>> quantitative easing? that's a tool we tend to use when we're at the effective lower amount and can't cut interest rates anymore. nothing like what we're seeing the current day. it's a different test for stopping quantitative tightening. we would use q.e. going forward only in a situation where when rates are at zero, and we're a long way from zero now. >> so you think, just generally speaking again, if things were to remain stable, you'll continue to unwind the balance sheet, continue quantitative tightening. can't give me a range on this? is that what i hear you saying? >> that's right. >> well, i encourage you to keep doing that, because i think that's important to be able to make sure you've got powder for the next issue we may face. thank you very much. appreciate you being here. >> senator warner. >> thank you, mr. chairman. chairman powell, good to see you. one of the thingsi've got two oi

want to get through fairly quickly. while our regulatory framework should always promote financial innovation, and innovation can't come at the expense of things like anti-money laundering, consumer protection, financial stability, i continue to worry, and many of these hearings where we see this regulatory creep outside of the boundaries of traditional financial regulation, we are starting a system from scratch, if you would design it this way. it is one of the reasons i'm looking forward to working with chair scott on a framework at looking at stablecoins in particular within the regulatory perimeter.

i'm looking to make sure that we get those guardrails put in place, how it touches the fed, that something terribly important to me. you and i have talked in the past about the notional idea of the same activity on the same regulation. that's in the nonbank sector. would you like to waxed briefly around this question of stablecoins and how we think about them in the sense of the same point of being similar to other activities with the same regulatory structure? chair powell: we definitely support these differences to create a regulatory point around stablecoins. it's important for that development in a safe and sound manner that protects consumers and all that there be a within

the last contract -- congress to add our technical thoughts on how to do this. we think it is a constructive exercise. sen. warner: there's a lot of expertise in this sector, people coming in with a lot of opinions in crypto, from over the top to the other end of the spectrum. i'm going to need to rely on your expertise as well as we try to work through a framework for stablecoins. i know that there were a lot of earlier questions on cfpb. you know, i think the record is pretty darn good, returning $20 billion to consumers. matter of fact, last time we had the previous chair here, mr. chopra, we talked about $55 million to virginians. i have to mention this for my colleagues. tim kaine and i did a town hall last night. lots of things happening.

normally, we would get maybe 3, 5, 6000 folks on a town hall like that. we had 60,000 last night. i haven't seen anything like that in my time here on the hill . a huge amount of concern about what the doge boys are doing. whether the information is safe. in light of the cfpb, without a direct connection, she was saying are there deposits -- are the deposits at the bank safe? we tried to give them assurance, but i said to them, ma'am, i'm going to be talking to the chairman of the federal reserve tomorrow. with this dim munition or shuttering, at least, for the time being, of the cfpb, can i tell mary from virginia that her

bank account is safe? chair powell: they are saved overall across the economy, we still have positive insurance in the banking system is well-capitalized. sen. warner: i think that the concern being raised was over the dim munition of consumer protections and her concerns about the dollar being safe. the last thing i want to recognize is, you know, there have been reports in the media about the sin this in the treasury markets. -- thiness in the treasury markets. what to do with these unpaid tax cuts. one of the things that was striking to me was that yesterday the president mentioned how he was examining treasury debt payments for possible fraud, suggesting that the debt may not be as high as possible. we all understand the full faith and credit of the united states

is based on the reputation. if this president were to suddenly say that i'm wiping out this debt because i don't believe we owe it, what kind of effect with that have on the stability of the dollar and our economy? chair powell: it will probably not surprise you that i will defer to you on that question. caroline: from the fed -- sen. warner: from the fed standpoint, the president of the united states saying we will pay our treasury debt, you will have no view at all? chair powell: i'm not going to comment on things the president says. sen. warner: i would like to see us at some point get a stronger answer on that. i think that in light of the presidential willingness to shut down agencies willy-nilly, his ability to curtail payment of debt would have devastating consequences on the economy. thank you, mr. chairman.

