again, when you look at the interest rate increases, why there was not more warning or hedging from you as the impact it may have on the fiscal system, the financial system, the banking system. as we've well-acknowledged, the regulators and the communication from the government was lacking. i am out of time. >> the chair recognizes the gentleman from massachusetts. >> i think the ranking member -- thank the ranking member. welcome, chairman powell. it is good to see you again. i heard your comments the last couple days about the fed seeking a softening in the labor market. as a former union president for united workers, i always took a dim view of a softening of the

labor market, because it produced power and that sort of thing. but i do admit that right now, unemployment rates are historically low across the country. is 2.8% unemployment. arkansas, even less. alabama even less. i understand the need for your position. but when you look at the black and latino unemployment rates in some of the major cities, they are double that. i cannot help but see this as an opportunity to perhaps redouble our efforts to pull workers are not traditionally have strong connections to the job market and make things happen. at the federal level, we fund about 25,000 job training programs.

according to the gao, we do not do a good job. the average program produces three workers per year. i am aware of the work the boston fed is doing with the gateway cities program, susan collins is running that in the boston area and the fed helps us with data and coordination and cities like brockton, massachusetts, my district, but also more rural areas, the fed comes in and actually provides a great amount of expertise and has done wonderful, wonderful work. i am wondering, are there other tools in the toolbox that the fed could use to help? you could soften the labor market by adding workers, and i would rather see the on the supply side then simply restrict credit and squeeze companies into a position where they have

to lay people off. i am wondering if there are other tools you think might be available to us to accomplish that. >> i will say two things, first what the softening we have seen so far in the labor market has been around job openings declining. it has not been around unemployment increasing. we have seen some wages moderating back toward more sustainable levels. you remember well the labor market before the pandemic, where we had 2% inflation and a really tight labor market with no inflation. a lot of the gains were going to people at the lower end, that is where we all want to get back to. what we have now is a very tight labor market, but inflation is so high it is eating up the wage gains. we need to get away from that. in terms of other tools, i visited east hartford, another one of the cities. i agree with you. we are not spending taxpayer

money on this, we do not have the authority to do it. we convene to have private sector funds and focus on a city. i was really impressed -- you sound like you visited one or more of these cities, it is amazing what you can do. as a convene her rather than an agency that has the authority to spend money on people. we do think about these things, we think the most important thing we need to do for working people is get inflation back under control. it is people at the lower end of the income spectrum who suffer most immediately and the worst from high inflation. >> i think there are deeper structural problems in the limitation in our workforce. i met yesterday with a group in boston and i talked to new electrician apprentices, mostly women of color. they are working days, their

husbands are working nights. it reflects in that very low unemployment number, which -- getting around 2%, it is really people who are in between jobs. those are the people. there is no real reservoir of unemployed workers that you can rely on. i appreciate the way the fed came in and foot -- foot -- big footed the situation without spending federal taxpayer money. so i am going to continue to try to find ways that we could use the resources we have available. i yield back. >> the chair recognizes the gentleman from georgia. >> good to see you, thank you for being back here. i want to continue a dialogue we had about fed now and i want to continue voicing my concern that

this product is a solution to a problem the private sector is already addressing. the network is capable of instant settlement with a much greater degree of connectivity down fed now will have at lunch next month or in years to come. my concern is the fed has an undeniable advantage over the private sector and payment space as it can clear transactions through fed master accounts. furthermore, the fed already has options to improve transaction speeds through existing services. for example, the fed has discussed extending the operation for the national settlement security -- national settlement service since 2015. why not respond to industry demand by improving existing services instead of launching a new one that could compete with private industry? >> as you may remember, we surveyed all of the banks, not

just the large banks who set up rtp, which was a positive development that we supported. overwhelmingly, the smaller banks wanted us to set up fed now. this was an overwhelming view amongst smaller banks, they wanted an alternative to rtp. we set it up and i would agree with you, that is not a reason not to work on the efficiency of other payment services and i hope we are doing that, i know we are doing that. >> we also discussed in the past about setting up guardrails to protect customers from accidental fraudulent transactions. we know that is a big issue across the entire financial services sector. in response, you note the banks have procedures for customers to report unintentional transactions and fed now will come up with a suite of features to help institutions investigate and remedy any unintentional or

fraudulent transactions. with real-time settlements, this becomes a lot more difficult than just debiting the account that received funds by mistake. can you elaborate on how you will handle this protection? >> rtp faces the same issues. it is a problem with real-time payments, you have to have very high levels of security around the payments and that sort of thing, and we think we can master that and build that in. again, as any payment. >> do you have any ideas of the direction you are looking to go? how are you going to be able to resolve those? or is it something you are beginning to look into? >> i think we have built strong safeguards. we will be happy to supply that. >> just a couple other questions. will the federal reserve itself use fed now for real-time payments between banks in the system?

