaging 7% last month which is tough for lower income homebuyers and increases of just one percentage point or two could be the difference between owning a home or not. are you concerned about this interplay between lower demand yet stubbornly high prices, and what it means for folks trying to get a home, and what do you think is driving these high prices? >> the housing market in a very challenging situation, you have

this longest housing shortage but at the same time you have a lot of things that have to do with the pandemic and inflation in our response with higher rates see you do have a shortage of homes available for sale because many people are living in homes with a low rate mortgage and they can afford to refinance so they aren't moving which means the supply of regular existing homes for sale is historically low and very low transaction and that pushed the prices of other existing homes and other new homes because there's not enough supply and the builders are busy but they are running into all kinds of supply issues still around zoning and workers and things like that. so it is challenging and rates are high. people who are buying, a lot of the buyers are cash buyers are able to pay without a mortgage because mortgages are expensive. the first problem, the longer run problem, supply, is a longer problem but the other problems associated with low rate mortgages and high rates

and all that, those abate as the economy normalizes and rates normal life, but we are still left with the housing market nationally where there is a shortage. >> there is no question of the supply issue. in this issue of high prices and lack of supply and of course disproportionately impact some communities more than others according to the monetary policy report and the employment rate for the black prime age labor force people between 25 and 54 reached a historical peak in 2023 and the gap between black and white prime age employment dropped to nearly a 50 year low at around 3% and we do appreciate progress but a 3% gap is still significant and would you agree that it is important to continue to focus on narrowing this gap and, if so what tools does the federal reserve have to do this work? >> it's important than the

single best thing we can do is get prices under control again and inflation under control so we can have a long expansion with the record clear that long expansion gives significant benefits to people at the low end of the income spectrum because the labor market gets tight and inflation is low and they benefit more than anyone and that is where we were before the pandemic. we would like to get back to that place. >> thank you. i think there are some legislative tools the congress could use and i am happy to continue to work with the chair in the ways we have already done to improve that difference. thank you. >> the senator from wyoming is recognize. >> thank you and welcome and it is nice to see you, mr. powell. my first question is about cdb sees and there has been chatter lately about the social media that people are concerned about the said creating that without

legislative authorization and you and i have discussed that before. as you know, there are other means other than that that could use digital assets to create a secure and instant payment system. the question is, do you still agree that the federal reserve can't introduce a u.s. central-bank digital currency without congressional authorization? >> i do. >> thank you. that really calms people's fears, the people who are concerned that we could end up with something like the digital you on that is used as a means of surveillance and i think that will calm some of those discussions down. my next question is about your course cpe.

as you know, there is a disconnect between how you measure inflation and how the american people see inflation because the american people are spending the money on gasoline and food and things that have gone up a lot. they hear about these improvements in the economy that they are not seeing in their everyday lives. can you explain what measures you used to evaluate inflation and explain to the american people why you don't factor in the things they spend money on every day like food and gasoline ? >> we do. our statutory target is inflation and it's not core inflation and if you look at headline inflation over the last 12 months, that is it and

that is our goal and it's 2.4% and core inflation is higher at 2.8% and the reason is some energy and food prices have come down and those don't count in core. our overall legal target is headline inflation, which is the best effort to capture the cost of living that people face and it isn't perfect and you have to make all kinds of judgments that aren't easy and i mentioned housing earlier and how do you measure that? a lot of issues. but that is what we target and the reason we look at core is headline inflation tends to be more volatile and pushed around by commodity prices which really don't relate to the overall state of the economy as it ties in so it tends to be a better predictor of overall inflation. and i know that is complicated but ultimate the our target is headline inflation, which does include food and energy.

>> i would like to include a letter in the record that the senator night and two democrats and i on this committee have submitted with regard to basel iii. >> without objection. >> thank you. my question is this. what you think is more likely that it will be harder for consumers to get a house and small business to obtain a loan under basel iii, or will lending migrate outside of the banking system, which may be harder to assess because it is opaque? >> i am sorry i did not get your question. >> with regard to basel iii, if there are more constraints on lending activity, what is more apt to be the consequence of that, harder for consumers to buy a house or a small bune