developments very carefully in developing our forecasts, we've been tracking closely developments in greece and china and other parts of the world. the issues that exist are not new for example. the committee in june was aware of these developments in june when the participants wrote down their views of the economy and appropriate policy, taking into account these developments and the risks they posed, they still thought the overall risk to the u.s. economic outlook were balanced. and they judged that it would likely be appropriate sometime this year to begin raising our target range for the federal funds rate. of course, we continue to watch these developments, these global

developments unfold and we will in the coming months. were we to judge that these developments did create substantial risks or were changing the outlook in some notable way, then a change in the outlook is something that would affect monetary policy. as we've said all along, we have no judgment about at this point, about the appropriate date to raise the federal funds rate. our judgment about that will depend on unfolding economic developments and how they affect our forecasts. >> you stressed in your testimony that the pace of rate increases is more important than the timing of the first rate hike. and many economists, including the imf have argued that the fed should wait longer to start raising rates, possibly waiting until next year. but should then follow a slightly steeper path of

subsequent rate increases. so my question is, is if the fed waits longer than currently forecast to start raising rates, will that mean a steeper path of rate increases? >> if we wait longer, it certainly could mean that when we begin to raise rates, we might have to do so more rapidly. so in advantage beginning a little bit earlier, is we might have more gradual path of rate increases. as i indicated, the entire path of rate increases does matter. there are many reasons why the committee judges in effect is an appropriate path of rate increases is likely to be gradual. given that we have been at zero for over six years, it's been a long time since we've raised

rates. doing so when we finally begin in a deliberate and gradual way, looking at what the impact of those decisions are on the economy, strikes me as a prudent, a prudent approach to take. >> as you know, the markets have been anticipating a rate increase for quite some time and that it will follow one of the fomc meetings that has a press conference afterwards. currently there's a press conference after every other fomc. >> chair yellen addressing questions from the house financial services committee. covering a lot of topics, from the growth of the fed to the pace of rate hikes, asked about illiquidity in the bond market. steve liesman has been monitoring it all. >> i want to go over what she said about greece. basically that the market, the fomc was sort of neutral on this.

was still in june aware what the story was, what was happening in greece was not new. at that point the fomc still judged they would go ahead with rate hikes sometime this year. but she did hold out this idea, look we're going to be watching this, if this thing were to deteriorate, it could definitely have an impact on policy. one thing on the dodd-frank report or on the flash crash report. she said it could be regulation. and then she was questioned very strongly by garrett there. this notion did you look at regulation specifically and she was kind of on the fence on that issue. so clearly, congress zeroing in on the flash crash and whether or not regulation and dodd frank had an issue there. carl? >> she did say on the list of things. >> that's right. >> steve thanks for that let's get back to the questioning on the hill. >> a few weeks ago we met, had a long discussion about a number of different topics. one of them was operation choke point. and i asked you at that time or made mention of the fact that i was very concerned from the

standpoint that government oversite reform had this report that they put out with regard to the internal emails and memos that showed that the fdic was going well beyond their statutory authority and duties in trying to limit the ability of certain legal businesses to do legal business. and was impacting a lot of banks in a very negative way. and the fact that you oversee some of those banks as well, i felt that you should be pushing back and have a meeting with chairman gruenberg and i asked you to do that. have you done that at this point? >> yes, i have done that. i've discussed with chairman gruenberg operation choke point. and our views about what appropriate policy is, on the part of the banking agencies, with respect to how our examiners deal with banks and

the services they offer. we both certainly agree on the importance of making sure that examiners and our policies don't discourage banks from offering services to any business that's operating within state and federal law. he and i agree that that's appropriate policy. and -- >> did he indicate to you, though, how he's going to stop operation choke point within his own agency? >> i don't want to speak about his -- >> i think it's important that you make the point to him that he has to stop in this report. this report of his own emails, within his department, he is implicated as being part of the problem and therefore it's important, i believe, that you have a discussion to say he has to cease and desist those kind

of activities and get an assurance from him that that's done. >> he explained a number of policies he's put in place to be absolutely certain that his examiners are abiding by the policy that i indicated, which is the banks we supervise, that examiners in -- examining them, do not, do not -- >> if at some point you find that his this is still continuing, will you confront him about that? if it's continuing in banks that you oversee, will you confront him and say we find this continuing to be operational and therefore, you need to stop it? will you stop him from doing that? if you see it? >> i will continue to discuss with him this issue and to make sure that our policies -- >> all right. with regards to another issue we discussed, with regards to specific designation, one of the