are you going to use the fed now for real-time payments between banks within the system? >> yes. that is what it is for. it is an interbank payment system that allows banks to offer real-time payments to customers. >> am going to divert just a little bit. i have dealt with in the past at state level with government competing with private industry. we run into a problem where the government has an undeniable advantage. in this case, it had to deal with internet services. city governments got involved in internet servicing and started competing against private providers. the issue came that the city governments were undercutting the private providers because of the access fee, so we passed legislation in georgia that required any municipal government that provides a service that competes with private industry has to assess

themselves the same fees. with that in mind, will transactions between federal reserve banks be subject to the same rules and fees as other banks? are you going to charge yourself the same fees the private industry and abide by the same rules as a private industry? >> i do not know the answer to that. i will say i would not advocate -- indy payment space, there are many instances of a government operated payment system operating side-by-side with the private sector. it is not something i would advocate broadly for in the economy. you think about fed wire, there are private and public sector payment utilities operating next to each other in the united states and around the world. >> i yield back. >> the gentleman from california is recognized for five minutes. >> thank you, i appreciate the

opportunity and want to think the ranking member. i have always had great confidence in you, i told you that personally. now they are a debt head, i am not quite sure. [laughter] anyway, thank you very much for being here, i appreciate the service you have done for our nation. one of my colleagues was talking about the difference in inflation rates in the united states and europe, on both sides. i was wondering, if you saw the headline today in the new york times about the u.k. inflation rate. you saw that they are running i think at 8%. >> i did. >> you were asked a question a gentleman on the other site of the aisle that when the biden administration took over, what you could buy for a dollar now

cost $1.16. that was hurting consumers. you said i strongly agree. the question inferred that inflation was the fault of the biden administration, that is the whole point. >> the question i answered. >> i will give you an opportunity to answer that. you later said the pandemic was the issue all around the world. so is the biden administration the cause of all this inflation? >> just to be clear, the question answered was is inflation hurting people? it was nothing to do with cause. >> but it is inferred, when you say this has happened during the time of the biden administration, the question clearly infers that. >> i think you understand the question that was answered. i would say again, people are going to be unpacking the causes

of inflation, many academic careers will be built on new ways to look at this. the former chairman delivered a paper with a colleague just a couple of weeks ago at brookings on this. you see inflation everywhere in the world, there is a common factor here that has to do with the pandemic. there is room for fiscal policy and monetary policy in the explanation and i think it is hard to unpack. it is not up to us to make a judgment. we do not render judgment on fiscal policy. do not support or criticize it, we take it as something that arrives at our front door, no matter who is president, no matter what fiscal policy is. it is not something we play a role in commenting on or criticizing or appraising. >> i appreciate answer, i wanted to give you an opportunity to make sure if there was any confusion, it was cleared up and i think you have. i want to answer question that you passed on, the question was

if congress should be in charge of setting the federal rates fund. i cannot think of a worse idea. the only worse idea might be another idea that was set forward earlier that maybe we should be involved in supervising the banks, congress. we cannot even figure out a plan, we closed on the government over appliances. we cannot figure that out, i do not know how we would be setting rates and supervising banks. i think you guys can do a tighter job of supervising banks, i do think -- you guys have admitted to that with silicon valley bank. i know you are looking at the regulations. it was brought up that since 2008, 2009, capital requirements have gone up and banks generally have done well. what was the law that caused the capital requirements to go up? >> a combination of dodd-frank

and others. >> those are the things i have heard from colleagues on the other side -- now they do not do it as much, but when i first got here, that was the choir. just saying it is the terrible bank. the reality is it would save banking in the united states and i appreciate it. i am going to make this comment, obviously your focus is narrow and it should be. the notion of climate change is important. i think it is affecting the economy and our world and i think we have had our head in the sand for way too long. we have to do something about it. that is not your mandate, but it is important and i hope we do something about it. we do not have the courage to do in congress and that is why others are doing it. we see the bigger hurricanes, we see things happening because of our participation in making it happen.

