very carefully. we have certainly heard the market concerns on this topic. at this point, i can give you a list of factors that may be causing this phenomenon. i should say you see this decline in liquidity in some measures, but not in others. so the extent of the decline -- >> isn't it an important issue to be watching? >> so there are a number of things that might be involved. first of all, there have been changes in the structure of the market. a larger share of bonds are held by buy and hold investors such as insurers and pension funds. that may do less trading. we have had higher capital requirements and other

regulatory changes, but firms are also changing their own risk management practices in some sense in some cases in a more conservative direction. we have seen an increase in algorithmic and high frequency trading. that may be leading to changes in market trading practices. in the corporate bond market there have been increased reporting requirements that may be reducing the desired sizes of trades. all of these factors could potentially account for what's going on but we have not yet been able to figure out what the contribution of each is or just how serious. the concern is while day-to-day and normale time of most measures of liquidity seem to be roughly unchanged, there is a

concern in stress situations it may be and we've seen some cases where it's less available. >> in any market you need risk and liquidity, do you not? >> you don't have a market would you the? >> we need liquidity in markets. maybe even high-leveraged banks were exposed and providing high liquidity and vulnerable if liquidity were to be reduced. it seems more of that risk has turned to low leveraged investors. there are two sides to this.

>> in reduceing systemic risk do you believe having fewer systemically risky financial institutions would be a good thing? >> arguably yes. >> okay. should banks through regulation like the fed, be encouraged to reduce systemic risk everywhere they can? >> we are certainly trying to put in place a set of incentives that will reduce the systemic footprint and risk of firms. i think higher capital requirements we plan to impose surcharges, capital surcharge is on the most systemic firms and other regulations that will diminish the risks, create incentives for their footprints to be reduced in ways that will

reduce their systemic risk to the financial system. >> senator brown. >> thank you, mr. chairman. madam chair, i continue to be concerned, as i know you are, that the economic recovery has not taken hold for all americans. notably large numbers of women and in communities of color. i know that confirmation bias can be a problem in investing and some might think it's a bit, it might exist on capitol hill too. i see lots of evidence of underemployment, unemployment virtually evidence of inflation and lots of sources of head winds for our economy. what are the risks of tightening monetary policy too soon? and once rates are increased, what would be the impact of the gradual rate increases on working americans? >> of course there are risks of the recovery of tightening too

soon. we have been highly focused on those risks. that's an important reason why we have left rates as low as they are. they've been effectively zero. we had recovery that has been slow to take hold. growth has been slower than most u.s. recoveries following a severe financial crisis. we have clearly made progress. i agree with you that there remain groups struggling in the labor market. as we try to show in the monetary policy report arguably the standard unemployment rate we look at that's 5.3% may somewhat understate the real degree of slack that exists in the labor market.

we clearly want to see improvement in the labor market and want to do nothing that would threaten that. on the other hand the labor market is getting demonstratively closer by almost any metric to a more normal state. the degree of monetary accommodation has been in place a long time to have significant improvement in the labor market. as head winds that are holding the economy diminish and i believe they are diminishing, it does become appropriate to begin -- not talking about tightening monetary policy. i think we are talking about slightly diminishing the very high degree of accommodation that we have in place. of course we wouldn't want to do so at a way or at a pace that would threaten continued

progress in the labor market. at the same time inflation is very low. while we've indicated that a good share of that is for reasons we believe will be transitory and we expect inflation inflation headline inflation to rise much closer to core levels that's another reason why we can be patient in removing accommodation. there are risks on both sides. just as we don't want to tighten too soon to threaten rhett covery or jeopardize the return of inflation back to our 2% target we also want to be careful not to tighten too late. we could overshoot both our goals and be faced with a situation where we would need to tighten monetary policy in a very sharp way that could be

disruptive. my preference would be to tighten in a gradual manner. there are reasons i would like to be able to do that. i agree there are certainly risks to the recovery and to the labor market of tightening too soon, but there are risks on the other side as well. we are trying to balance those. >> thank you. some have recently some people suggested american workers need to be willing to work longer hours. i don't think many work less by choice. many americans working part time would like to work pull time. this slack in the labor market seems to indicate we have a ways to go. discuss with us your concern

about the numbers of workers working part time. >> yes. we have an unusually large share of the labor force. i believe it's around 4.5% that report themselves as working part-time for economic reasons. that means they would like to be working more hours than they are able to work. broader measures the measure of the unemployment rate we normally look at it's referred to as the u-3 measure. we have a picture in the monetary policy report and we show how high that is. we show that although of course it's always higher than a narrower concept of

unemployment, it is very much higher than you would expect historically given the narrower measure of unemployment. so to my mind this really suggests that our standard unemployment rate does understate the degree of slack we still have in the labor market. >> thank you. we have breaking news out of chattanooga, tennessee. sue herera has more on that. >> a news conference is going on about those shootings at a military facility in chattanooga. the mayor saying there are a total of five people dead four marines and the shooter. he also said others were shot, as well. we do not know how many people or their condition. there was a police officer shot. he was shot in the ankle and is

in stable condition. the u.s. attorney for eastern tennessee who was speaking a moment ago says they are now investigating the shooting as an act of domestic terrorism. the fbi is going to do that investigation. once again we have a total of five dead four marines and the shooter itself. a police officer has been wounded. others shot as well. we are going to get clarification, hopefully, from officials as to how many people and their condition. >> thank you. sara and i will continue watching as the q&a continues now. >> we had negative interest rates yet it seems the fed continues to watch not just the stats but is affected by the markets and worried about

disruptions in the stock market. wondering if you might address that. >> i would push back against the notion we are unduly affected by the ups and downs of the stock market. we are certainly very focused on the fundamentals and economic statistics that describe where the economy is and in terms of the labor market and inflation which are the two goals assigned to us by congress and a lot of different kinds of economic information go into the forecasts that drive our decision making our forecasts about where the labor market and inflation will be moving but financial conditions broadly, and i'm not talking about the stock market here uniquely but a wide range of financial

variables that i would say go into assessing financial conditions, the ease for households and businesses of borrowing that affect their spending patterns whether it's consumer spending or investment. or our ability, our competitive position in the global economy that affects our ability to export and the competitiveness of import competing goods. the state of financial conditions broadly speaking is one variable that does affect our forecast of the economy. so we can't completely ignore what's happening in the markets to housing prices to equity prices to longer term interest rates, to credit spreads that influence borrowing costs to the exchange rate that affects the competitiveness of u.s. goods