concerns that i have especially with insurers and asset managers is as we were, as are designated, there doth seem to be a way for them to become the designated. there's no path that's written out. obviously you can say well, they need to change their business model. but i would think that it would be helpful whenever they're designated to be able to say if you do this, this and this, these are the problems that have caused you to become designated if you change these things, do these things differently, it would allow us to dedesignated you. i don't see any path to dedesignate. can you elaborate a little bit on that? >> well fsoc reviews every single year the designations of firms and considers whether or not they're appropriate or no longer appropriate. and firms that are designated

are given very detailed. >> okay. >> material to enable them to understand the basis for the designation. >> i would encourage you every year to be sure you put something like that in there so there is some certainty on the part of those folks that are designated. one quick question in here with regards to the board is charged with adopting capital stand for fellow supervisors insurers. the capital standards are of concern from the standpoint this is the first time that the fed has gotten involved in capital stapd rds for insurance companies and i know through fio you're looking at international capital standards for companies. would you commit to prioritizing domest domestic capital standards. >> international capital standards would not become effective in the united states unless a regulation or rule were proposed. >> that's my concern. >> went through full debate.

>> that's my concern. we want to make sure that the domestic insurance industry is protected. i yield back. >> the chair now recognizes the gentleman from missouri, mr. clay, ranking member of our financial institutions subcommittee. >> thank you, mr. chairman. welcome back chairwoman yellen. were you quoted in a june 17th american bankers article, as stating that the federal reserve was examining ways to improve its implementation of the community reinvestment act. amid concerns that regulators are letting too many poor communities go unserved by banks. how would the federal reserve's efforts seeking to improve implementation of the community reinvestment act encourage investments in places like the

ones that i represent, such as ferguson, missouri, and other communities throughout this country, that are mired in poverty? >> well we've been working to improve implementation of the cra regulations. with other banking regulators. and we've been doing that in part by trying to improve our guidance, adding do a set of interagency questions and answers on the community reinvestment. and we are, we came out with additional q&a in 2013 and we're working toward further additions. so with this guidance does, is try to clarify the ways in which basic banking services can help to meet the credit needs of low and moderate income people in the context of cra and by doing

that, i hope we will be encouraging banks to consider providing the kinds of banking services that people in these communities need to be important part of their cra program. >> okay. and along those same lines of questioning, you stated in your testimony your concerns about the limited availability of mortgage loans. as a supporter of dodd-frank, has the law given us unintended consequences and tamp-down bank's ability to lend money in order for people to get mortgage loans? >> so it's hard to say. i mean certainly lending standards are much tighter than

they were in the run-up to the financial crisis. and i think most of us think appropriately so, we don't want to go back to lax lending standards. but it may be that the steps we've taken are having some unintended consequences. and that you know, we need to work, to work on that, make sure that credit is available. >> so do we need to -- tweak the law in order to allow banks to really get money out into our economy and allow people to realize the american dream and purchase homes? >> well there are a number of obstacles that banks see to lending. some have to do with put-back risks. which are matters that the fhfa is working on with fannie and freddie. and you know, there's remains

uncertainty about securitization and the rules around securitization so we've not really seen an active market come back for private residential mortgage-backed securities and that could be part of what's happening. >> well, okay. >> the federal reserve released a report titled -- strategies for improving the u.s. payment system. a follow-up to a 2013 consultation paper that signaled its intention to expand its presence in electronic payments. why has the fed embarked on this faster payments initiative? and what does did hope to achieve? and what is the federal reserve's plan? >> so our basic plan is that we want to see a faster and safer payment system in the united

states. we think that many steps can be taken. >> fed chair janet yellen is still on the hill fielding questions about operation choke-point. the pace of rate hikes as well as current state of lending standards. up town at our delivering alpha conference, the tech bubble is front and center. our jon fortt hosted a panel just moments ago and joins us now with the highlights. jon? >> thanks, kayla, i had scott cooper from andreessen horowitz and ethey are dyson from adventure holdings talking about whether or not there's a bubble. and the first thing that most people say is no, there's not a bubble, but there was some nuance behind it cooper was talking about some of the things he's watching that will determine if a bubble does eventually appear in the start-up market. take a listen. >> the things that we're watching are from a pure venture capital perspective is limited

capital inflows so 2014 was up. we're nowhere near we were at bubble levels and inflows and the nature of limited partners so this is a qualitative measure. but the number of callings you get from limited partners who haven't traditionally been in the asset class. if those things start to increase, i think those are potentially worth worrying about. >> we talked a lot about the by f bifurcation, what's happening at the angel level, as opposed to the late-stage. a lot of me, too early start-ups, that's a bit of a concern. listen to what she said. >> the problems these people are solving are mostly very, very first-world problems. and so they're dealing with the problems of the 1%. >> i don't want to take a taxi, i want a black car. >> how do i find friends to go to the concert with on thursday night. >> my app does tuesday night, it's completely different. you know, they're more

