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.

they were decisions made by policymakers. chair powell: correct sen. marino: it is disingenuous to hear my father talk about inflation when they caused it. you work at the department of treasury. at what point do you think they were going to run out of ink? did it concern you it was possible that they were printing so much money that the treasury would have to find alternate ink suppliers? chair powell: it did not occur to me, but good question. sen. marino: something that concerns me a lot is the idea that we would look at -- like china in any way. can i get your commitment that we will never have a central bank digital currency? chair powell: yes. >> it makes me happy to hear you

say that free is something that matters to me and entrepreneurs all over the country is why can't i wire somebody money at 6:00 p.m. eastern time? can we get a 24/7 scenario when wires are cleared every day all day? i think that would be very helpful to businesses all over the country. chair powell: that's coming, just slowly. we have that at fed now. we will get in touch with you about that now. we provide that service between two banks and others want to provide it too. but we do lag a lot of other countries in that. sen. moreno: i don't want to put you on the spot, but to put you on the spot, said now, very familiar with it. a little late in coming. can we get a commitment to do that this year so by the end of this calendar year businesses can transact 24 settle payments? chair powell: i think they can do that now. i believe they can do it now on fed now. and on the rtp system as well.

i think it is available. let me check in and follow up with you. sen. moreno: that would be great. one other piece of the puzzle here is, what do you think the fed can do to fight international terror groups, for example, hamas, hezbollah, iran proxies funded by places like qatar, do you think we are doing enough to keep them outside the banking system? at the end of the day terrorism is ultimately funded by directors. i met with hostage families this morning. it was heart-wrenching to hear stories about kids that are my kids age being held for almost 500 days. the qataris are complicit in all this. what can we do? what advice would you have to make certain that we bring these terror groups to their knees? sen. moreno: we do enforce money

laundering laws very strictly. but that is a tough question. it's a huge focus in international meetings and things like that. you are right. it is really hard to nail it down, particularly if it is all happening overseas. we can do what we can do with our banks. we do not want to make it so costly that they d bank people because they are so worried about violating anti-money laundering laws. some of what is happening according to the banks is they are so afraid that there might be money laundering that they just keep -- cut people off at the first flag as opposed to perfectly legal business is being thrown out because of their fear of being caught doing money laundering. there's a balance there. but it's a really hard project. it is one we have spent a lot of time on. chair scott: the patient and

persistent senator kim. sen. kim: i wanted to make sure my colleagues had a chance to go over some of their meetings and i have enjoyed hearing some of your articulations here. i did a telephone town hall last night. i am glad to hear some of my other colleagues as well. there is a lot of anxiety now from the american people trying to understand what is happening. seeing and interpreting what is happening on the news. i want to ask you, for your independence when it comes to the federal reserve. chair powell: the point is, we will make better policy, we will keep inflation lower if we just focus on doing our job and a stay out of politics, stay out of elections, don't try to favor or hurt any political party, any political figure, just focus on the data.

if we start putting up political filters we will be no good. we will be less effective at our already quite difficult job and i think that is broadly understood. i think there is broad support appear in both political parties and on both sides of the hill. i think there's a decent degree of support for continued independence. that's not to say we should not be accountable. we should be very accountable and transparent about what we do. we should be up here explaining what we do and why to our oversight body, this committee and the same committee on the house side. if that is what i would say. sen. him: making decisions about your core mission about stability and about growth, but not thinking in terms of the context of an election cycle, for instance, is that right? chair powell: exactly. sen. kim: there has been a lot of attention to the role of public servants in our government, understanding the roles they play, how many we

need to have. i want to ask, can you speak to the role of the federal reserve employees and their qualifications? more important, their importance to the mission and engaging how important they are to the work you are trying to do towards stability and growth? chair powell: i am very proud to be associated with the people of the federal reserve and i will give you an example of why. when the pandemic hit, kind of out of the blue, economies all over the world are shutting down. the u.s. treasury market is stopping to function. companies cannot roll over their commercial paper. economists are writing about depression. people at the fed that went through the global financial crisis 10 years before step forward and say, we've got this. we know what to do. here is what we do with the treasury market. here is what we do with money market funds. here is what we do with