chairman: senator brill? senator: thank you, mr. chairman. we been referencing elon musk, the work of doge, it is important to remember the trump ran on this. he said that we would look for wasteful spending across the government. we are $36 trillion in debt. it's morally irresponsible. the difference between this administration and the last administration is that trump is the final arbiter and it's interesting that none of you had anything to say over the last four years when it's clear that the commander-in-chief wasn't in command in if we are going to use the term copresident, let's go back and say copresident -- copresident jill biden. it seems that some of the biggest decisions were made during the president's afternoon nap time. we need to be a little bit more honest about what has been laid out and what's actually occurring. chair powell, i do want to discuss some monetary policy issues, but first i want to

highlight some supervisory items. unfortunately, we started 2023 with several bank failures in the fed itself admitted that their supervisors were too slow to ask. the question was asked earlier about who was fired and who was not. i think there is real merit to having accountability that we have not seen their. in the aftermath of those failures, the fed was certainly not slow to act when it came to new regulations. like the new capital requirements that would have but the u.s. banks at a global disadvantage and hurt consumers in my state. the way i look at it is the world came up with a gold standard. and then the vice chair said hold my beer. unfortunately, that hurt the people of alabama. in addition to that we had the community reinvestment act and stress testing frameworks adopted in secret.

as we discussed last week, the reputational risk in just the arbitrary nature of that and those standards that were used to push political agendas. none of this is acceptable and we have to take a look at how to promote greater accountability and transparency into the fed's supervisory function. shifting gears, as of january 30 at the federal reserve had a mark to market loss on its balance sheet of roughly $221 billion. looking back, the fed has posted losses since september of 2022. meanwhile, we have seen transfers to the cfpb totaling $2 million since september of 2022. just to clarify, chair powell, these money transfers are requested by the cfpb director each quarter, and then directly deposited by the fed. is that how that works? chair powell: so, the director

of the cfpb requests money and we under the law, we send the money, yes. sen. britt: dodd-frank prohibits the reviewing of those requests? sen. britt: correct -- chair powell: correct. it gives up to 12%. there's a ceiling on it, but that's correct. sen. britt: to level set, how many times has the cfpb funding request been denied by the fed? chair powell: zero, we don't have the authority under the law. sen. britt: that's what i thought. i would like to applaud the administration for inserting accountability back into the agency by pausing these quarterly blank checks. i know that there has been a lot of conversation around the bureau for the last few days, but i want to focus on the last couple of years, particularly the $2 billion the cfpb received

from 22 through the last receipt on january 22, 2020 five. congress specified in statute that the fed should fund the cfpb through the combined earnings of the federal reserve system. as i mentioned, the fed has no current earnings. they have a balance sheet of -200 million. instead of the recent audit statement saying the fed is funding the cfpb through assessments on reserve banks, mr. chair, there are only two statutes that authorize the fed to make reserve bank assessments and neither permit the cfpb to fund transfers. so, what [no audio] what authority, exactly, did the federal reserve have to assess

the reserve banks in this manner? >> senator van hollen? senator van hollen: i would point out that trump did not run on implementing project 20 25. when he was asked on the campaign trail about the project, he said he didn't know anything about it, who are those people? yet early on and quickly he installed a key architect of project 2025, russ vote, as the head of the office of management and budget, which we know is the command control center for the budget overseeing all federal agencies. that's what elon musk is doing now, implementing project 25 -- project 2025 that he said he knew nothing about it he said that because he knew it would be unpopular to take the financial cop off the beat. i want to start by talking about

what's happening over at the consumer financial protection bureau. that is the cop on the beat to go after fraudsters and scammers who cheat americans out of their hard earned money. they have returned billions of dollars to our constituents, to the consumers who have been victims of these scams. in doing so, they have earned some powerful enemies who want to shut them down. elon musk is doing that dirty work on behalf of those fraudsters. there is something especially twisted about the richest man in the world shutting down an agency that helps victims of scammers and fraudsters recovered just a little bit of their hard earned money. i find it especially interesting that the new self-declared head of the cfpb, russell vote, told employees not to come into the office and essentially to stop work.