and services. all those factors feed into financial conditions and they're relevant to forecasting the economy. so it is one element of our evaluation, but i don't think we pay undue attention to it and i don't think we should. >> i agree. thank you. the living will process is something that i know our ranking member alluded to dodd frank and senator warren and myself were assigned to work on those particular areas, came to an agreement and senator shelby offered an amendment on the floor that passed 95 votes to make it even stronger if i remember correctly. at least alter it to some degree. certainly make sure it became law. wife's we've had some questions about the living wills, the last round. there was concern on my part and i think a few others that there was regulatory capture taking place that these living wills

were pay lacking in substance. yet maybe the fed really wasn't you know putting the pressure on these organizations to deliver as they should. i had a good meeting this week with mr. truillo. the substance of these living wills, and i know you all sent out statements regarding what's happened. they are better than they have been. it's clear these living wills have to be able to resolve an institution under bankruptcy. i wonder if you might speak to that for a moment. >> i agree with you. we worked closely with the fdic in this last round a year ago to set out a clear set of expectations for what we want to see in the current round of submissions. we worked closely with the fdic and the banking organizations to make sure they have been very

clear about what we expect in this round of submissions. we've instructed them to enhance their disclosure in the public part of the documents that they produce. it looks like preliminary reads suggest they have made progress there. and we're going to be evaluating them in the coming months and we indicated that if we continued to see shortcomings in the living wills that we'll use our authority to determine that these resolution plans don't meet dodd-frank requirements. that's where we stand and what we'll do. >> thank you very much for your service. appreciate it. >> senator mendez. >> thank you for the work you've been doing. as you know the fed's dual

mandate directs it to pursue maximum employment and stable prices. how the fed chooses to balance these goals has significant consequences for the quality of life of millions of americans. on the first element are labor markets improving, but most americans feel like they have a lot of catching up to do from the deep hole the financial crisis put us in. they don't feel their personal circumstances has certainly risen at all and they feel enormous challenges. meanwhile, inflation continues to run well below target as it has for an extended period of time. so it would be a mistake, from my view for the fed to shift its focus away from jobs at this critical time. with interest rates near zero the fed has essentially no room for error if it tightens too soon. if it tightens too late i think the risks are much lower and the fed has plenty of ammunition to

keep inflation anchored. as a follow-up to senator brown's question i'd like to know, in order to avoid choking off economic growth prematurely, will the fed wait to raise interest rates until after it has seen signs of actual inflation rather than based on some intangible fear of future inflation, which may or may not ever actually materialize? >> so senator, i agree with your characterization of the risks, that if there is a negative shock to the economy with interest rates pinned at zero we don't have great scope to respond by loosening policy further, whereas with a positive shock, of course we can tighten monetary policy. we have the tools and we know how to do that. that's a consideration that has

been weighing on our decision making for quite some time. and has led us in part to hold interest rates at these very low levels for as long as we have. so that has been a factor we have been taking intoe account, and it partly explains the policy that we have been following. but there are lags in the effect of monetary policy. we need to be forward looking. on the other side that's there are risks from waiting too long to act, as well. we have to balance those risks. you asked me if we would likely raise rates before inflation has risen substantially, and there i would point you to section 3 of the report that we gave to you where we show each participant's

forecast or we show a summary of their forecasts for the economy and for policy. as i mentioned in my testimony, most participants as of our june meeting, envisioned that economic developments would proceed in a way for the rest of this year that would, in their view for almost all of them make it appropriate to begin the process of normalizing policy some time this year. if you look at their inflation forecasts, at the end of the year on a year over year basis, most participants envision that total inflation would be running a little bit under 1%. so that's well below our 2% objective. and they envision core

inflation, that is for the year as a whole at the end of 2015 as running in the neighborhood of 1.3% 1.4%. in that sense you can see in their projections that they are envisioning it's being appropriate to begin tightening policy with inflation below our objective. but what we've said is we want to have reasonable confidence before we tighten that inflation over the medium term will move back to 2%. what is going on here is that we think there are transitory influences namely the marked decline in oil prices and the strengthening of the dollar that are holding inflation down. and that underlying inflation, even with core inflation at low import prices and declining import prices are a transitory factor holding that down that

as we see the labor market improve and these transitory influences wash out, that we believe that inflation will move back to 2%. so if we have that confidence the committee would be likely to begin before seeing inflation go back up to target. >> normally at my experience here i would have interrupted you a long time ago because i lost i expired my time but because your response was so interesting and i'm trying to grasp where your policy view is from it that i let it go. let me make one, if i may, very briefly, chairman, a comment. that is from -- i listened to you intently. from my perspective, i think it is much less of a problem that inflation may run high a little bit. i didn't say significant inflation, which you reference. run high a little bit for a short period of time until the

fed's response to it takes effect, then the alternative, which is cutting off much-needed job growth and income growth, too, which would have been my second question. i'll submit that to the record. >> don't want to cut off job growth and income growth and we do want to see inflation move up to 2%. we would not be pleased to see it linger indefinitely below 2%. >> thank you, mr. chairman. >> senator rounds. >> thank you, mr. chairman. recently the senate banking committee held a hearing that examined the role of the financial stability board in u.s. regulartory framework. a lot was international regulation overtaking u.s. decision making. do you agree it's important for the united states to set its own insurance capital and regulatory standards before agreeing to any such standards internationally?