sustainable problems like food logistics. internet of things out in the real world, not just on rich people's wrists. >> so eventually they're going to be focusing on companies that solve more real-world problems, there's a wave of maturity perhaps coming into investing in some of these companies. so definitely some warning signs to watch as people begin to wonder whether we're getting a bit frothy. >> good to see esther on stage. let's get to capitol hill and the fed chair. >> we've said that we plan to give them to you as soon as it's we're able to do so and not compromise an open criminal investigation. >> compromising open investigation. >> we want to see this investigation succeed. >> you do. let's talk about that. >> you want to see it schedule. so let's talk about the timeline. this happens in october of 2012. you don't follow your policy. you general counsel does an extensive six-month

investigation. after that investigation, the general council is supposed to make a referral to the ig. that doesn't happen, the general council gives a report to the committee, right? an when you get that report, because are you so concerned about justice, you're so concerned about bringing the leaker, to the forefront, what do do you? nothing. you didn't make a referral to the ig. you didn't make a referral to the fbi, the s.e.c., the cftc, the doj, you did absolutely nothing. zero. and so you're trying to say that congress is going to obstruct your investigation when you had information, you did nothing to perpetuate an investigation that would lead us to the truth. eventually the ig did their own investigation. and then they closed it. and guess what, congress stood forward and said this is important stuff. we just, as elizabeth warren would say, we don't want to have those that are well connected get information through leaks. we should know who the leaker is. and so it was because we

pressured the ig, with a closed investigation and we pressured you that all of a sudden there's now a second investigation and they go no, no, no. we can't give you that documentation now because it's a pending investigation. and we're concerned about you jeopardizing it. madam chair, it appears that you are the one who is jeopardizing or the fed is the one who is jeopardizing this investigation. am i wrong? >> the fomc has in place a clear set of rules for there are to be followed. when there are allegations of a leak. >> you didn't follow them. >> they call for a review of the incident by the general council and the fomc secretary. we have described to you how that review took place. it took place before the review was complete. the inspector general -- >> did the general council -- >> did the general counsel --

>> he had undertaken -- >> did the general counsel per your guidelines talk to the fomc board? or did he make a recommendation to the ig? because the requirement is they do an initial review and solely determine whether they make a referral to the ig. >> before his review was complete, he was informeded by the ig. that the ig had undertaken his own investigation. and therefore, the ig was already looking at it. before it was necessary for him to make a decision to refer it to the ig. >> my time is almost up. >> the ig was already involved. >> if anyone is trying to sweep this under the rug, it's the fed. it is congress is trying to bring light to this. i sent you a letter in response to your denial with chairmanning an looen in the 17th of june. we have footnotes where congress has done oversight during an open, pending doj prosecution, we have right to these documents, you have duty to provide them to us, you have

cited no legal authority to deny that kwxt we are entitled to do oversight, you're required to give us the documents. i hope you'll reconsider your denial. i yield back. >> the chair now recognizes the jenltlelady from alabama, ms. sewell. >> thank you, mr. chair and thank you, chair yellen for being here today. i want to bring your attention to wages and what i see as income inequities going on and get your take what we can do as far as monetary policies to close that gap. during the height of the financial crisis, the u.s. economy has made remarkable progress, particularly contrasted to parts of the world. the unemployment rate fell from 10% to 5.3% in june. the president has pointed out over the past four years that we've put more people back to work here in the united states than europe has and japan and other nations. despite the overall employment

gains, there are still some districts, mine included that have folks who want to work, who haven't been able to find work. the hourly labor compensation has been tending to lag behind the growth in particular. and the president's budget projects that the share of national income going to labor rather than capital will remain at historic lows for years to come. what in your view can and should be done to reverse the trend and insure that workers reap more rewards and gains from our glowing economy? i'm particularly interested in the disparity that exists among minority unemployment? i can dell you that in my own district of alabama, while the overall nation has 5.3% unemployment, our median average unemployment in a district that is disproportionately african-american is right at 9% to 10%. which is vastly different. we would love to know how you think our monetary policies can

go about changing that. >> strong recovery in the job market. and what we're not there, yet. i believe we've made substantial progress. i -- as the economy improves, and the labor market gets stronger, i would expect to see the growth of wages pick up over time. and at this point, i think we're seeing at least some first tentative signs that wage growth is increasing. it's been running at a very slow pace. there are often lags between improvement in the labor market and a pick-up in wage growth. >> do you think unemployment rates, is it more because of structural changes and cyclical factors? >> both matter.