here's what he wrote. "employee you should not come into the office and stand down from performing any work task." so, this is an interesting situation. federal employees continue to get paid, but the trump administration tells them to stop doing their work. that is, apparently, what the trump administration is -- what the trump administration thinks of as a good deal for the taxpayer, paying employees not to do their job. mr. chairman, i have a simple question for you, is that a practice that you pursue at the fed, to pay employees and tell them not to come to work? have you done that? no -- chair powell: no. sen. van hollen: that wouldn't be very efficient? chair powell: it would not. sen. van hollen: yet that is what the so-called doge efficiency boys are doing. in addition they are rummaging through the private and personal

sensitive information of americans at the department of treasury. seems to me that the trump administration and elon musk are focused on everything except what donald trump said he was going to focus on during the campaign, which was to bring prices down. when you look at the price of eggs these days, i noticed that waffle house just instituted a new $.50 per egg surcharge due to the nationwide rise in the costs of eggs. they said that's going to be a new surcharge with other restaurants following suit. you have seen that, right, mr. chairman? and at the same time the trump administration has restricted federal agencies from providing the public with information about the bird flu. avian flu. which is a part of the costs of

the increases in egg prices. what we are really facing here is an administration that campaigned on bringing down prices and is not doing that, did not campaign on project 2025 and that is what they are doing. when it comes to prices, mr. chairman, the president is also talking about significant increases in tariffs. our republican colleagues are also talking about passing a tax bill that gives disproportionately to the super wealthy, adding trillions to the deficit, by their own account. they are talking about playing around with the baseline. my question to you is simple. all things being equal, do the big increases in tariffs and increasing the deficit and the debt put upward pressure on inflation? isn't that simple math? chair powell: you know, it really does remain to be seen what tariff policies will be implemented.

it would be unwise to speculate when we really don't know. we have seen proposals, but it is hard to say what's going to happen. sen. van hollen: last time the trump administration was in office, the fed took actions because they were concerned about the impact of increasing tariffs. isn't that the case? chair powell: we wound up cutting rates in 2019, i guess it was, it was because growth slowed and confidence was weak and the global economy was weakening. the net effect of that, it's not just tariffs. it's tariffs, immigration, fiscal policy and regulatory policy. those will all go into a mix and we will try to make sense of it. sen. van hollen: if you could get back to me on the question of increasing the deficit by trillions of dollars and what impact you believe that has on inflation and prices. thank you, mr. chairman. >> senator loomis? senator loomis: thank you, mr.

chairman. thank you for being with us today, chair powell. i think you are aware of the direction my questions from take. they will be focused on bank supervision and that function of the fed. when you and i were dollars, -- toddlers, 1956, the chairman of the fed at this time said that the federal reserve board is an agency of the congress. ben bernanke said something similar in 2013 when he told janet yellen yellen that congress is our boss. do you agree with that statement? chair powell: yes. the way i always say it is that our accountability and supervision runs through the legislative branch, not the executive branch, as it does through many other forms of government. sen. loomis: thank you for that.

i wouldn't have guessed that that was going to be your response. the way that the fed has behaved for the last four years in its relationship with the u.s. congress is to thumb its nose at congress. your staff has repeatedly stymied information requests from this committee. notably made by myself, the chairman, the ranking member, senator tillis, former senator toomey, and others. in my experience, the fed is a black hole. it consumes information but never releases it. your fellow governors have personally misled me on at least two occasions with respect to wyoming and digital assets.

in recent federal court filings, former senator pat to your staff of lying to him while providing technical assistance on legislation that passed in the national defense authorization act in 2022. now, i have behind me a statement by the fed general counsel. one of the staff that is sitting behind you today who said -- the fed generally resists legislative prescriptions. to me, that is thumbing his nose at congress, the very people that you and i just agreed to you are responsible to. and of the people depend on. this is why the american people think there is a deep state.

this is why they think there are faceless bureaucrats making policy to hurt the very people of this country. look at the mess that the fed made of the silicon valley bank. i contend that there is a lack of understanding that is deliberate on the part of the fed with respect to digital asset policy. so, the constitution says congress is your boss. but somehow, your staff have not gotten that message. so, chairman powell, do you commit on behalf of yourself and the federal reserve staff's to comply fully with all document demands issued by this committee in a timely manner? chair powell: sure.

sen. loomis: will you instruct your staff to their responses and not to obstruct the oversight functions of this committee? chair powell: we always work with the committee to be responsive to your requests. sometimes they are beyond our capacity to respond. you have to do that, but we always responsive to committee requests. sen. loomis: i will look forward to engaging with you when you feel that our requests are outside the scope of the oversight we have over the fed. do you come -- commit to disciplining and removing staff found to have engaged in the banking activity -- debanking activity regarding chokepoint 2.0 and other misconduct? chair powell: i can't make an open-ended commitment to remove anybody, but i will tell you i