>> well we are working on u.s. standard s standards. nothing applies to u.s. firms until we have gone through a formal rule-making process or process with orders in the united states. so no international discussion or agreement applies to u.s. firms unless they're consistent with u.s. law and we've gone through a full-blown rule-making process. but discussions are taking place internationally about appropriate standards. i think it's very important we weigh in on those discussions so the standards that other countries adopt work for our markets and for our firms, and

that we end up with a playing field that is competitive for our own firms to compete in. so we participate in those international discussions, but with an understanding that nothing applies to u.s. firms until we have gone through a full rule-making process here. >> with regard to sifi resignations, in the spirit of reducing systemic risk do you support giving designated firms a specific road map for dedesignation, like an off-ramp or approach that would allow them to basically decertify? >> so i think firms should have the ability to decertify. the fsoc every year has to

review designations to make sure that remain appropriate. firms are given great deal information during the process of designation. they understand very clearly what it is about their business model and strategy that has caused them to be designated. what about their business activities is responsible for designation. i don't think it's appropriate for fsoc or regulators to try to run these businesses to try to micro manage what these firms do. i don't think there is any single appropriate offramp. we shouldn't be telling them

exactly do the following list of things. they understand what they need to do to change their profile in a way that would change fsoc's evaluation. if they were seriously contemplating making those kinds of substantial changes, i'm sure there would be many opportunities to interact with fsoc and staff to gain perspective on whether or not the kinds of changes they were thinking of would significantly change their systemic footprint. >> thank you. one last question. as you know madam chair, when you talk the markets clearly listen. as you work with the federal reserve's open markets committee, you look at a balanced approach and you are looking at several goals. you've clearly defined your goal is a 2% inflation rate. what about when we talk about

maximum employment? where do we go and what do you lay out as the firms look at it in terms of what to expect from the committee? what's your goal in terms of the maximum employment? >> so as we say in our statement of longer run goals and monetary policy strategies there's something different about the two goals. we have a goal for inflation, 2% and maximum employment. a central bank can choose or determine what its inflation target should be. we chose 2%. we're in good company that is what most advanced central banks have chosen. maximum employment is different. we can't just decide what do we want that to be in the long run. we think there is some normal longer run rate of unemployment or level of maximum employment

that is consistent with stable inflation. for us it's not something we can say we would like it to be this or would like it to be that, it's something we are trying to determine. it can change over time. it's not easy to know exactly what's possible given technology and democratic and demographics and the institutions the way the labor markets function. we trying to estimate it not determine it. participants in the committee are asked every three months when they submit their forecasts to write down their own current views on the unemployment rate that corresponds with what they regard as normal in the longer run or consistent with maximum employment. most members of our committee or participants currently regard that as an unemployment rate in the neighborhood of 5.2 to 5.3.

that is something that can change over time. it has changed over time and we report that publically. >> thank you. thank you, mr. chairman. >> thank you. senator donnelley. >> thank you mr. chairman. thank you, madam chair. madam chair, i know you share my concerns with income inequality and a continuing trend of middle class wage stagnation. in your testimony you said although there are tentative signs that wage growth has picked up it continues to be relatively subdued. so as the economy improves how do you expect middle class wages to show substantial improvement? what are you looking at? >> well we look at several different measures of wage growth. three aggregate measures that we look at are the employment cost index, hourly compensation, average hourly earnings. they don't always tell exactly the same story.

i think we have seen a meaningful pick-up over the last year in the growth in the employment cost index, but less movement in the other two measures. so there are early indications are conflicting indications there. the levels of increase are still relatively low, and in real or inflation-adjusted terms compensation or wages are increasingly less rapidly than productivity. >> what do you expect to see in the next year? >> i would expect to see a pick-up in -- so i'm not going to say middle class wages, but aggregate wages in the economy. i would expect to see some further upward movement. we're thinking depends in part on productivity growth. for example, if productivity growth, and there is a lot of uncertainty about what it is

but if it were to trend rate running around 1.5% with a 2% inflation, we would expect to see rate growth -- >> the key to that is that there actually would be some correlation between productivity growth and growth in wages as well? >> there tends to be over long periods of time but it's not always true over shorter periods so there is some uncertainty about this. we have been through a period in which wages have been -- >> we have not seen this -- >> growing less rapidly than productivity. i would expect to see a pick-up, it's not a certainty here but to my mind it is evidence of some remaining slack in the labor market. that's my forecast is we will see pick-up in wage growth. but it is important to remember that there has been increasing

wage inequality in the you'd over a long period of time. certainly going back to the mid to late 70s. that reflects deeper set of structural factors that the federal reserve doesn't have tools to combat. what we are looking for is an overall job market that's functioning in some sense well, but we see big gaps between increasing gaps between the wages or compensation of more skilled and less skilled workers, and that's been holding down middle class wage growth for a long time for other reasons. >> let me ask you about a little bit different subject. i voted for dodd frank because i wanted to see safety and stability in the system. it wasn't a design to load it up with regulations, but a desire to make sure we had safety and

stability. but now what we've seen is a growing shadow banking system which brings other concerns. so as you look at this since shadow banking entities are not subject to the same regulatory oversight, how concerned should we be with the potential risk involved here? that is what we are trying to drive at in the first place with dodd frank was eliminate some of the systemic risk. >> i think you've put your finger on a very important phenomenon, and we were well aware when we put these regulations in place in dodd frank that wherever you draw the regulatory perimeter that there will be a tendency for activity to migrate beyond it to what we call the shadow banking system. so we clearly need to be very vigilant about monitoring risks

that are migrating to that system. certainly in the federal reserve, we have hugely ramped up our attention to shadow banking system. the fsoc is focused on risks developing broadly through the financial system in shadow banking. and the financial stability board has a large work program devoted to shadow banking. we are thinking about regulations that might address, like minimum margin requirements that would apply not only to banking organizations but more broadly that might address some potential risks in the shadow banking system. of course we have seen some height en d heightened attention to risks by the fcc in money market funds

which was an important piece of the shadow banking system where risks developed leading to the crisis, but you are absolutely right to focus on that. we are attempting to address those risks as best we can. >> thank you madam chair. thank you, mr. chairman. >> senator scott? >> thank you, mr. chairman. chair yellen thank you for being here today. as i travel across south carolina people express concerns about american leading from behind. whether my conversation has been about the administration's failure to enforce their own red lines in syria or the ill-advised nuclear deal with iran south carolinians have this sense our nation is timid, that it is comfortable sitting back and taking cues from foreign actors rather than occupying our traditional role as leader of the world. i'm certainly not suggesting that you somehow are in charge of military policy or middle east diplomacy, but you are in

charge of our regulatory policy for some of our country's most successful businesses. sometimes it seems to me like our u.s. regulators are leading from behind. especially when it comes to our involvement in international regulatory bodies like the financial stability board or international association of insurance supervisors. the fsoc designated domestic surers at sifi after the fsb did. we saw something similar happen with capital buffers for money market mutual funds. the fsoc and s.e.c. seemed to take their cues from the fsb. madam chair, now that the fed is riding a capital rule for insurance companies, i would encourage to you break from the tradition of leading from the behind by developing a capital standard that first works for our domestic insurance companies