>> the chair now recognize the gentleman from oklahoma. >> thank you. mr. chairman, it is good to see you. many of my colleagues have expressed their concerns about the upcoming basel three revisions and i hope you will continue the dialogue once the joint rule is proposed and open for public comment. i would like to follow-up with a topic we discussed back in march. i am sure you are keenly aware of how important it is for banks and companies to manage interest rate risks. the silicon valley bank made that very clear. could you speak generally to how hedging and first-rate risk -- interest rate risk is important for u.s. banks and companies? >> you see the reality. when rates go up, banks are encouraged by supervisors and their own internal personnel and risk communities that they need

to manage the risk. most u.s. banks did a good or adequate job at that. a very fundamental risk of banking, one of the most basic risks along with credit risk. >> i have heard concerns the fed basel three revisions could increase cost for derivatives and users, whether hedging interest rate risk or commodity price risk. i am optimistic the concerns will be addressed. having said that, these revisions to capital requirements do not exist in a vacuum. the sec is proposing major changes of their own. last week, i asked secretary yellen of treasuries coordinating with the fed and sec on economic analysis necessary to understand potential consequences of u.s. banks implementing significant market structure changes and increased capital airman's associated with market videos,

the secretary responded that the fed is coordinating with the treasury on this analysis. are you aware of the coordination and been a part of the conversations? >> i have not been a part of those conversations. but i do understand that is correct. >> chairman powell, i would like to follow up with you on your conversation with congressman gonzales from earlier today. you assured this committee the fed is not a climate policy maker and i appreciate your commitment. i am concerned the fed's regulatory toolkit will be utilized in a way that would infect -- in fact require the federal reserve to make policy decisions on climate change. we have seen other u.s. financial regulators embark on significant climate rulemaking and chairman powell, are there principles you keep in mind when insuring the fed does not give in to political pressure around

things like climate change? >> there are. one would be we do not see it as appropriate for us to tell banks what legal businesses they can lend to. that is not our role, we do not allocate credit. what we do is supervise banks to make sure they understand and can manage the risks they are running. we are thinking of that as our point of contact with climate change in the since it is another risk that over time, banks need to be able to analyze and assess. as i mentioned earlier, climate change is going to be a very important issue for a long time and it needs to be addressed by elected people. it has a almost distributive consequences and we do not have a mandate to deal directly with climate change as a policymaker. it does arise in connection with bank supervision, but that is

not the heart of bank supervision. that is just a small part. >> another topic, i would like to discuss the fed balance sheet that currently stands at around $8.5 trillion. the size of the balance sheet more than doubled as the fed worked diligently to stabilize markets during the height of the pandemic. as the fed begins to reduce the balance shoot, can you explain the process and describe levels of securities the fed would look to maintain long-term? >> securities mature and rolloff the balance sheet. that is the way it works, there is a cap for mortgage backed securities and treasuries so it does not get too large. if you hit the cap month upon month, it works out to roughly a little less than $1 trillion a year in shrinkage, which is a whole lot faster than what we did in the last cycle. the balance sheet is that much bigger. in terms of level, we are

thinking about a level that will allow us to operate abundant reserves regime with enough of a buffer on top so that reserves will not accidentally become scarce. i can follow-up more. >> the gentlewoman from ohio is recognized from five minutes -- for five minutes. >> thank you for being here today, i have two questions i will try to quickly get through. the first question on the u.s. dollar dominance is a follow-up to congressman torres' question. in the national security subcommittee, we have been discussing the importance of preserving the u.s. dollar status as a global reserve country. can you share with us the current status of dollar dominance as it stands today and

whether there are risks to the strength of the u.s. dollar in the international financial system? if so, what are the risks? >> the u.s. dollar is the dominant reserve currency in the world. that is principally thought to be as a result of liquid capital markets, the rule of law, strong democratic institutions, price stability over the years, money can come in and out of the united states without legal restrictions. all of those things are necessary to provide the world reserve currency. there is not another economy that has all of those features. as long as we are a country of rule of law and relative price stability and strong democratic institutions and open capital accounts, we can continue to be the world's reserve currency. history shows this is not a