am struck and my colleagues and i are struck by the growing number of cases of what appears to be de banking and we are ready to take a fresh look at that. i took the thing you showed during the debanking hearing, we saw that and we took that out of the many will. sen. loomis: thank you, my time is up. click senator smith question mark senator smith: thank you for being with us today, chair powell. appreciate your presence here. i'd like to start with the issue of the rising costs of homeownership, something that is a great interest to many colleagues on this committee. mr. chair, i know you care about making homeownership acceptable -- accessible to folks. i know that many folks to. i think that this is something that we can agree on, the rising

costs of homeownership is a big challenge for our constituents, for americans. one of the big pressures, one of many, one of the big pressures is the rising costs of home insurance. families, seniors are struggling to manage that an increase in home insurance rates. we have seen this over the last seven years. chair powell, you have told the committee in the past that the rising costs of combined insurance for your home has been a source of inflation, as we try to manage it. i don't know anyone who doesn't see this rising crisis and insurance rates as being caused by the massive flooding and fires across the states. these are climate related events.

not a political position, just a fact. we have banks that require a homeowner provided insurance as a predicate for getting a mortgage. there's a big question about what will happen when insurance becomes unaffordable or in some parts of the country literally not available, and what impact that would have on the mortgage markets, on the value of american homes. last week a new analysis from 1st street showed that overall the value of u.s. real estate could be reduced by $1.4 trillion you -- $1.4 trillion because of unaccounted for climate risk, the risk of not being able to afford home insurance because of these extreme weather events. the prospect, trillions of dollars in property becoming uninsurable, is clearly a recipe it seems to me for market instability in the rental and mortgage markets. my question, chair, is that given these trends, how do you

think the fed and we should be thinking about the challenges that these events are going to pose to insurance markets and to the overall financial stability of the economy? i'm not asking you to comment specifically on climate change. i understand that my colleagues on the other side of the aisle see that as a political question. it's more like what do you see is the risk to financial stability here? 4 we don't regulate or supervise insurance companies for the most part. we are seeing the same thing. banks and insurance companies are pulling out of coastal areas, areas with a lot of fires. what that means is that if you fast-forward 10 or 15 years, there will be regions of the country where you cannot get a mortgage, there will not be atm's, banks won't have branches, things like that. that's a possibility coming down the road.

banks will not stay there and keep making loans in the evidence of disasters, they can cancel those policies every year. i think the risk is they just won't be there and that people won't be able to get them. that's the issue. sen. smith: seems to me that that would be a massive source of instability in the economy overall, if you were to see that kind of dramatic decline in homeownership. home values, the disruption that would occur as people could not be in their homes anymore. chair powell: if that happens, it will fall on home in residence, but also state and local governments. it's what you see happening now, where they are stepping in where states with insurance are going away, private insurance, states are stepping in. they want those areas remain prosperous. it will have serious economic

consequences. sen. smith: to try to figure out how to provide re insurance, as an example, places where commercial insurance is not available, that would be a massive impact on state budgets. in this committee i heard comments on both sides of the aisle talk about the challenges overall with flood insurance, as an example, and the massive expense that would have as well. this is an important issue we need to pay attention to end it has a fundamental impact on the health of the economy looking down the road and at where we are right now. i'm out of time. thank you, chair powell. you and i have talked frequently about my deep and keen interest in the community reinvestment act and i will follow up with a question about that for the record. >> thank you, senator smith. senator haggerty? senator haggerty: thank, chairman scott. welcome, chair power -- chair

powell. less than a month ago you expressed serious concerns over the risks of inflation, but since then the fomc has cut the target rate by 100 basis points, as you mentioned in opening remarks. fomc says now that they felt the labor market and inflation have reached a point where you are comfortable maintaining the target range. markets have been pricing in fewer cuts. i want to talk probably about the market conditions that you see. is there evidence of a higher neutral rate and emerging at this point? chair powell: yes, let me say there was a lot of reason to be concerned about downside risk towards the middle of this year, but concern has diminished significantly, labor market is very strong. my own view, and there are many

different views on this, the neutral rate will have risen meaningfully very hard to be precise about it. extraordinarily so, historically. many of my colleagues feel that way. sen. haggerty: seems that way. i would like to turn now to what seems to be a popular topic at this point, the cfpb. in your response to the earlier questions, you confirmed that when they submit quarterly funding requests, the fed is not in a position to exercise discretion over what the funds are used for, correct? chair powell: as long as it is compliant with the law. sen. haggerty: it strikes me that the fed is not in a position to hold the cfpb accountable for what it does or how it spends its money. congress hasn't been allowed to hold the cfpb accountable for what it does and how it spends its money. it looks like no one has been