rather than letting international standard setting bodies like the ones i mentioned already write rules and export them back to our country. i would also encourage you in your capacity as a member of the iais to take that lead in that body promoting activity-based regulations of insurers as a group that reconsiders its g-side designation methodology late they are year. it appears governor truillo committed the fed to activities-based approach to asset managers but i haven't heard him say he would do the same for insurers. will you commit the fed will take the lead and follow these courses of action on insurance companies, capital standards and promoting the replacement of deregulation based insurance? i think senator rounds was starting down this road when asking his question. it appears the european regulators are concerned about

the creditor protections we at home are far more concerned about protecting the policy holders. i would like a commitment to use our domestic approach and export it as opposed to importing their philosophical disposition of capital standards based on creditor protections. >> i guess all i can really say is that we are playing an active role internationally in insurance, which is why we joined the iaias. we are participating jointly with the federal insurance office and the state insurance commissioners. we are collaborating to think through what is an appropriate system of capital and liquidity standards for globally active

firms. we have a strong interest in doing that. it's important for us to have our voices heard in that process. i don't think it's accurate to say we are sitting back and not trying to play a leadership role. i think we are. domestically we've been given increased flexibility through the columns thanks to design and tailor a set of insurance regulations, capital standards that we think are appropriate for our institutions. we want to carefully tailor them to the unique characteristics of the firms we supervise and we are taking the time and interacting with these firms to make sure we understand what an appropriate insurance centric,

well tailored set of capital standards will look like. >> thank you. at the end of the day, all the washington regulatory speak downed academic but what it ultimately boils down to is a price that americans will pay for their retirement. one of the things we are trying to do is make sure that price goes down and not up as we found ourselves from my perspective, adopting international standards as opposed to taking ours and exporting them. thank you. >> thank you mr. chairman. good to see you again, chair yellen. i want to follow up on senator corker's question. dodd frank requires big financial institutions to submit living wills, a plan for how they could be liquidated. i want to quote the statute. in a rapid and ordinarily fashion in bankruptcy without bringing down the economy or needing a taxpayer bailout. by law, the fed and fdic are supposed to determine whether these plans are credible or not.

and if they are not credible the agencies can order the institutions either to simplify their structures or eventually to sell off assets. so last august the fed and fdic identified significant problems with the living wills submitted by 11 of the biggest banks in the country. the fdic determined that these living wills were not credible. but the fed didn't. instead, the fed said that if the banks did not, quote, take immediate action to improve their resolvability and reflect those improvements close quote, in their new living wills, the fed, open quote, expected to find the new living wills were not credible. the 11 banks submitted their new living wills at the beginning of this month. i know you haven't completed reviewing them yet, but i want to make sure we are clear on this point. will the fed find living wills

not credible if the bank has not fixed each of the problems that the agencies identified last august? >> we are certainly prepared to make those determinations. we will work jointly with the fdic as we have been doing to analyze the living wills and see whether or not we feel that the responses to the directions that we gave to these firms are satisfactory or not. if we find that they're not, we are certainly prepared to say that they are not credible. >> okay good. i'm glad to hear that. two of the issues the agencies directed the banks to address were quote, establishing a rational and less complex legal structure and developing a holding company structure that supports resolvability. jpmorgan chase, to pick one

example, as over 3,000 subsidiaries. it will make a lot of work to establish a rational structure that permits jpmorgan to be resolved quickly as required by law. but to be clear again, the fed will find jpmorgan's living will not credible and living wills of the other 10 banks not credible if they have not taken concrete steps to significantly simplify their structures and are not sleek enough to be resolved quickly? >> well we have given them those directions and we will evaluate that. i would simply say that the regulatory reports that we receive indicate that these firms since 2009 have reduced the number of legal entities in their structures by

approximately 1/5. >> but you will note that number i gave you is not from 2009. it's over 3,000 subsidiaries at latest count that i've seen. i just want to be clear that you are willing to say not credible if they don't meet the legal standards that they could quickly be resolved and that includes how complex their structure is? >> well agreed they need to be less complex, and we've given them that direction, but i'm not sure we can determine exactly how complex they are by just counting the number of legal -- >> fair enough. i'm glad to have lots of ways you look at this. >> they are not at all equal. some are set up for very narrow purposes and are not really material parts of the, you now, represent serious impediments to resolving the firms. >> okay. i don't want to determine this

by count of legal entities. >> count by itself i understand that, but we do remember that the statute says rapid and ordinarily liquidation. that goes to the question of complexity. i raise this because the living wills are one of the primary tools the fed has to make sure that taxpayers won't be on the hook if one of these giant banks fails. it is critical that the fed uses this authority, and like the fdic has been willing to do to make our financial system safer. i want to ask you one other question just quickly. in dodd frank, congress directed the fed to impose tougher rules on banks with more than $50 billion in assets. that covers roughly 40 of the biggest banks in the country. about 1/2 of 1% of the 6,500 banks we have in the u.s. together this 0.5% holds more than $14 trillion in assets.

about 95% of all the banking assets in this country. 40 banks, 95% of all the assets. the tougher scrutiny is designed to direct regulator attention where serious risk is. in other words, concentrate regulatory scrutiny on these 40 banks rather than on community banks and credit unions. there have been proposals recently about exempting many of these banks from tougher rules by raising the $50 billion threshold to $100 billion, $250 billion, $500 billion. the argument i hear is that $50 billion banks just don't pose systemic risks. i want to ask a question on this one. we learned or should have learned in 2008 that in a crisis, several banks can find themselves on the verge of failure at the same time. do you think it could pose a systemic threat if two or three banks with about $50 billion in assets were on the verge of

failure? >> well when a significant number of firms is at the risk of failure, often it's because they have highly correlated positions. we always have to worry about that resulting in a drying up of credit to the economy. during the great depression most of the banks that failed were small. they were a lot smaller than $50 billion or adjusted for that time. so when many banks fail of course we have to be concerned as well. that's one reason why for all institutions, even for community banks, bastl 3 regulatory requirements have safety throughout the banking system though the most systemic firms as you pointed out need the greatest scrutiny. >> it's the top 40. i want to say, there are two approaches to this issue.