companies that can't get any financing for the markets were closed. companies were having maturing debt they had to rollover. the people that knew what to do in that pretty dire emergency were working at the federal reserve and other places. i will tell you. it was impressive. if you could have seen the way people react, how hard they work, how much they know, how well it worked, our work during the acute phase of the crisis was very successful. that is entirely due to the knowledge base that resides with the career people at the fed. sen. kim: would you say the fed is overstaffed? chair powell: overworked, maybe, but not overstaffed. everybody at the fed works really hard. sen. kim: and there is a lot of conversation about staffing numbers and other -- difference departments and agencies going back to the sense of the taxpayer dollar, the

accountability there. as the fed paid for by the taxpayer dollars? can you explain the burden on the taxpayer? chair powell: we are self funding through our large balance sheet. sen. kim: so the staff and for the federal reserve is not coming from taxpayers, right? chair powell: and directly. all of our profits we get back to treasury and those profits would be higher if we did not pay for the fed. in fairness, it is ultimately paid for by the taxpayer. but in that sense, we are so funded. sen. kim: you talked about different actors involved when it comes to levying tariffs, paying the importer, the exporter, the consumer. you said that a middleman could be a part of that. do you know any way to 100% guarantee consumers won't have to pay higher costs when it comes to tariffs? chair powell: not really.

it won't be easy to identify with any accuracy were costs do fall. we will just have to see. >> i just want to make one point before we quit about law enforcement. if you keep the laws the same on the books but fire the cops you will have a lot more crime. that is law enforcement one-to-one. the problem we have now is not law in the books about consumer protection has not changed, but the cops, at least at this moment at the cfpb, have been told to stand down. i appreciate that we have state ag's that step in and ultimately partner with the cfpb. but there is no one else for the giant banks who actually does what is called a bank examination, supervision. that is so important. remember the wells fargo scandal

where wells fargo was illegally opening fake accounts in people's names. you will find that through bank examination, not because the person that got cheated could figure it out. bank of america gets called in because bank examiners discovered they were charging people illegally on junk fees. nobody finds that but the people down in the banks doing the bank examination on be half the consumers. we tried a patchwork of law enforcement for consumers before 2008. we had all of the laws scattered among seven agencies. we saw how it ended. it ended with millions of people losing their homes. millions of people losing their jobs. millions of people losing their savings. the cfpb is our law enforcement agency to make sure that the giant banks follow the rules on consumer protection. for me, right now, i would be

really worried about doing business with a giant bank when there is no cop on the beat. sen. thank, --chair scott: thank you, senator. i recognize myself or one question, relevant to your job, mr. chairman. there were some questions. your response was basically to get people in place for the next administration and then we will proceed again. treasury beth sent recently sent the banking system is "well capitalized, perhaps over capitalized." given that assessment, whether you agree with it, could you discuss the necessity of a new basil three proposal, how updated regulations would impact the ability of regional banks to compete with big wall street banks and what considerations

should be taken into account to ensure we have a competitive banking system. the concern comes and goes in for those of us that have largely regional banks for -- banks for community banks or credit unions a competitive system is very important. answer that and i will wrap up. chair powell: chair powell: we are eager to get together with the fbi say -- fdic and uscc to finish basel iii. my view is our banks are well-capitalized at basel iii was not supposed to be an exercise raising capital on euros -- u.s. banks. mario draghi said that back in the day, i believe. we have some work to do, but i believe we will get there fairly quickly. in terms of your regionals, they don't face the surcharges.

they don't face quite the burden large banks based on resolution planning and that sort of thing. we need those banks to be healthy and profitable because we need them to compete with the g6. we don't want a world where the g6 just keeps getting a bigger and bigger share of the economy. that is not what we are looking for. a lot of pressure. we have seen the number of community banks declining for 30 years. we don't want to be the cause of that if it is happening by national causes or because of technology, that's one thing. but we don't want to be inadvertently causing that to happen. sen. cramer: when you look at the basel iii exercise can you think of anything specifically that ensures a competitive, diverse banking system is maintained rather than consolidation, whether it is fewer community banks, more