able to hold the cfpb accountable at all. now i hear complaints coming from every corner, particularly from the other side, complaints about the excessive delegation of authority. when the entity was intentionally created to be wholly unresponsive to elected officials. i find that quite risk. -- rich. coming to a point on climate, particularly the fed forays into climate activism that have taken place over the past four years in the recent retrenchment we have seen. it has sought to benefit from past climate activism incredibly claim they have divorced themselves from partisan climate policies. they need to end there climate policies. while much attention has been given to the potential external

pressures on the fed, it is critical that we scrutinize how the fed's own regulation and supervision might be utilized to politicize institution. as they embrace partisan climate policies, the fed involved itself in debates to invite legitimate political scrutiny. i want to urge the fed to refocus entirely on their core statutory mandates. i know it is a commitment you and i share, mr. chairman. thank you. chair scott: thank you. senator warnock? senator warnock: thank you very much, senator scott. chairman powell, i want to echo the words of the ranking member, warren, on the project 2020 five illegal attack on the consumer financial protection bureau. certainly, the bureau was not created to be dismantled. since its inception they are the

only agency solely dedicated to protecting americans from scammers and predatory companies. the cfpb reduced costs for americans, returning more than 21 billion dollars to americans who have been cheated since its inception. i want us to focus on that as folks are talking about chasing after waste, fraud, and abuse. the cfpb has returned more than $21 billion to americans. make no mistake, the attack on the cfpb will increase costs for americans in give the green light to fraudsters and predatory actors seeking to cheat hard-working americans. thousands of georgians of all political stripes have written

into my office and they are alarmed by an unelected billionaire and his hacker dangerous attempts to access americans private data in the treasury department systems, which controls $6 trillion in annual payments to millions of american citizens, including social security, medicare, and tax refunds. quickly, yes or no, have elon musk or members of his team, to your knowledge, attempted to access the fed protected data and some to systems? -- data and systems? chair powell: i don't think so. sen. warnock: would you be able to make us aware if elon musk or doge attempted to reach those systems? chair powell: yes. sen. warnock: monetary policy states that the type labor

policy has allowed for employment and earning gaps between hispanic and white americans to narrow. i was glad to see that many of the long-standing disparities in employment by sex, race, ethnicity, and education have narrowed under the biden administration, with some gaps having reached historic lows. specifically, the gap for black workers and white workers is near its lowest point in almost 50 years. that is the economy that the trump administration is inheriting. a historic low of almost 50 years. as you work to promote maximum employment, what steps with the fed take to make sure these equity gains are permanent? chair powell: it is both of our mandates, really, because as you well know high inflation hits

people at the low end of the income spectrum first and most. in addition to that, we know the benefits of a strong labor market time can be really visible and important in those communities as well. we pursue our mandate, we keep our heads down, and it works out that that's the single best thing we can do to foster closing those gaps. sen. warnock: you pursue the mandate to make sure it's working. would you agree that we need good equity data to continue to close those gaps around race and gender? chair powell: we will always be in favor of good data at the fed to. we do actually have quite a bit of it on our website. sen. warnock: but if we don't have that data, it would be difficult to know? chair powell: yes. sen. warnock: glad to hear that you still believe in the power of good equity data in policymaking.

better to fly with the data then to fly blind. not sure what so controversial about the data. i was disappointed to hear that the fed, independent from the white house, scrubbed their diversity and inclusion section from their website after the trump executive order, they also scrubbed data on racial, ethnic, and gender equity for economists and researchers, i hope you will continue to make sure that the public has good data as to how they are working or not working for the historically marginalized americans, and you will consider the conditions you made around the whitewashing. on the black-white wealth gap or employment gap, it's understanding, from what you have seen in the data come historically, what kind of events have caused the black-white wealth or employment

gap to widen? chair powell: well, high inflation. down turns. you see generally, taking the lack of employment rate, it moves generally at twice the speed of the white unemployment rate. when it goes up, it goes up faster and comes down faster. at the end of the day, there has always been a gap and we want to run a strong labor market. we target overall, you know, overall labor market conditions for maximum employment, but one of the benefits is that the gap comes down. sen. warnock: we all know that firing bank examiners, weakening the fed's supervisory capacity base, unfortunately, real consequence to eliminating those financial regulations that keep us safe.