cyclically it's as the labor market picks up, the pace of aggregate wage growth will pick up. but structural factors are also very important. productivity growth matters. over time to real wage increases. and productivity growth in recent years has been frankly very disappointing. that maybe holding wages down. but across groups, differences in wage trends across different groups in the labor market, i think reflect a deeper set of longer-term structural influences and go way back to the laid '70s or mid '70s, where we've seen growing gaps. by education, we've seen a persistent -- >> clearly the fireworks are going to continue on the house side as congressman duffy at a

vociferous q&a session with chair yellen. some of the headlines coming out of delivering alpha. we have more. >> jeffrey smith making his presentation now. the managing member over at star board talking about his best idea, macy's. only halfway through the whole conference, this is what he's saying he's saying that the department store macy's has a potential combined value of over $125 a share. saying that can be unlocked by macy's during the course of improving some operating performance and what-not. as you can see by the chart. shares of macy's had been lower for most of the morning here. they did get up about 50 cents throughout the course of the initial part of the presentation. and now are up by about $2.27, 3.5% to the upside for macy's, towards the highest level so far today. we'll keep you updated on more of the best ideas, panels, discussions that are happening now. for right now, jeff smith at starberg making bullish comments

about macy's. the shares are reacting, you can see about 3.5% to the upside. >> third best performer on the s&p. there's jeff smith right there. by the way this is all happening in a relatively tight tape, dow up 20 points and the s&p has been within a five-point range all day. let's get back to capitol hill and chair yellen. >> we have community development efforts that are addressed to low and moderate had been-income communities to try to see what can be done. >> i thank you for your efforts and hope you'll continue them. >> the chair now recognizes the gentleman from tennessee, mr. fincher. >> thank you, madam chair, i appreciate you being here today. i'm going to get right to the point,le going to talk a little bit, a couple of lines of questions, cost/benefit analysis and raising interest rates and what kind of impact they'll have on national debt versus personal debt and the committee room being remodeled, i've been

watching the tvs which have informative and the charts that are being shown by my colleagues on the other side of the aisle if we would just change the top to the progress that the republicans have made since we took the house since 2011, i think it would be great. >> back to cost-benefit analysis. the small medium-sized banks, lending institutions all over the country. the impacts of dodd-frank, being burdensome, overburdensome. just two or three questions and you can answer, we'll move on. does the fed's independence in setting monetary policy mean that financial regulations are above the law? and has anyone at the federal reserve done an analysis of the cumulative impact of dodd-frank regulations on the broader economic availables, capital

formation and perhaps most important job creation? now the cftc, s.e.c., these other agencies do this. why aren't you doing this? and can you shed some light on why you're not? and would you be open to doing it? >> well we do a great deal of analysis to try to understand the costs of regulations that we put in place and their benefits, for example, with respect to the basel iii capital requirements, we participated along with other countries in a very detailed cost benefit study of the likely impact of raising capital standards. we came to the conclusion that even though there might be a very modest burden, burden on raising spreads and the cost of capital to, to the economy, that the costs of financial crises

had been so dramatic and so large, that the impact that we would have of reducing the odds of a financial crisis is passed the cost-benefit test easily. we regularly make sure that we comply with the -- >> are you not to interrupt but my time is slipping. would you be open to doing a specific cost-benefit analysis for every big decision? what you're saying there, get what you're saying, i know it's very complicated. you're saying in order to make sure we don't hurt this one over here, we're doing this one here. but we're really not going to give you the information. it's not cut and dry, we need more than we're getting. would you be open to doing a cost-benefit analysis, yes or no? >> we do follow the analysis that's required by current law and in some cases i think it would be difficult to do that. after all, congress is for

example in dodd-frank already made a judgment that they want to see us put certain requirements into place based on congress's judgment that it would make the financial system safer and sounder. we put out proposed regulations for comments to try to accomplish an objective that congress has already assigned to us. because they've determined that it would be beneficial. >> reclaiming, it seems like a common-sense approach. i no it's very complicated. but that the s.e.c., cftc, other agencies are doing, that we have a common-sense approach, a cost-benefit analysis. think you're saying you're not in favor of doing it at this time. maybe congress needs to, maybe we need to do something else. let me move on. oar not in favor of it raising interest rates, nationally, the debt that we owe, we see the current national debt, personally the debt that many americans owe in this country. when we start down this path of