the first, which every republican on this committee supported, is to raise the threshold to $500 billion. that is cut loose about 30 or so of the biggest banks in this country. and just hope for the best. if it doesn't work out, the taxpayers can pick up the tab again. the other approach is to play it safe. keep the threshold where it is and rely on the fed to tailor the rules to fit the risks posed by these different banks. that is the approach i support. since the american taxpayers are on the hook when the economy starts to implode, i expect most of them would prefer congress be careful, too. thank you, madam chair, thank you, mr. chairman. >> madam chair, some people have proposed that we don't have any threshold. you've i seen some of that. the regulators have the power to do their job properly. you've seen some of that, i'm sure. >> thank you, mr. chairman. i want to follow up on exactly the same question senator warren

just finished on. last september i asked federal reserve governor truillo about raising the trigger when a bank is systemic important from the $50 billion level. in hearings we heard the asset threshold should be raised or changed because it's arbitrary, includes institutions not systemically important, focuses only on size and produces undesirable incentives. governor trulo said several years of testing and assessment have given regulators a better understanding of the dgs nation threshold. begin the intensity and complexity of work around stress testing, he said regulators haven't felt the benefits of sifi regulations are substantial to warrant the compliance and resource expenditures required of banks above $50 billion in assets, but well below the largest systemically important institutions. my question to you which is sort of another way of asking

the same question senator warren just asked. do you agree with governor tuillo's analysis there would be a benefit if congress focused more on substantive evaluations of true risk than an arbitrary number? >> so like governor truillo, i would be open to a modest increase in the threshold and the reason i would be open as you just stated we do have smaller institutions that under section 165 are required to do for example, supervisory stress testing and resolution planning.

but if there were to be a modest piece in the threshold, what is essential is that the federal reserve retain the discretion to subject an institution that might fall below the new threshold to higher supervisory requirements. for example, that we would be able to insist it perform supervisory testing if in our view the risk profile of that firm in spite of its size, led us to believe it had systemic import that made us think it was appropriate. every firm over $50 billion has to do supervisory stress testing. what we found is the burden

associated with that for many of those firms really exceeds the benefit to systemic stability, but retaining the discretion to a supervisors require them to do that if we thought it appropriate, that would be important for me to support that. banks with similar profile should not be subject to similar standards. the question that i think i heard you say was that the real issue is the risk profile. and that the regulators should have the authority to evaluate the risk profile of our financial institutions and regulate them appropriately. did i hear you correctly? >> i think that's a fair

summary. >> the office of financial research published a study that uses a multifactor approach to creating this systemic risk of each of the institutions suggested to 165 of dodd frank. >> i'm not really familiar with that. i haven't had a chance to review it. >> i get asked all the time about things. if i don't know about it tell them. the study shows different banks subject to the $50 billion, who are on the up side of the $50 billion trigger have vastly different risk profiles. the question i was going to ask whether this study has validity in showing there are vastly different risk profiles above the banks with the $50 billion

trigger. isn't it correct there are very different risk profiles in this pool of banks above the $50 billion trigger? >> yes. they have very different risk profiles. some are essentially large community banks that are not especially risky. on the other hand we have a couple of u.s. firms that are designated as gsps. there are a lot above $50. they have business models that make their activities systemically important. firms of the same size can have very different risk profiles and the appropriate supervision of those firms can be quite different. >> thank you. i'll conclude with this comment. that is i think we would be much better served if our regulatory system allowed our regulators to

focus on risk and regulate to that rather than forcing them to utilize arbitrary numbers. >> thank you, senator. >> your position would be that a threshold is appropriate, but then discretion to look at different banks over that threshold differently is what really you think is the ideal? >> within limits we can tailor our supervision to the profiles of the firms. i guess i would be concerned if the threshold is raised we are now seeing that banks that used to be above the threshold now fall below the new threshold. they are no longer automatically subject to a number of

requirements. >> and might engage in risky behaviors? >> we might want as supervisors to say no no no. those two firms they need to continue doing that. we know they are now below the threshold but want to subject them to it in i how because it's right for them now. there may be many other firms that have now been relieved from what was a burden that isn't appropriate for them. >> just to be clear. this issue of threshold is not to essentially, if you get below a threshold, you don't have any responsibility. you want to follow risk even if it's below the threshold? >> that's right. we are going to step in as we head toward the close of trade on this thursday. you've been watching live coverage of janet yellen's testimony day two of her testimony on capitol hill. yesterday was the house financial services committee. no real fireworks like yesterday

with representative duffy. elizabeth warren did bring some energy there as she tried to pin janet yellen down on enforcing those living wills the banks have to fill out. >> and the credibility of them. as expected elizabeth warren going straight to financial regulatory reform. it was interesting janet yellen on this issue did say for the first tomb that she would be open to a modest increase on the threshold of sifi-designated banks, banks too big to fail. yellen is open to that. when it comes to interest rates, she favors a prudent and gradual approach to raising interest rates. reiterating this idea that perhaps the first interest rate increase could come sooner. that doesn't mean it's going to happen rapidly higher in a stair step after that. >> clearly, that is sara eisen, not kelly evans. she is on vacation. i'm bill griffeth. welcome to the end of the first hour of "closing bell."

bob pisani stepping in. we had a modest rally today. noose dakota may close in record territory here. >> looks like it's going to do that. we've been advancing on the major indices. germany up 9% australia up 9%. s&p up about 4%. all in the last week. greece looking better. china stabilizing. that's important. at the same time the global growth story is not looking good. energy stocks are looking terrible. material stocks are looking terrible. big global names like dover, emerson, eaton had a terrible time in the last few weeks. then other sectors are not looking particularly good. industrial names. you are being led forward by defensive names. health care, telecom names. we need more global growth and we are not getting it.