working people are the ones who especially suffered. thank you so much and i will close these gaps. chair scott: senator banks? senator banks: thank you, mr. chairman. chair powell, thank you for your reports in coming to work with me and my office last week as well. we have enormous power over the ability of americans and the earning of their living. an especially big impact on manufacturing, which depends on big investments. chair powell, the fed data on manufacturing is still holding up nationally, but it doesn't look very good in the chicago region, which includes most of my state, and indiana. manufacturing products are declining. steel demand is at a low level. auto production has slowed. machinery orders are down. what does it say about the rest of the country when manufacturing in the heartland

slows? does it signal trouble for industries in other parts of the country? chair powell: it can. it doesn't always. manufacturing jobs tend to be high productivity and are very important to the economy. i would say that over the last couple of years manufacturing was pretty weak during, you know, the years in which we had high gdp overall. manufacturing is a smaller portion of the economy than it used to be, but it is still extremely important. sen. banks: senator reid as to why free trade doesn't work when one of the big players doesn't abide by the rules. china shock is an example of that. how do you account for an industry that has repeatedly been suffocated by unfair competition? chair powell: we don't do trade policy, we are not responsible for it and don't comment on

those who do do it, so we don't really have a role in specifically focusing on that. that really is left to those who have responsibility over trade. sen. banks: do you agree that a healthy manufacturing economy is important to the overall economy? chair powell: i do. sen. banks: i hope you are able to read the essay in the times regarding why a trade imbalance is harmful to the citizens of both countries. how does the fed take the trade deficit into account in decision-making at all? chair powell: again, we really don't. we are aware of it but it doesn't really affect our mandate goals. sen. banks: so, not at all? chair powell: no. i did read his book, by the way. sen. banks: it is a good book. conventional economists reportedly hate tariffs, but indiana gained a jobs during the 20182019 tariffs.

even though conventional wisdom is that tariffs reduce jobs, do you commit to following the data and not prejudging the outcome? chair powell: very much so, as we did in 2018 and 2019. sen. banks: my staff reviewed the research paper on tariffs in preparation for the hearing. i want to point out that one of them, called the employment consequences of the u.s. trade wars, i would like to enter this for the record, mr. speaker? it found that the timing of a tariff is very important in that the chinese retaliation on the trump terrace hurt u.s. jobs, but if u.s. had imposed tariffs earlier in the 90's and early 2000's, it likely would have completely eliminated job losses because of the china shock. i know you said what you said before, but will you and your staff take a look at the paper? chair powell: i would love to see it, i imagine we already have. sen. banks: appreciate that. home ownership is an essential

part of the american dream but families are struggling to afford homes. in five years the price of a typical home in indiana has gone up 60%. three quarters of american families cannot afford the average home in the neighborhood. how do fed decisions about monetary policy affect the ability of regular families to buy homes? chair powell: most of what drives that increase would have been about regulation. it's also just about wages going up and the costs of materials and things like that going up. land costs and that going up a lot. the channel through which we affect housing is, of course, interest rates. right now, they are of course still pretty high. actually, mortgage rates are not really set, the fed doesn't key off of those longer run things. nonetheless, we are clearly having an effect on the housing market. that will unwind as we normalize policy.

we will still be faced with high insurance and material costs, labor shortages, and all the things that keep driving up housing prices across the country. sen. banks: thank you, mind time has expired. -- my time has expired. chair scott: senator gallego? senator gallego: housing costs are one of my top concerns. over 12 years rents increased 72% in my state. in the average 30 years fixed mortgage rate, it's been 6% for 30 months, with very few rate cuts anticipated in the future with potential costs increases expected, with a demand that we will see in terms of rebuilding from california, with labor shortages, what do you think needs to happen to make housing more affordable in arizona and in the united states in general? chair powell: housing policy and

things to help housing supply are really in your wheelhouse, not ours. i do think, you know, housing markets around the country are still suffering from the effects, the after affects, of the pandemic. once that's through in the short-term rates are down to whatever the new normal level is , i think that housing costs are still going to be high. it is still going to be expensive to buy house -- produce housing in many parts of the country where a lot of the urban areas, the obvious places to build housing, has happened. there is a short-term problem that should go away in the coming years, but there is a longer-term problem with housing availability. that's something that is not within our power to affect. sen. gallego: one of the things i've seen in arizona is we have people who are locked into mortgages at 2.9%, 2.8 percent. for them to move to a new house,