regional banks, or if regional banks and more wall street banks? chair powell: think twice before you impose -- the kinds of things we impose on the largest banks and next to largest banks, you want to be careful not to just think we should do exactly the same thing. that is what tends to happen. for smaller banks it raises the fixed cost of banking and makes it harder to start new banks. it makes it harder for anybody but the largest to be successful and that's not what we want. we wanted a lot of competition. regionals, it's important they thrive. chair powell: i agree --. sen. cramer: i agree. thank you for staying with us for the day and i'm glad we could get you first. as we wrap up, senators that want to submit questions for the hearing record though 31 week from today tuesday february 18. chair powell, you have 45 days from that day to submit your response to questions for the

record free to thank you. the committee stands adjourned. alix: fed chair jay powell testifying before the senate banking committee the first of two days of hearings on the hill. headlines out of the testimony. he affirmed the fed favors delaying additional interest rate cuts. yields had already been higher before the testimony. state higher, perhaps shaving a little bit off on the 10 year yield. 3-4 basis points higher. 10 year yield at 4.5332%. said officials raised their estimate of the neutral rate. we knew that. the market thanks to the neutral rate is even higher than what the fed has raised its forecast two. reserves still abundant. about the level they were at when the runoff started on the balance sheet. we still have a ways to go unwinding the balance sheet. he did not want to talk about tariffs. we were anticipating that. no comments whatsoever in tariffs. on the deficit he said the path

is unsustainable and ultimately the level of debt will be unsustainable in the longer we wait to deal with it the more painful it will be. a lot of talk about housing, high mortgage rates. the banking. he said it is time to take a fresh look at questions ofde- banking and there was good reason to do that. assurances that while he is fed chair there will not be a central bank digital currency. bitcoin took a lead lower on that. markets in general. seeing a down day before jay powell's remarks. not too much improvement. the s&p 500 doubt about .25%, 15 points. the nasdaq 100 down more than .5%. bitcoin down 1.5%. just above $96,000 per coin now. yields. the fed has much less influence over the long end. surely, the front end, more influence. the two year yield 4.2917% up a basis point 310 year yield

4.5312%. over the course of the two hours, senators pressing powell on a range of topics. he said the central bank is not in our rush to reduce rates. listen. chair powell: inflation has eased significantly over the past two years but remains somewhat elevated relevant to our 2% longer term goal. longer-term inflation expectations appear well anchored overall. a wide set of indicators suggest conditions in the labor market are broadly imbalanced. the labor market is not a source of significant inflationary pressures. with our pollen see -- policy stance now significantly less restrictive than it had abandoned the economy remaining strong, we don't need to be in a hurry to adjust our policy stance. we know where policy restraint too fast or too much could hinder progress on inflation. >> for more let's bring in michael mckee.

he covers all things fed for bloomberg. on inflation and gdp growth that we learn anything new from the fed chair today? michael: we did not. basically chair powell repeated what he had other members of the fed have been saying for quite a while. it was kind of a quiet message to the markets that nothing has changed. the fed is still on hold but they aren't putting a timetable on it because they do not know with the president's policies will be. he wanted to stay out of the markets. for the most part he did. >> he also said absolutely nothing about tariffs. you anticipated that would be the case. he doesn't want to go there. michael: he doesn't. we knew that going in. he has done his best all along to stay out of the debate, at least in public, about what will happen to the economy. but they don't really know because the administration hasn't given any details. they put 20 5% tariffs on but they don't start until march. will there be exceptions? we don't know.

there are a lot of unknowns out there. at one point he committed to saying we will only react to the data to what actually happens to the economy from the tariffs rather than what we think might happen. in that sense, he discussed the fed reaction function a little bit but really try to stay out of those debates. >> he talked about the longer end of the yield curve and how the fed was not able to influence is that as much as the shorter end and really that is a supply and demand. did we learn anything new about what he feels about the tenure given scott bessent certainly wanted to be lower. michael: those questions were asked by david mccormick who used to be at bridgewater, very familiar with the yield curve and how the markets work. dave -- jay powell basically saying what mr. mccormick knows, the fed moves the short end up and down for the two-year is the