raising rates, i'm afraid you know there's a whole generation of people now that think the interest rate standard, 0% is the standard. they don't know what interest rates back when i was a kid, when interest rates were 18%, 20%, under the carter administration. when you start up down this path of raising rates, my fear is we go into another recession. then you can't raise rates again, because rates are already low. because you haven't raised them much, anyway. the only answer is more quantitative easing, more dumping money into the economy. and that gets very serious, very quickly. what is your, do you fear that raising rates is going to do this? i know my time is up. >> we're not going to raise rates if we think it's going to tip the economy into a recession. we will raise rates because we believe the economy is strong enough that it is appropriate do have higher rates to meet the objectishes we've been assigned by congress. and -- >> this is a concern for you as well? >> we wouldn't do something that

would jek jep dies recession unless inflation were at risk. >> the chair now recognizes the gentleman from illinois, mr. foster. >> thank you, mr. chairman. and thank you, chair yellen for appearing today. on page 12 of your report you note that net exports, trade imbalan imbalance, has been a substantial drag on gdp growth. the house and senate will soon go to conference on a customs bill that was part of a trade package that was mostly passed into law last month. so -- >> we are continuing to watch this question-and-answer session of fed chair janet yellen on capitol hill and are keeping an eye on the markets, where we're seeing modest gains across the board. treasury yields have been fluctuating in the wake of the testimony from chair yellen, as well as a slew of economic data out this morning. but europe will be in the headlines as we wait for the greek parliamentary vote. let's bring in simon hobbs to tils what to watch for as the markets just closed moments ago. >> we're slightly high anywhere europe, so back up to the

three-week highs. continuing to make gains. greek vote, yesterday is the day mandated by the euro group to pass the austerities in greece. we have the pictures of the greek prime minister battling with his own party, in order to try to get them with him. he'll probably have to rely on the opposition votes to succeed. in an environment where the imf has warned it may not participate in any new bail-out, bail-out of greece, the third bail-out to be discussed because there isn't sufficient debt relief. given how rapidly the greek economy is deteriorating. one more thing, the deputy prime minister of greece has explicitly thanked this country and president obama for helping to secure a greek deal it would appear that washington was instrumental in pushing the europeans along a track which arguably therefore they may not have gone as far down. which may mean maybe one reason why the german finance minister scheubel at this point is

attempting to do some sort of u-turn. the greek parliamentary, 5:00 their time. >> we'll keep watching for it in matter of hours, in the meantime, back to capitol hill, fed chair janet yellen and the house financial services committee. >> you're aware the imf definition does not talk about the value of currencies, it talks about action. we have to be running a persistent trade surplus, accumulating additional foreign exchange reserves and you have to be holding excess foreign reserves. it's my belief that none of those three would have been triggered by all of our response and the question is in so that the administration's position was just fundamentally wrong, that imf definition would have prevented us from you know, the accommodative monetary policy that was so important to rescuing our economy. >> my concern with this is that i think it's important for

countries to be able to conduct monetary policies. that best pursue domestic objectives. those policies are not intended to impact currencies. but because they do africa interest rates and interest rates affect global capital flows, they have impacts on currency values. all i have said about this topic is that i would worry about any type of legislation that could cripple monetary policy from achieving the objectives that congress has assigned us. >> i understand you're worried about it. the precise question, is there anything you did that would have triggered the imf definition of currency? >> i'm not sure. i haven't studied it carefully enough and i -- >> would it be possible for to you get back with an answer for the record? >> i'll try to look. >> of that precise question?

thank you i appreciate that i have a little bit of time left. are you familiar with i'm a physicist. are you familiar with albert einstein's quote that any theory of the universe should be made as simple as possible, but not simpler? are you ever reminded of that quote when you talk about these things like the taylor rule? where you imagine that the entire universe can be reserved, reduced to a linear relation between a handful of variables? >> i think that's a very good point. and i think it is apropos of the taylor rule. >> a quick break here to take you back to delivering alpha. cramer hosting the panel with the activists. we were watching macy's earlier. now keep your eye on eth? >> if you're in the mod for furniture, sandal asset management is calling this his best idea. you can see again shares were just about flat before the presentation started. ethan allen shares up by about 4% towards their highest levels today. volume about 228,000 shares so far.

so ethan allen now that, we're going through the presentation now. so we will bring you more details. for right now, ethan allen, the presentation has just started. ethan allen his best idea to unlock value over the course of the next year. >> got a similar pop, macies. now back to the hill. >> thank you, mr. chairman. chair yellen in your first appearance as fed chair before this committee you commented on the need to move forward with housing financial reform and do you continue to believe the current state of our secondary mortgage market pose as systemic risk? and should congress and the fhfa be taking steps to share that public risk? based backed by taxpayers with the private sector?