they will have to essentially go in and try to get a bigger house with a mortgage payment through the roof. while i know the fed doesn't set the mortgage rate, this seems to be one of the biggest drivers of inflation. like in arizona, housing costs, the decisions that you may on whether or not to move rates are based on inflation, driven by housing costs. we are in a sort of her pet -- perpetual and vicious circle in arizona. i don't know what the answer is, but i want there to be some sort of understanding. it can't cut itself over and over. chair powell: that's right but it's not obvious that lower rates would lead to lower housing inflation. it would increase demand, likely, and unlock lower mortgages, creating both a buyer and a seller. it's not clear that that is something that would drive down

housing inflation. sen. gallego: my supposition in places like arizona, growing fast, is that by increasing supply with lower rates, you end up essentially having more of a competitive market so that people will start moving and essentially bringing down the overall costs. this is arizona and the -- concerns about the threat in tariffs imposed on key u.s. trade partners. how should we expect prices to move for basic items like tomatoes, peppers, cars and the like if you place a 25% tariff on mexico next month as the president has threatened? as you know, we don't to tariff policy or commentary on it. i think that just generally, when someone has to pay the tariff, it could be the exporter , importer, it could be the general. somebody does it.

in most cases it doesn't reach the consumer much. in some cases, it does. it contributes to inflation overall? chair powell: it can, but it would depend on how persistent that would be. sen. gallego: i understand that you are not here to comment on trade policy, but overall is it your opinion that high tariffs can lead to higher costs, which would then be seen in terms of inflation copulation to helping you set the rates? chair powell: that's a possible outcome and it would depend on specific tactics. chair scott: senator mccormick? senator mccormick: thank you, chair scott. good to see you again. in the last five years alone,

federal debt spending has increased by 50%. our true debt obligation has tripled in the last 15 years, reaching nearly 20 trillion. it's now at 20% gdp. runaway spending contributed to an aggressive tax on all americans. in the past five years, the cost-of-living has skyrocketed for those working in pennsylvania, especially as you and i discussed when we talked about who relies on fixed income. the compounded effect of inflation hasn't been offset by a commensurate rise in inflation -- and wages for many pennsylvanians. i've heard from many who have canceled family trips and tightened their belts. as we discussed these heady issues, let's not lose sight of the human costs of the decisions

made by those in this room. given that, i would like to ask you about the national debt and the costs of financing it. we now spend more to service the debt annually than we do on national defense. how concerned are you about the accelerating pace of government borrowing and the borrowing costs, which will affect families in the form of higher mortgage rates? chair powell: you know, we don't comment on fiscal policy other than to say that, as my predecessors have said, the u.s. federal budget is on an unsustainable path. it is not that the level of spending or the level of the debt is unsustainable, it's that the path is unsustainable and ultimately the level of debt will be. the longer that we wait, the more painful it will be. it's something we will need to do in the long-run and short run. sen. mccormick: as a practical

matter, how do you factor that into policy thinking and decisions? chair powell: we don't. we are here to achieve price stability and maximum employment. it's up to congress to deal with fiscal issues. we knew that to you. sen. mccormick: as a more practical question, i think that what clearly falls in your bally wick, because of the national debt, it's caused a supply of u.s. treasuries needed to finance the debt to skyrocket. that is at the same time that the fed is shrinking holdings of treasury through quantitative tightening. so, the question is, or could you at least give us some insight as to the impact that this is having on the treasury market, the investors. i am particularly interested in how the biggest holders of u.s. treasuries, their behavior is changing as debt increases.

chair powell: chair powell: did -- chair powell: this is a real treasury question, but i think those buyers will be factoring in their assessments of the supplies coming, which may be part of the reason the term premium has increased, as you know, over the course of this year. though you know the rates have been going up and down lately, back to almost where they were before the election. sen. mccormick: i know that the fed has been moving forward with comprehensive changes to the distressed test process. can you discuss how you are thinking about reducing the volatility of the results and increasing transparency on the stress test? chair powell: we will release the models, clean them up, put them out for comment. in terms of volatility, we are also going to release the stress test scenarios before we implement them.