permanent status, but it is lasting. in the case of the u.s., as long as we maintain those characteristics of our government and country, we can continue to be the world's reserve currency. >> let me go to another question that will not be foreign to you. as the former chair of diversity and inclusion, i asked you and others of your colleagues. let me say for the record, chair powell was always on point, went out of his way, in my opinion, to make sure that there was fairness and equity for all people. in light of that, i would like to follow-up with congresswoman waters comments and maybe congresswoman velasquez, may be what she was talking about. several colleagues in the senate, you or the person who preceded you -- it had been

stated by many of us that we thought through banking d regulations, he was enabling risky banking practices and failing to combat lending discrimination, which some thought it might have perpetuated racial inequities. if you weeks ago, on june 7, you said we understand at the fed that our actions affect communities, families and businesses across the country. everything we do at the fed is in the service to our public mission. could you maybe elaborate -- the timer and out with congresswoman waters on is there anything you would like to share with us that you do at the fed that would dispel that there are things you are not looking at that causes

members of congress to think it is perpetuating racial inequities? >> as you know, we do consider -- we call out economic characteristics of different demographic groups, including by race. we want those facts to remain present in the room as we make our decisions. we try to think of maximum employment -- we think of it as a broad and inclusive goal. we are not just looking at the aggregate level. it is important to keep those facts in your head as you think of monetary policy. we have one federal funds rate and we do not have tools that address distribution and historical inequities and things like that. the fed is not an agency that has those things. the best thing we can do for

everybody, including low and moderate income communities, is maintain price stability over a long period of time and a very strong labor market. strong labor market conditions are the single biggest contribution we can make on this area. >> let me end by saying i appreciate your comments that you realize high inflation imposes hardships as it erodes purchasing powers for food and housing from the least of us. thank you for being sensitive to everyone. >> the chair recognizes the gentleman from michigan for five minutes. >> thank you, good to see you again. i would like to follow-up on an exchange we had this past march where we were discussing the parameters highlighted in the federal reserve board legal opinions that highlight how asset managers can operate

without being deemed in control of a regular bank or bank holding company. letters from the fed legal division also include certain commitments made by asset managers to ensure the same result. it is no secret this percentage of ownership held by asset managers will constantly fluctuate as a shares are purchased and sold on a daily basis. with the ever-changing ownership structure, someone must ensure asset managers are complying with not only opinion letters prepared by your own staff, but also with the statutory and regulatory framework the letters outlined. i would like to ask again, is the fed taking any steps to assess or monitor whether vanguard, blackrock and others are complying with commitment made in november 2019 and december 2020 respectively? is that ongoing? >> can you give me one second?

>> sorry, that is a very specific question, i did not know the answer. we are broadly monitoring the situation, we have a particular focus on asset managers. >> those were opinion letters put out by your folks, outlining very specific things that could or could not happen. back in march when i brought this up and again today, i am looking to find out who is actually minding the store on that. it is a little concerning that we do not have an answer on that . i guess we will continue this conversation and maybe you can answer this. what division at the fed is responsible for reviewing and monitoring asset manager compliance with opinion letters

issued by the legal division? >> it would be the general counsel. do not have any reason to think they are not in compliance. >> nobody is checking. >> we will check, but i think we will know we are going to find. >> i would like to know you are going to find, not what you think you are going to find. i will follow-up with a letter for more detailed questions on the topic, i assume you will commit to getting us a timely answer into that. >> i think we offered your staff a briefing on this, by the way. >> yes, there was a briefing. let me be clear, i appreciate the cooperation that has happened. he had other briefings, there have been a number of briefings we requested. and frankly you're division of government has been more helpful than others, shall we say. i'm going to pivot to committee investigation of the silicon valley bank failure. your staff has been working to

get us some answers on the outstanding questions. you did your own report, now it is our turn. can you appreciate our committee is conducting its own independent review of what happened in march? >> very much so. >> will you commit to producing interview notes and allow us access to the staff who participated in the interviews conducted for the fed's own internal review of bank supervision report? >> i am not in the middle of that discussion, i do not know where that stands. i do not want to make commitments i cannot back up. i will be happy to understand where the discussion is and try to work with you. >> we will follow for sure on that. when vice chair bar concluded that a culture shift happened, do you know if fed officials spoke with the of other banks, or was this made solely after the review of svb? did they find a problem throughout the fed?