>> we have a slew of earnings on the second hour of the "closing bell." welcome to "closing bell." im i'm sara eisen in for kelly evans. >> i'm bill griffeth. we had a good rally under way. dow finishing up 69 points. 18,119. s&p up 16 almost 17 points. and the nasdaq, a good rally up 60 points. 1.26% in record territory at

5163. >> joining us to discuss all this, michael santoli from yahoo finance. and google set to report. michael santoli, we are expecting earn frgs amings from google and mattel. >> the response to earnings has been very good. everyone knew the bar was low. they are hurdling it. i think it's interesting that we had this outperformance of nasdaq from bell to bell. it was a nasdaq market. it was a traditional growth stock market. bob mentioning materials being weak. strong dollar hurting that. it's been a week-long draining of anxiety out of the market. vix dipping below 12% is telling. >> feels like this market is

grinding. the average trading range for the dow was 190 points. today pretty low. we are grinding higher here. >> we are grinding higher because we were in the midst of macro concerns the last couple of weeks. now we are focused on company specific issues and earnings. to the point of earnings being good, they have been. they started last week with walgreens alliance boots. the most encouraging sector so far is the financials. they ran into the prints. one of the best sectors into the earnings. they delivered and they rallied since then. them acting well on the news that is interesting. a big part of the s&p in terms of a weighting. >> how much of that was the cross cutting, lower legal fees they didn't face this time

around? >> we have loan growth. 6% 7%. loan growth is what's important. we haven't seen loan growth in the last several years. if do you a 6% 8% annualized loan growth number that is a good sign. number two we haven't seen the benefits from higher net interest margin. we won't because rates aren't going to go up that much higher. that is a better tail wind. most importantly, the balance sheets have improved. 2016, capital outlays might be the theme. >> tell that to elizabeth warren. >> we'll see. >> this has been a strong week. u.s. stocks are set for their best week in nearly four months. >> the best five-day run since december. it has been very strong. people got too defensive. too much cash built up. i don't know that means anything in terms of a decisive break above the range. >> google earnings coming out.

john fortt, what do they look like? >> revenue in line at $17.7 billion. earnings per share, $6.99. that includes the traffic acquisition costs. they are not backed out. aggregate paid clicks year over year up 18%. cost per click year over year down 4%. sorry. year over year down 11%. sequentially paid clicks up 7%. sequentially costs per click down 4%. overall, this report looks pretty much in line. it looks like google did some things on costs that investors are going to like. this is ruth porat's first

earnings report as cfo. "we are very focused every day on developing big new opportunities across a wide range of businesses. we will do so with great care regarding resource allocation." that is one of the themes investors hope to hear more about on the call which starts in under a half hour. >> that was the key. they wanted to see how much they would cut costs. this has to be a good sign. google rallied into this report. it's up about 5% after hours. >> absolutely. this is exactly what investors want to see. we got a nice big beat on the earnings side on the eps side. we are finally going to get a degree of cost control. we all want to own google. when you have a sense their spending is faster than revenue growth, that is unsettling. to have ruth deliver these numbers is a big positive. she came in late may. this isn't just her up packet.

the old cfo makes sure the new cfo starts out with a good quarter. this is what investors look for and why the stock is rallying. google outperformed the index materially year-to-date. >> do you think her being at the company will increase transparency? not only on the cost side but transparency of the company, how they doing and how they will get there? >> absolutely. the communication. transparency. the one concern you have to have is, this is a company that is controlled by their founders that have super vote. they brought her in to do these things, but will they let her do that? that is something we'll see over time if she is able to fulfill her mandate to control costs, that will be a catalyst this year. you'll see mobile modernization

improve. >> what did you make of these numbers? >> i think these numbers are great coming out of google. i had revenue with tack cost at $17.75. the numbers i came up with are about $6.85 earnings per share. honestly, this is a quarter where google was set up to rally. ruth coming from morgan stanley. a wall street-friendly, shareholder-friendly message she will be delivering. when you look at valuations this is a company trading at 16 17 times forward earnings. with $65 billion in cash there is a lot the company can grow. a lot of areas outside search. search is 85% revenue. there are things they are working on where they are looking at bringing in the internet of things and dominating that area driverless cars. there are a lot of areas where if they can maintain that search dominance, they can fend off

competitors like twitter and facebook, this is a company that is positioned to rally 15% to 20% in the next 12 months in my opinion. >> i wonder if the new shareholder-friendly cfo means cash return. google has $60 billion in cash. >> i don't think google is at that moment yet. it's not as if the cash is that huge a percentage of the market value. >> stock was flat for the last year. >> we are talking about the stock has outperformed into this report. it did nothing last year. >> when robert said this stock was poised to rally, you nodded your head. you agree. >> yeah. it's a been a laggard for a while. i was nervous it rallied up 8% into the print, but again to michael's point that it has been a laggard to the facebooks of the world and higher growth names. what is interesting about technology so far in earnings investors are willing to pay for

expensive growth. this is growth but not expensive. it could play a big ketchup game in short order. >> what are you going to be listening to on the call? >> this is just the beginning of what could be a very nice move for google. what companies best positioned to hit that magic mark it's google. they've got a variety of revenue streams that could explode over the next five years. >> is it time for her to return some of the money to shareholders? aren't we past that? make acquisitions. build a factory. hire more people. aren't we past that phase? >> a company that never paid a different send. that is no longer the dominant theme. i think they want to see something else out of google. google is in a weird spot. it's in transition being a pure growth secular growth story to something more like a core holding of everybody.

>> now for something completely different, it's toy maker mattel. dom chu, how do they look? >> fun and games right now. 5% to the up side for mattel shares. 62,000 shares traded after mattel reports earnings coming in a one penny per share earnings per share number. that beats average analyst estimate for a 4 cent lost. $988 million. the company does go through some of the brands but looks like for right now we did see the american girl brands up about a percent. fisher-price up about 9% in constant currency basis over the last year. fisher-price perhaps a source of strength. investors at least at first blush like the stock announcement for earnings. earnings beat a slight miss on revenues. as a resu we have a 5% gain

on 60,000 shares of volume. >> barbie which is the headline product saw gross worldwide sales down 7%. i don't get it. that's an important one for investors. it marked the turn of mattel. they were suffering in some of the other brands. good to see the strength that fisher-price and american girl. >> you have new management in place, a stock that was horrendous last year. they are back to the point where they can deliver what they are saying very low expectations. cheap stock. >> let's pause for a moment. more about that deadly shooting in chattanooga, tennessee. >> nbc news identified the name of the gunman. five people were killed four marines and the shooter himself. senior federal officials confirming to nbc news the

suspect in the shooting was muhammed yousef abdulazeez. five people killed and that included the shooter. back to you. >> thank you. >> back to business. >> for a while that was the only reason to own it. >> we want to go back to washington, d.c., where senator chuck schumer started questioning fed chair janet yellen. >> productivity growth has certainly slowed down since 2007. it's been decidedly slower than before that.

i think it's important to focus on policies that would improve productivity growth. they have to do with making sure that every american child is able to get a world class education and is able to succeed in this economy. we promote innovation and entrepreneurship and capital investment both public and private that are necessary to drive innovation. those are the kind of policies that congress and the public need to consider to address these deeper structural trends that are not just related to the cyclical state of the economy and have been around for a long time. >> there is certainly a limit what monetary policy can do.