secretary lew suggested such an approach. >> i've long said. we think it would be desirable to see congress address gse reform to decide explicitly self-consciously, what is the appropriate role of the government in the mortgage market. and to try to bring private capital back into the mortgage market. there are a number of ways, different strategies, congress could take to accomplish that. but i do, i do think it's important for congress to try to resolve those issues. >> thank you, chair yellen. last year i along with other members of the house financial services committee wrote to treasury secretary lew and copied you regarding our concerns about f-soc's lack of a formalized process for reviewing nonbank financial institutions facing designation and we shared concerns about the f-soc's need to conduct a review of the

insurance industry before moving to designate individual insurers. since sending that letter, the f-sok has taken additional steps to understand the financial industry. specifically federal reserve governor terrulo has endorsed an in-depth marketwide analysis and an activities-based systemic risk review, but the f-soc has still not taken steps to study and better understand the insurance industry. do you think it would be appropriate to conduct a thorough study of the and analysis of the insurance industry as well? shouldn't all nonbank financial institutions face a similar process for review? >> the asset management industry is one where f-soc thought it appropriate to focus on activities and to look at whether or not there are systemic risks associated with

system asset management activities, examples would include liquidity in redemption risk and use of off balance sheet leverage. with respect to insurance, i mean this is not a matter that of going from a reviews of individual companies to the activities type of approach. it's not something that f-soc to the best of my knowledge has discussed. >> let me go then to my last question, in february of 2014, i asked you about the deepening economic crisis in the commonwealth of puerto rico. you said that the federal reserve was monitoring developments and continue to analyze the potential consequences for financial stability of these events. you also said that it would be best to not have the federal reserve step in as a creditor of a state or municipality. in fact you said it is more appropriate for congress and not the federal reserve to address

financial issues. faced by states and municipalities. do you believe here that the best outcome would be that puerto rico, electric power authority and its creditors come to an agreement without any government intervention with respect to this issue? without what intervention? >> without government intervention. but instead, work it out between the power authority and the creditors? >> so this is not a matter in which i have an opinion. the federal reserve -- it's something the federal reserve can't and shouldn't be involved in think it's appropriate for congress to consider what's best to do in this case. and it's not a question on which i've formed, i have an informed judgment. what we've been doing is you know, obviously monitoring developments in puerto rico. which economically are very,

very difficult. we are looking to see, are there risks that are being transmitted to the broader municipal debt market and we're not seeing signs of contagion, that's another topic. that is obviously important. but exactly what should be done in this situation, i think is a matter for congress to consider. >> and in the past you've said it's best to not have the federal reserve step in as a creditor of a state or municipality. >> and i continue to believe that very strongly. >> thank you very much. >> the time of the gentleman has expired. the chair recognizes the gentlelady from ohio, ms. beatty. >> thank you mr. chairman and thank you, ranking member. thank you for being here today. and let me just say that we were very proud to have you last week in the great state of ohio. although it was not columbus, capital. we would certainly look forward to having you come just a few

miles north to visit us. my first question is to follow up on congresswoman waters' question. when she asked about discrimination in the loss of wealth base on subprime lending. in part of your answer, i'm not sure if you got to finish. when you said -- >> let's take you back to some of the headlines coming out of our delivering alpha conference uptown. these from bill miller and jeff gu gundlach. >> thanks so much. just coming off a dynamic panel with jeff gundlach, the well-known bond investor and bill miller. gundlach had an interesting view on the fed, especially in the midst of the yellen commentary we were looking at. he said there's a gap between expectations and reality. he thinks the fed's tone is

being misinterpreted to where just because chair yellen said she hopes she can raise rates, it doesn't mean it's going to happen. he said the economy is really not as strong as the fed would like to see. it looks better than it is. because real gdp has been falling with inflation and yet if you look at the fed's own growth forecast for a couple of years ago like 2013, they were 5.3% growth for this year and clearly we're not on track for that. so here's what he had to say in his own words about the counterintuitive nature of how our economy looks if you take a step back. >> if you had just been off on mars and you came here and looked at that one chart of gdp, you would say -- gosh, i wonder if the fed is going to ease? you wouldn't be talking about tightening. but the fed really wants to get off of zero. because who wants to be at zero should the economy actually go into some sort of recessionary mode? so i can see why they want to get off of zero. but the economy hasn't really