-- systemic problem throughout the fed? >> i did not play any role by design in the preparation of the report. i think i know the answer, but i do not want to guess. we can give you a 100% clear answer on that, but i would rather not speculate. >> along with the fdic and department of treasury, you expose the systemic risk resumption for silicon valley and signature bank, guaranteeing all depositors will be made whole. regulators could have used liquidation authority, the very tool dodd-frank was intended to resolve the two big to fail institutions while protecting taxpayers. why was the decision made, and do you think it would lower the bar to use sre in future bank failures? >> i hope we do not have to face that question again as long as i live. >> we all do. has a new bar been set? >> this happened with no warning

in the middle of the night thursday night. less than 12 hours later, we are on the phone with the fbi see -- fdic. it was an emergency situation over that weekend, we could see there was an electronic run building up. we did what we had to do to address that, and i think successfully. >> time is expired, we recognize the man from illinois for five minutes. >> thank you. wars have historically been associated with elevated levels of inflation worldwide. though the relationship is complicated and there can be impacts on supply and demand, higher inflation may be one of the many prices humanity pays for the decision to go to war. we do not have boots on the ground, there is no doubt that both europe and the u.s. are effectively at war and support

the freedom of the people of ukraine. his 2% inflation target a realistic and appropriate goal during a time when much of the world is effectively at war, or should the 2% goal be thought of as a go from normal times, with policies being put in place that will return to 2% when the war is over? or at least when we have decoupled adequately from the russia economy? >> 2% is the goal and will remain our goal. it is a medium-term goal, so we are using our tools to get the inflation level back down to 2%. we are not considering changing it because of the war in ukraine and i do not know that that is playing a particularly important role in inflation today. when commodity prices went up at the beginning of the war, it certainly was. >> it is an important factor for europe. you have been trying to deal

with the question of how you balance the dual mandate. whenever you try to optimize two different things, the first step is to put them into common units. just to be specific, let us say you are missing your unemployment goal by 1% and missing the inflation goal by 1% in the opposite direction. at some point, do those to cancel? is 1% in one goal equivalent to the other, or do you need to percent missing of the unemployment target? there must be the coefficient in the taylor rule and things like that that try to predict behavior, but internally, how do you view the difference between 1% unemployment missing on the target versus 1% of inflation? >> taylor rule is a good place to start.

>> it is a coincidence if the coefficient is one because you could choose annual or decadeal and get different numbers. >> there is a significant amount of research about relative social costs of inflation and unemployment. you would not want to ignore the research either. i think there will be a lot of judgment. the labor market is extraordinarily strong and we are far from the inflation target. >> you will get complaints the labor market may be too tight. at least from the taylor rule point of view, there is a penalty that you pay when unemployment gets too small. there is a target you are trying to hit. >> both sides are calling for type policy.

>> at present. you can foresee times where there will be tension. you are saying it is pretty much 1% -- >> i think it does not lend itself to that level of precision. >> it is either that or you have to face questions like you've been facing for the last decade, and just how do you balance this? in terms of internet or electronic runs on banks, it seems like that is a new thing that will have to inform bank capital and liquidity. if you get a significant electronic run on a significant sized bank, is there anyone but the federal reserve that can provide that emergency assistance? or do you have to be the only line of defense against big internet runs? >> regulation and supervision can play a role.