we are facing sequestration here in the congress. current spending bills proposed by my colleagues on the other side of the aisle would slash funding for key resources. pell grants. $300 million, cuts to education. these are the kinds of programs you mentioned in part as catalysts, stronger wage growth. i don't want you to weigh in on specific programs obviously, that is not your job. as we look toward the end of the year, can you talk about the broader impact to our economic recovery that is drastic, automatically triggered budget cuts may have as well as potential for government shutdown and uncertainty surrounding the debt ceiling? do you believe these events could create fiscal head winds for our recovery? >> fiscal policy has gone from

creating a significant drag on the economy to being roughly neutral, and that shift in the favorable direction, i think, has helped to promote economic recovery. so i would be concerned about something that was large fiscal shift. i don't know whether or not this would be but policies governmental action that create uncertainty like government shutdown or running up against the debt ceiling that reduce the confidence of households and businesses on the ability of their government to function in an effective way and create fear and loss of confidence. obviously, you're not hopeful to recover. >> just getting to the wage growth conundrum, wouldn't cutting education, cutting training programs that make workers more able to be productive be counter to that?

>> so i don't want to as you indicated, weigh in on specific programs, but i do think that education programs programs to promote training and skills acquisition are very critical in addressing wage inequality. >> thank you. >> madam chair, thank you again for your appearance and willingness to come. we hope we can work with you on some of the proposed legislation. i think there is some misperceptions of what we are trying to do. we are trying to give you a lot of power. you already have a lot of power and some discretion. chairman shelby wrapping up the senate banking committee hearing listening to fed chair janet yell enen as her testimony concludes there steve liesman standing by. it's the senate banking

committee and there are among those who passed dodd-frank but asking janet yellen to be the apologist for it. >> you hit the nail on the head on that one. it troubles me. nobody has the responsibility here. some republicans in the senate and the house want to change dodd-frank. they keep pressing yellen and the fed to do something about it. she says you know what? you guys passed this thing. if there is something wrong with it, fix it. here's the other problem. they keep asking have you studied the regulation? the fed says they are looking into it but i don't know how formally they are looking at economic impacts of the regulation which could be considerable if it's holding banks back from lending. this is like this netherworld nobody has respond for. great point. >> easily the most anticipated questioning came from elizabeth warren. her line of questioning had to do with the efficacy of the living wills banks had to fill out here.

she was pinning chair yellen down on how much they would be enforcing those living wills should they not meet the standards that are set up by dodd frank. >> the credibility factor. >> this was part two, right? remember when she was, i don't know blind-sided or pounced on yellen the last time over this issue of the number of subsidiaries jpmorgan has. we found those subsidiaries are not quite as important as maybe senator warren suggested. however she tried this time, next time this happens or when you go over these living wills will you reject the living will of jpmorgan? warren wants to use the fed and dodd-frank to slim down some of the bigger banks. i don't know if we have a minute to talk about monetary policy. >> the take away is the soon erer

but gradual approach to keep september on the table. >> she said a couple of things that make me think she is really on course with this september rate hike. tell me if we have that sot it? is available. big thumbs up. let's roll the tape. >> the labor market is getting demonstratively closer by almost any metric to a more normal state. and the degree of monetary accommodation has been sufficient over a long period of time to generate pretty significant improvement in the labor market. >> a couple of things. she won't be tightening, but slightly diminishing the degree of accommodation. she went on to say the fed would hike rates despite the inflation not being at the target on the

way to the target. those two things if they align the way she thinks they are, if the data cooperates could lead to a first hike in september. >> she expects wages to go up. >> right. that is true. >> thanks steve. google's conference call getting under way. stock soaring after a big earnings beat. the first beat since back in 2013. we'll bring you the news from the call. ruth porat's first call. >> netflix streaming sharply higher. that's clever after reporting strong earnings and big subscriber gains yesterday. up next we will discuss whether its plan to double down on original programming will take this stock to new heights. t-mobile now extends your coverage beyond the borders at no extra charge. get 4g lte data in mexico and canada just like in the u.s. and call and text as much as you want to and from the united states, mexico, and canada. you heard right!

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sleep train's interest free for 3 event is ending soon. ...guaranteed! ♪ sleep train ♪ ♪ your ticket to a better night's sleep ♪ now schlumberger out with quarterly results. >> that's right. we have a beat on both the bottom and the top line for schlumberger for q-2. oil field services company reporting 88 cents adjusted per share.

revenue better than the $8.97 billion anticipated by the street. q-2 revenue decreased by a dramatic decline in north american land activity as rig count dropped by 30% in the quarter. citing pricing erosion that continued in north america and international areas. also saying that as we enter the second half of the year visibility still remains limited in terms of oil supply. first signs of flattening north america production appeared while opec marketed supply has been increased once again. saying enp investment in north america expected to fall by more than 35% driven by lower land activity.

not great news but potentially saying there could be a slow bottom coming here. we did see meet on top and bottom line. shares are up nearlyer hours. >> thank you, morgan. amd out with its earnings. dom chu back with those. >> stock down 30% year-to-date basis. down 60% over the course of the past year. up 2% in the after hours on about 209,000 shares. the company reports a loss of 17 cents per share. that was in line with analyst expectations. revenues came in light. $942 million. analysts were expecting $951 million. they offered q-3 revenue outlook. they think they'll see 6% gains sequentially plus or minus 3%. mid point of that number falls slightly below analyst

expectations. they cite weak consumer pc demand for their past quarter revenue decline. not a lot of great news. this is a stock that's beaten down a lot over the course of the past year-to-date and 12 months. on balance because earnings were in line. narrow sales miss. stock is up about 2% after hours. claiming weak consumer demand. >> the stock lost 20% just since lowering this q-2 earnings guidance i think last week. we were expecting this to be an ugly quarter for amd. >> this is a $1.5 billion company. this muscle memory of two decades ago when this was a bellwether. it's down 90% a decade. >> two sectors we heard about now. oil and chip makers. they are both suffering right now. everybody is rallying on these earnings. >> estimates have come down a

lot for energy. talking about going into earnings season. i think this is classic. numbers have come down. they are making it. see how others do. these are the leader of the industry. see how the other companies do. i think what i heard from their commentary wasn't surprising. >> and the market indexes are going up. these guys aren't participating. energy is only intermittently helping it out. >> good point. >> netflix skyrocketing. is it in danger of cooling off? >> or streaming higher. >> and larry kudlow's take on fed chair janet yellen's testimony before the senate. what he thinks about the fed raising rates, if it will happen this year at all. i've got a nice long life ahead. big plans.