been able to corroborate the hope that they've been showing. >> so that summed it up pretty well. another point that he made, he thinks the housing story is in some ways over. he thinks that millennials are not focused on buying, they see it as a risky endeavor. he's negative on builders in general. bill miller, his co-panelist has the opposite view. has a large position in the builders, thinks they're a good blaise to be and there you have it. interesting commentary on the fed, on the economy and where to put your money now. >> we're seeing the banks talking about mortgage lending on the rise. >> comments of jeff gundlach on the broader economy, it comes as we watch testimony by janet yellen on the hill. talks about the prospects for raising rates as better the sooner you do it that means you

can have a slower overall rate hike, let's get back to chair yellen on the hill. >> that african-american unemployment rates tend to be higher than those of on average among in the nation as a whole. it reflect as number of different sources of disadvantage that are operative there. in our national monetary policy. we're trying to achieve a situation where jobs are broadly available in the economy. to those who want, want to work. but we seek the maximum sustainable level of employment or we, we have to be careful not to try to push the economy to a point, we have to worry about inflation remaining under control. and given our focus on

inflation, there's certainly limits on what we can do for any particular group. >> thank you. i have a few seconds later. let me continue in this theme on the other side as i talk about the office of minorities and women in inclusion, certainly you know section 342, that created the office and part of the things that we've struggled with is the whole reporting authority. and the standards for reporting back. what those federal regulation offices are doing. do you have any insight on that? it's the omwi program. >> we make each of the federal agencies, are entities that are covered by this. >> another best idea popping over at delivering alpha. we've gotten macy's from one, ethan allen from another and now a third, dom chu has that. >> this is a real estate play. american realty capital. those shares are moving higher as keith meister over at corevex

is calling this company, american realty capital his best idea for the 12 months. he's starting a presentation, now meister says it's a fundamental value investment with a new management team that understands how to drive value. he has seen a number of positive cat lites for the stock down the line. he's going into some of those right now. but what we can tell you is that the stock sup by about 2%, as keith meister, you can see is taking the stage at delivering alpha. going through the investment merits of american realty capital he says it looks poised to recover from some of the accounting problems it's had over the past couple of weeks and months so we'll watch those shareses on the best ideas panel. delivering alpha. american realty capital, one to watch today. >> interesting to see that and ethan allen, a retailing/real estate play, with macy's. despite what gundlach says about home ownership. let's get back to chair yellen on the hill. >> at the lower zero bound.

both quantitative easing and low interest rates have made financing of the nation's deficits much easier and certainly has relieved pressure to enact real physical reforms to solve our long-term debt problem. chair yellen, bolt you and your predecessor, chairman bernanke have argued that fiscal reform is important long-term and have also stated that fiscal prudence can be ignored in the short-term to not hamper the economic recovery. chair yellen, it has now been seven years. we can no longer say we are looking at the short-term when we are dealing with our country's debt problem. can we? >> so i believe the nation face as very serious debt problem in the years ahead. at the moment deficits mainly

because of congressional actions and those by the administration have succeeded in lowering deficits to the point where for the next several years, the debt-to-gdp ratio was stable. but over time under cbo projections, as the population agencies and especially if health care costs rise above trend as has been historically typical, the country will face an unsustainable debt path in which debt-to-gdp ratio rises and that requires further actions. that's mainly related to retirement programs, to social security and even more important, to medicare and health care costs trends. and so we've known about this for decades. and there remain as need for action on this front.

>> there does remain a need for action and signing those later cbo long-term budget outlook report on some of the consequences growing federal debt that comes from the cbo's long-term budget outlook. it cites things like less national savings, lower income, pressure for tax increases or spending cuts, reduced ability to respond to domestic or international problems and a greater chance for a fiscal crisis. are these things that you all consider at federal reserve with regard to monetary policy? >> i agree with the set of consequences that you just read to me. and ultimately when, when we see those things being manifest, those consequences, so in the years ahead, if deficits aren't addressed, and become very large, they will put pressure on

the economy that not right now, but in future years, likely will cause us to have higher levels of interest rates than we otherwise would have. diminished levels of investment and productivity growth in this which he. we would have to offset those forces by having a tighter monetary policy. and we're not in that situation now. >> particularly relating to long-term debt leading to a greater chance of fiscal crisis, is this something that you discuss as part of f-soc when you're looking at systemic risk? >> i've not been part of an f-soc discussion of this. but it obviously is a significant, significant issue for the long-term. >> a short amount of time. when do we get to the long-term, chair yellen? when are we there after seven years and adding $8 trillion in