>> part of that stopping the run from starting is knowing that if it starts, there is someone or some entity that can stop it. >> we are the lender of last resort, that is something only the central bank can be or do. changes to regulation to ensure you do not have this mismatch between liabilities and available cash to fund the run, that is something that we can and will address through regulation and supervision. >> the gentleman's time has expired. the chair recognizes herself for five minutes for questioning. welcome, chairman powell. i am going to start asking about the fomc, the federal open market committee latest forecast . it predicted that core inflation will fall below 3% within a year.

this forecast has been the exact seem for each fed meeting over the past two years and has been wrong each and every time. why do fomc participants continue to make the same forecasts, and what data are they reviewing? to make the forecast? >> end up -- >> in the world of economic forecasting, there been a number of private sector forecasters that are well resourced and the data is all public. we do not have private data, that is not how this works. i think essentially all forecasters have made the same mistake. which is thinking at the beginning the supply chain problems would be resolved quickly and workers would come back to work quickly and things like that. inflation has consistently surprised us and all other forecasters by being more

persistent than expected. i think we have come to expect that and expect it to be more persistent. >> it seems we have moved past transitory and they have been saying it will be under 3%, clearly they have missed that. it was just a little concerning to me, there is something we are missing. let me move on. in your press conference last week, you stated the conditions we need to see in place to get inflation down are coming into place. what conditions are you seeing that show we are moving in the right direction? my constituents are feeling great pain of inflation that continues to persist. >> their underlying conditions, but the point is you get them in place and the process of inflation moving down will take a significant amount of time.

we have been consistent in saying that. the conditions would be we need economic growth to be slower, we needed to be modest and it has been a modest levels. secondly, we need supply chain bottlenecks to go away and get better. thirdly, we need the mismatch between demand and supply in the labor market to diminish and that has been happening. all of those things are happening much later and much more slowly than we would hope and my committee and i believe the process of bringing inflation down is going to be a relatively lengthy one. >> it is clear that spending on consumer services, for example. a car oil change, a haircut or concert ticket remain almost unresponsive to rate hikes. do you have a projection for when we might see spending go down?

>> non-housing services, the broad service sector is famously less responsive and less focused on rate hikes and the cost of capital. that is about half of core inflation. i think broadly this is what forecasters think, it will take some softening in labor market conditions. in the service sector, it is very labor-intensive. by far the largest because for most companies is labor. what you want to see his rebalancing so demand for labor and supply, a lot can happen through job openings. >> the consumer price index or cpi, which measures the price of everything from groceries to cars to rent, has declined from the peak. personal consumption expenditures that measures consumer spending remains historically high.

how else can you account for the difference when it comes to a rate hike pause? >> we never use the word pause and i would not use it here today. we agreed to maintain the rate at that meeting, almost every single of the 16 of the 18 participants on the fomc wrote that they believe it will be appropriate to raise rates, raise them twice this year. i think that is a pretty good guess of what will happen if the economy performs as expected. >> more rate hikes are needed to bring inflation back down to 2%. we are concerned about a hard landing and recession. my time has expired, i recognize the gentleman from illinois for five minutes. >> thank you.

in june of 2021, you said climate change poses profound challenges for the global economy and financial system. in october 2021, reporting on climate related financial risk and addressed climate change as a threat to u.s. financial stability. the fed released supervisory principles for large banks that said financial impacts that result from economic impacts of the change in the transition to a lower carbon economy pose a risk to the safety and soundness of financial institutions of the united states. he made many comments that are broadly consistent with that and i appreciate the comments you have made in that capacity. can i safely conclude that in june of 2023, 6 months after that release, that the fed position is still that climate change presents a risk to the global economy and financial

system? >> yes. i hasten to add our role in this is important, but quite small around regulation. >> understood. the reason i ask that question is because on may 11, a colleague at a speech in spain said quote climate change does not pose a serious risk to the safety and soundness of large banks or the financial stability of the united states in said risks posed by climate change are not sufficiently or unique to merit special treatment. should we understand that he was speaking in personal capacity and not as a designated of the fed? >> i do not comment on things my colleagues say. >> i understand, but you understand the concern that if markets and regulators are to understand the fed has a

consistent policy and one of the members is saying something that appears to be directly opposed to fed policy from six month earlier, that is a concern. >> governors have had the ability and reserve bank presidents, the ability to have their own views on things. that is going to happen and it is probably a good thing that we have diversity of perspectives. there may be less then you suggest. what i am saying is -- the extent we have a role, it is to ensure banks understand and can manage the risks they face from climate change. >> i do not want to create internal tension, but we are all aware you among anyone is aware your words are closely scrutinized and we were concerned with the words of your colleagues. i would like to introduce a working paper from the european central bank, the impact of global warming on inflation. i did not know if you saw this