in terms of volatility, what we said we would do is average the changes. the problem is, the stress capital buffer can move up and down because of volatility in the results. it seemed like an idea -- a good idea to smoothed that out over a couple of years. we are putting it all out for comment and ultimately we will do more to reflect the -- those comments and our final decisions that we made. sen. mccormick: thank you, i yield back my time. chair scott: senator blunt rochester? senator blunt rochester: thank you for meeting with me last week. we discussed everything from fed impact to housing and how it impacts our lives. i got a chance to concern with you the concerns of the delaware he and sue over the last couple of weeks have been frightened by firings and funding freezes.

just the real impact on the people possible financial end of data and information. you know, when doge has access to this information, i'm hearing from my constituents about the potential shuttering of the consumer financial protection bureau, as senator warnock mentioned. cfpb has returned 21 billion dollars to millions of consumers and that is a real impact. i also want to highlight that it was your leadership in the fed to, working with congress and the biden administration to really help answer the question about switching with germany, france, and others, that you said no, you would rather be here. that success is a testament to all of us. we came together during a tough

economic time during the pandemic. it limited the recession in job losses. since covid we have seen robust growth. we have also grappled with inflation the drove up prices. one way to address this phenomenon is this restructuring. i joined in on introducing the bipartisan brazilian supply chain act to find the indications. inflation may be slowing, but too many are still facing high prices with economic uncertainty. we need to do everything we can to address this anxiety and the realities that americans are facing. there seems to be a disconnect. while the economy is doing well here, on the ground people aren't really feeling that.

mr. powell, from your perspective can you talk about what is driving this disconnect between traditional economic indicators such as gdp growth and stock market performance and the tangible benefits for families? chair powell: i would be glad to. it's clear that the overall aggregate numbers are good for the economy. 4% unemployment, inflation down in the last year with the economy growing well. these are good numbers. but what people are feeling is the result of several years of inflation. particularly for people in the low to moderate income category. they are really feeling it. if you look at the earnings releases and press conferences that they do, companies like "the dollar store," places like that do customers, they are telling you that those consumers are feeling strapped. we understand that and try to keep it in mind, though we

acknowledge that the overall data are good, we see what people are feeling. you know, that's inflation. it's just another reminder of how much people hate inflation and how bad that is for people, high inflation. sen. blunt-rochester: i know a few others have asked questions previous to me about this, but i would love to follow up afterwards with specifically what you think are the short-term and long-term things that we can do to really address the housing supply and affordability crisis. i have legislation that looks at things like reducing regulatory barriers, zoning reform. things that we know we can enter

partnership with local governments to make a significant difference. if i could, i would love to follow up with you. even cutting red tape, those kinds of things that we can do long-term and short-term. i wanted to mention one last thing in my last 20 seconds, the activities that you do, fed listens, a lot of times working people don't feel they have a place in these conversations. can you talk about what the fed does with fed listens? chair powell: we did this as a part of our review and we did it on an ongoing basis. breaking out from the usual people that we talked to, which is a pretty diverse group, and try to deal directly with people who are experiencing the economy and our policies. it has been quite eye-opening to listen to people talk about -- we had one person at the chicago conference, five years ago, who said that the expansion, then nine years old, is just reaching his community. he talked about how companies

were going into prisons and finding people who were not going to get out for a year or two in training them and stuff like that. you could hear a pin drop. it was very telling stuff. i think we learned from all of that. so, we will keep doing it. sen. blunt-rochester: i will end with a famous quote, i think it was martin luther king, we may have come over on different ships, but we are all in the same boat now. need to get it bit -- get together. i yield back. chair scott: sen. marino: a broad general questions. when you increase the money supplied by 40% over a shop -- sharp period of time, will that drive inflation? chair powell: it could. monetary aggravates -- aggregates have not been a great predictor of any other thing, but that is something that might

cause inflation. sen. marino: to be clear for people watching, that happened because of public policy in this institution here, correct? in other words there was not a civilian led effort to increase government spending outside of the elected leaders that were chosen to make those decisions? chair powell: that was part of it. there were a lot of causes to the inflation we saw. fiscal policy, monetary policy, closing and reopening the economy generated a bunch of confusing signals and no a lot of inflation everywhere in the world whether people did a lot of fiscal policy or not. there are many factors and that was one of them. >> businesses did not choose one day to close. they did not decide one day to not be able to go to work.