debt over the last handful of years. when do we get to the long-term? >> the economy is recovering. i'm pleased by its progress. as i indicated, my colleagues and i think if the economy progresses, as we expect, we probably will begin to raise interest rates sometime this year and that takes us toward the long-term. >> how does that affect our current debt? chair yellen? >> well two ways. higher interest rates will raise the cost of servicing the debt. but a stronger economy, which is what will cause us to raise interest rates, the stronger economy whose tax receipts and is favorable for the federal budget. >> time of the gentlelady has expired. chair now recognizes the gentleman from michigan, mr. kildee. >> thank you, mr. chairman. chair yemmillenniu yellen, than

being here. i'm blocked slightly by mr. emmer who is acting as a pulling guard. got good coverage. the would, that i did before i came to congress and a lot of the work that i've been focused on since i've been here relates to the economic health of america's cities and towns. and i know that a lot of the regional banks, most notably boston, cleveland, chicago and in some other ways philadelphia, have been focusing some attention on this issue of the fiscal health of communities within their supervisory area. and i've raised this with your predecessor and again with you. and i'm curious, as to whether the board of governors might in the near future take up this question. what we have, and i've talked about this before. i know other members have heard me go on about it. we have an institutional pending, looming institutional

failure in this country. there's often a tendency to think about cities facing significant municipal stress as being anomalies, or having that problem as a result of significant mismanagement, or an episodic short of fiscal stress situation. but what we're seeing, what the data shows us is there is a structural problem. municipal governments of all types are facing enormous stress hundreds of millions of dollars in general fund revenues. and expenditures in many, many dozens of these municipal institutions that are facing potential failure. while i know the fed has involved itself most recently in the question of municipal bonds. potentially as a source of liquidity for banks. looking at the municipal financial situation from the inventory side, only one-half of the equation. and think it is overdue that the

fed with its strong voice and its dual mandate, particularly its mandate related to employment, take a look at the potential employment impacts of the failure of dozens potentially of american cities that are really central to our economy. i wonner if you might might comment on the problem and offer you know, any thoughts as to whether you think the board of governors might take this question up. i think it would be an important issue to take up. >> that's something i'm happy to raise with my colleagues, i am well aware of the work that's gone on in a number of reserve banks, reserve banks all have active community development functions. and many of them have been very focused on often older cities or cities that have suffered declines, some cases because of

the decline of manufacturing. and trying to help them work towards strategies that would lead to their revitalization. and they've done some very creative work. a numb of them, a number of them have. so i can discuss with my colleagues what we might do in that space. i am pleased to see the efforts in the good work that many of the reserve banks have undertaken. i think it's been helpful to community leaders as they try to devise strategies for revitalization. >> thank you. >> i would encourage you to look at this as potentially a part of the work of the board of governors itself. and looking at the role that the banks, regional banks have done, it's important. i think often what happens is when it's looked at from the perspective of a region, it's

seen as a an anomaly and if the fed would be willing to use its research capacity to help elucidate to many policy-makers that not only do this problem have a potential negative impact on employment, but it is a structural and pervasive problem that goes beyond what normally had been seen as an anomaly. or as an episode based on management failure or some unforeseen circumstances, it's a structural problem and i think it fits well within the responsibility of the fed to look at. >> i appreciate your suggestion, i know a number of years ago, the reserve banks collaborated to initiate work on this topic. they chose a numb of communities around the country, cities that were hard pressed. and tried to work on understanding what strategies worked to revitalize these different kinds of communities.

and it could be collaborative work. the roo serve banks undertake to work together. >> thank you very much. >> the time of the gentleman has expired. the chair now recognizes the gentleman from kentucky, mr. barr. >> chair yellen, welcome back to the committee. i wanted to talk to you a little bit about the low-rate policy that the federal reserve has pursued now for effectively almost a zero short-term interest rate policy, that the federal reserve has pursued for six years. one of the original targets that the fed set to begin raising rates when was an unemployment reached 6.5%. we are well below that target now as you testified, about 5.3% unemployment. i appreciate your testimony that you expect to raise the target federal funds rate by the end of the year. what i want to explore are the reasons that you originally targeted for increasing rates and what it says about issues.

what does it say about the unpredictability of fed policy. i appreciate your potestimony tt effective communication desirable. doesn't nakt we're below 6.5% unemployment for a year and a half and you still haven't raised rates, doesn't that undermine the commitment to transparency and the commitment to communication? >> well i want to make clear that the 6.5% was never a target that we said we, we never said we intended to raise rates when unemployment fell to 6.5%. instead, we said it was a threshold and if unemployment was above that level and inflation was well under control, we would not raise rates. but once unemployment fell below that level, we would then begin to consider whether it was appropriate to raise rates and we have followed that