report that just came out recently, it says climate change poses a risk to price stability by having an upper effect on inflation. both food prices and headline inflation. what i wonder, if in fact we are looking at a world where climate change for the european central bank will increase inflation and we were to find ourselves in that world going forward, with the fed or other central regulators say we have tools to address this? or will we say that is non-core inflation, what are we going to do in hindsight? it feels like we have a major bank regulators saying climate change is running the risk of inflation, but i do not know what tool you would use to address that. >> i can say for now, this does not enter my thinking in any way that we would in the near term

change our inflation goal because of climate change or the need to deal with -- there is a lot of thinking and research that over a long period of time, really the process of investing large amounts of money in a green transition could drive inflation up. but that is not something we are thinking about today. during our meetings, we are not thinking about climate change as something that is relevant to current inflation or monetary policy, and that is very much our focus is inflation today. >> if we agree this is systemic risk and leads to inflation, there is a concern there. in april of 23, the report on svb, one of the lessons noted in the fed review said this was an opportunity for regulators and bank managers to be more willing to adopt a cautionary perspective in the fed must recommend supervision based on what we learned.

i am trying to figure out if we agree this is a forward risk, how do we get the fed the tools to apply a cautionary perspective? >> the chairman can submit an answer in writing to the record, i now recognize myself for five minutes. in march, you confirmed the federal reserve is a consensus organization built on garnering broad support before agreeing to any proposal. given the breadth and scope of potential changes to the capital framework that is under review right now, the consensus driven approach seems to be all the more important. i am concerned of the vice chairman for supervision has seemingly been given far too much latitude to act unilaterally, especially in light of a section of the dodd frank act, which provides the vice chairman for supervision

authority only to develop recommendations for the board and oversee supervision and regulation. can you speak to the process that is underway? is the vice chairman acting unilaterally, or? is that a wrong characterization? if it is a recommendation, can you walk through the steps the board will take from recommendation to a vote? >> i think what you see is very much the way the statute works. the vice chair for supervision has a responsibility, obligation to develop regulatory proposals for the board that will be considered by the full board. he is not the comptroller of the currency, he brings proposals to the board and the board votes by majority vote to support them or not. that is how that works. >> is he including other members of the board currently? >> all of us have been getting briefings on what has developed, but ultimately the job is to

present something to the board for consideration by the board. >> once he presents recommendations, how long will there be debate and deliberation? is it transparent for the public? >> there will be a meeting, it could be a virtual meeting, this summer to vote on these things. in the meantime, there is a lot of conversation going back and forth now. we are in that process now, but things are moving around. >> it seems right now the vice chairman writing personalized assessments of bank failures and results of new fed climate scenario experience without a whole lot of collaboration with other governors. given the new scheme could raise capital requirements by as much as 20% in a well-capitalized banking system and the cost of such changes could be $100 billion or more in lost gdp, i am concerned with your testimony this would be a virtual vote.

shouldn't this be a more transparent public word meeting in a process that includes all members of the board? >> it is really just a question of calendars. that is something -- we have not decided what form the meeting would take, would it be virtual. >> given it is a pretty big decision and the law requires the full board to make the decision and not one board member to act unilaterally, we hope the fed would hold public meetings on the new proposal. will you and the federal reserve board commit, when the proposal is voted on, to also include your economic analysis that would justify whatever capital changes are made? in a quantitative form? >> i do not know -- i am not

sure we will have exactly what you are looking for. we will create a public record that supports the proposal, whatever it turns out to be. the votes will be what they are and it will be subject to public comment and analysis, no doubt. >> in order for the notice and comment period to be meaningful, i think market participants will need to understand on a quantitative basis what the justification is for additional capital requirements, if in fact that is what the proposal is, given the fact we already have a well-capitalized system. i do not have much time left, will you commit to regulatory requirements based on the complexity and size of financial institutions? >> i will commit to supporting that, i cannot commit to what the final product will be or what the vote will be. as i mentioned, i do think we benefit hugely from a diverse

banking system and i would not want to do anything to jeopardize that. >> the wall street journal published an article that stated unlike your predecessors, you have not focused on fiscal responsibility. do you like to correct the record regarding that? >> i would. it was just an op-ed, but factually incorrect. you have heard me do this, i have said the same thing my predecessors have said. the u.s. federal budget is on an unsustainable path, which means the debt is growing faster. we are going to need to fix this into sooner is better than later. >> time has expired. the gentleman from new jersey is recognized. >> i am concerned the current regulatory environment disadvantages of small and regional banks, particularly with first republic receivership i am concerned largest banks