most responsive for the 10 year note yield incorporates talks about the possibilities of default, of inflation, all the things that could go wrong over a ten-year period. as the chair put it that influences the term premium. this has contributed to a higher a long end rate. the fed can't do anything about that, he said. we watch it and see what happens. >> in terms of anything related to politics he tried to stay away from it saying the president removing fed governors isn't allowed. he did talk about housing. he said putting housing finance back in the private sector has some appeal over the longer run, but i believe that with you in congress. did he overstep? michael: probably not. i do not think people would disagree with the idea that in a free-market society the housing finance business should be in

the private sector. there have been efforts to bring it back for some time. the issue is how you do that and whether or not the housing market can collapse. there are a lot of people who supported president who are holders of securities in fannie mae and freddie mac that would very much like to see those privatized because of course they would be a lot more valuable. but, the fed will stay out of the debate about how and when that happens. it's very complicated. it won't be easy. >> for sure. comments around crypto as well and stablecoins. the crypto show will be going over all that in a few minutes. very interesting comments out of the fed chair for all that. michael mckee, thank you so much, bloomberg's fed economist michael mckee. while the fed never gets economic uncertainty tech leaders are facing their own challenges with elon musk saying this week he made a $97.4 billion offer to buy openai.

but openai director larry summers says he has not received any formal outreach from musk. openai's sam altman replying to musk when he sat down with bloomberg earlier from the paris ai action summit and gave this response. sam: i think he is probably just trying to slow us down. obviously he is a competitor. he is working hard and has raised a lot of money for x ai. they are trying to compete with us from a technological perspective, getting the product into the market. i wish you were just compete by building a better product. gosh i wish he would just compete by building a better product. >> let's get to bloomberg technology's caroline hyde who has been following the whole thing. interesting and it frankly disrespectful comments on either side. sam altman saying, this is not serious and we aren't worried about this. we get up every day to do our work and elon should probably do the same. but the board will probably have

to take it seriously and come back with some kind of retort. taylor has had his own tumultuous relationship with elon musk since he was on the board of twitter when it became x. you have to go into the weeds of what is happening in openai. not only are they fundraising to the tune of a $300 billion allocation of that fundraising of about 400 billion dollars. but really what people are talking about is the structure of openai. under 2015, when elon musk first help their -- first helped bring it to bear. it converted in 2019 to be a nonprofit that then ultimately controlled the capped product structure that allowed it to continue to raise funds. openai says once upon a time, you wanted it to be for-profit too. at the moment they are also

converting to a public benefit corporation, trying to come in thinking around this. what would it mean that they have to pay the nonprofit a certain amount of money? at the moment about $30 billion, $40 billion, discussed according to reporting. elon musk is saying, your profit is worth up to nearly $100 billion. is that the bit they are trying to do -- to slow down? the restructuring of openai more broadly rather than the fundraising. there are a lot of questions and still many answers to compared mudslinging continues. >> obviously they have to take the offer seriously and there are a lot of steps to go through. is there a regulatory concern here? you mentioned monopoly. would this be allowed to go through? caroline: isn't it ironic elon musk is a saying it is a monopoly at the same time he's building his own large language model. you have anthropic. on the sidelines of the ai summit, tom mackenzie as well

and then x ai. you rarely see these sorts of competitors coming together. yes, we want to see more competition. the idea is this group of investors elon musk, of course, x ai and some of those investors with him are already investors in x ai, big fat bidders by -- backing his twitter buyout, joe lonsdale, >>. tyler perry is involved. chair powell: it all has a feeling like it's a movie under the making or a videogame real life. >> to continue the theme of the week, bloomberg technology to you -- technology anchor caroline hyde. that does it for bloomberg markets. let's check the markets. s&p 500 now down about .1%. improving. the nasdaq 100 also improving. the dow into positive territory.

the dollar index weaker by .25%. bloomberg crypto coming up now featuring a special interview with sec hester pierce. this is bloomberg. a sleep number® smart bed is perfect for couples. (♪♪) it helps reduce snoring with a tap so you both get your best night's sleep. and now, save 50% on the new

sleep number® limited edition smart bed. shop a sleep number® store near you.

>> live from bloomberg headquarters in new york, i am snow a basket. tim: we look at the transactions taking the world and decentralize finance. >> will be speaking to fcc commissioner hester peirce. she lead the task force to create a new framework for crypto assets. tim: just this week the sec filed a joint request to put binance on hold