were given preference, enabling larger banks to grow even bigger. my understanding is certain regional banks were unable to bid because of an extensive and time-consuming process put in place by regulators that put them at a disadvantage. are you aware of a regulator mandated preapproval process that banks must complete to bid on? firms going to receivership is there a notification process to inform banks that they can go through the process? some who wanted to bid were unable to. >> this is something within the jurisdiction of the fdic. when it comes down to selling a closed institution, that is something the fdic does according to their own procedures. i am not aware, -- that is a question, that is the heart of what they do. they have the lore, they have the people with experience. >> small and medium bakes old a

large portion of our real estate loans. higher interest rates may be increasing the risk commercial borrowers are not able to refinance loans and property values could lead to losses by banks that hold commercial real estate debt. i am concerned such a correction britain's the stability of lenders. how is the fed looking at this and helping banks manage their portfolios or think about the risk of commercial real estate loans, and what guidance is being provided given nearly 1.4 trillion in commercial margins are shut -- charset to mature? >> i think you put your finger on it. this is a problem or for smaller banks. it is the banks that have high concentrations. there will be losses in the office and mall sectors. there is a supervisory playbook, supervisors are working with the

company to help preserve capital and do the right things to get through what may be a difficult time for some banks that have high concentration. >> there are concerns banks may be tightening their lending process and processes and tightening what is available. are you concerned higher rates and instability will lead to a credit crunch that could make it harder for small businesses to finance their operations and potentially lead to a rolling blackout of loan defaults across industries? >> we are watching that carefully. bank credit conditions have been tightening for a year, partly as a result of rate increases. we are alert that the shocks in march might exacerbate that. it is something we will continue to monitor. >> are you concerned about nonbanks and the crunch? >> the banks are highly

regulated and have capital, some of the non-bank lenders are in a very different place. we do not regulate and supervise them, so it is something we are watching. >> how do you think we should be looking at nonbanks? >> where there is same activity, there ought to be same regulation. should not be able to conduct the same activity -- we regulate these things for a reason. if we are not regulating appropriately, that should be changed. if you can go across the street and start a business, it does the same thing without regulation and that is not effective or fair. >> with conversations up and running and driving toward some conclusions, is that something you have been watching so you have fed representation -- what are your largest concerns in terms of requirements and how you are thinking through that

right now? >> these are going to be very important. a number of important proposals are coming, it would put out a couple principles. banks are strong and well-capitalized, that is broadly agreed. i think we want to understand how even higher capital is justified. there will need to be a case made for that. almost as important or more important is we need to respect the diversity of institutions we have in this country. we benefit from having banks of different shapes and sizes and we do not want to push regulation or capital to a police were only the biggest banks have a viable model. we are a long way from that, but we need to keep in mind. >> i yield back. >> we have two more members here, but unfortunately we have a hard stop at 1:00. can we go over by five minutes?

no good deed goes unpunished. we will go to mr. davidson from ohio for five minutes, then miss garcia from texas for five minutes, then we will wrap. >> thank you for the extra time so we can get these questions in. picking up where my colleague left off talking about nonbanks and banks and the regulatory framework, you published online the list of master accounts the fed has. are any of the master account holders non-fdic? ? insured entities >> any of them? i do not know. >> can you get the answer back to us? >> yes. >> when i think about dynamics going on in the markets related to banks, nonbanks, securities, one agency in particular has been activist in this place. it is 10 then surely related to the fed.

but crypto and digital assets in the u.s. have a market cap of around $1.1 trillion right now. do you acknowledge this asset class has staying power in the u.s. economy? >> it appears to have some staying power. the 1.1 trillion dollars, what was that a year ago? a lot higher. >> it had volatility in large measure due to the lack of legal clarity, hopefully this committee will help that quite a lot this summer with at least two bills, one on stablecoins and one on market structure. it will be clear not just for congress, but regulators, including chairman gensler and market participants, whether they are forming the ideas or investing in the ideas or participating in activities in the space. when i think about activities, one of the core functions that has taken place for a while is

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