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what a day for netflix. shares closing up 18% after reporting better than expected earnings and big gain in subscribers. the subpoena receiving 34 emmy nominations this morning. >> the ceo was asked what it's doing to keep share in the streaming space. >> when you look at the original

movie work ted's been doing, it's incredible. you'll see with "beast of no nation" an intense, oscar-caliber amazing film. with "crouching tiger" and "war machine" with brad pitt coming major big-ticket studio films debuting on netflix around the world at the same time. we are continuing to raise the ante to get better at what we do. that's the key to continuing to hold on the share. >> they streamed the conference call. >> in casual sweater. >> you're always on the fashion side aren't you? will netflix continue to deliver? let's bring in todd hazelton. does it get better here? >> i think they are just getting started. we get the emmy nominations. who saw that coming when you are getting dvds in the mail right? i think there is a huge opportunity, too.

it's supplementing their library of videos people go through and sit on the couch. now you have these original series. they can create addicts. the hbo ceo says he is in the business of creating addicts. netflix should go the same way. they charge $7.99 at the low end. hbo is $15.99. you have a huge range to 0 move. in get people addicted to the shows. in the future start charging more. >> the question is just putting this in context, the stock is now up 137% so far this year. it is by far and away the best performer on the s&p 500 by almost triple the number two, which is electronic arts. justify the valuation at this point. >> you have all the original content and movies. you still see a huge increase in subscribers that are expanding internationally. keep pushing that. get people addicted like i was saying. then boost prices a little bit

here and there. i don't see how that goes wrong. >> you wonder if david einhorn is rethinking that letter taking them to task. >> i doubt it. the metrics on which they beat and which the market is celebrating are the same ones the subscriber growth which for now works. international subscriber growth story is still the thing that matters the most. i think the stock will not necessarily have its comeuppance. todd, longer term the cash needs to actually keep that content supply filled. does it ever catch up with them? >> yeah. i don't know. that's when it comes to adding additional features where you can charge more. i would like to cnet flicks go after licensing for offline storage. when you get on a plane you can still pay for something or play your movies back. i would pay a couple of bucks each month more for that feature or what we are expecting with the new apple tv route. try to get live stuff in there, too.

there's plenty of opportunities. we are looking at a company that was dvds. i don't know where we are going to be five years from now with netflix. i think there is huge potential. >> you wonder if reid hastings knows where they'll be. >> he is very open having a sense where they have to go and they sandbag numbers all the time. >> and international is the key. >> todd, thanks so much. >> thank you. >> time for a cnbc news update. the chattanooga shooting suspect has been identified by nbc news as muhammed yousef abdullraziz. the department of homeland security increasing security at federal facilities out of an abundance of caution. the fbi investigating the shooting as a possible act of domestic terrorism. >> the jury in the colorado

movie massacre trial reached a verdict after two days of deliberations. 27-year-old james holmes pleading not guilty by reason of insanity to killing 12 people and wounding 70. the verdict will be read 4:00 p.m. mountain time. president obama becoming the first sitting president to visit a federal prison. he took a trip to the el reno correctional facility in oklahoma. he took a look inside one of the cells to get a better feel how prisoners live their daily lives. amazon says customers ordered 34.4 million items worldwide during its publicized prime day sale breaking the record set last year's black friday sales. the company set a record number of new members tried its $99 per year prime service on the day of that sale. that is your cnbc news update. back to you. >> thank you sue herera. watching shares of google in the after hours climbing. the conference call just getting under way. >> up 8.71% right now.

>> solid profit and revenue growth. focus on expense control. we'll monitor that for you. >> and bring you any news. stay tuned.

let's take a look how we finished the day. another strong session with the dow closing up 70 points. s&p 500 up almost 17. nasdaq the star of today's session closing at a record high. >> google reported second quarter earnings. the stock popped after hours. up 8.76%. the conference call just started minutes ago. we will bring you some of the highlights later in the program. everybody listening carefully to what their new cfo has to say right now. >> especially managing costs and cutting them. let's send it over to dom chu. >> hertz up about 13% after hours. 7 7 780,000 shares traded. they completed accounting restatement of their numbers and gave guidance for full year 2015. that is in line with analyst

estimates. they reaffirm their prior commitment to repurchase up to $1 billion of their own stock. that coupled with the fact this stock has been down 30% plus year-to-date, 40% the past 12 months. you get positive news. a bit of a relief rally. the move about 13%, 14% to the up side on decent volume after hours. back to you. >> that is a heck of a relief rally, 13%. thank you, dom. you saw fed chair yellen finishing up her testimony in front of the senate banking committee. massachusetts senator elizabeth warren tried to pin her down on living wills. >> will the fed find living wills not credible if the bank has not fixed each of the problems that the agencies identified last august? >> we are certainly prepared to make those determinations. and if we find that they're not,

we are certainly prepared to say that they are not credible. >> she followed up with a few specific cases. joining us to discuss her take to capitol hill is our own larry kudlow. obviously, janet yellen spoke about financial 0 reform dodd frank questions and talked about interest rates what stood out to you? >> she talked a lot about interest rates. i am just not sure what she said. i thought there was tremendous uncertainty in almost everything she said. >> she is the fed chair. that's how it's supposed to work right? >> actually in the old days when i was in the fed system and when i worked on wall street, volcker used to say nothing and greenspan argued he would say nothing. yellen says a lot of things to come out to nothing. i think it's wired. markets didn't react to it. it's a below the fold story. let me just say this. my view for what it's worth, the

fed will move at the pace of an injured snail. that's way think they are going to do. i agree with that. i don't think there is any rush to move rates higher. >> what is keeping her from raising rates now? it's clear she is itching to get that first one done. she is telling you, don't fear that first rate increase. why doesn't she do it now, do you think? >> i don't think economic conditions necessarily warrant it. that's the problem. maybe the fed is split internally. their forecasts are always too high. that's an issue. look at the numbers this week. retail sales and industrial production, two key indicators manufacturing. year on year 1.5% growth. that's all you've got. the latest consumer price deflator, 0.2%. what you have is slow growth and

virtually no inflation. in that scenario i think it's hard for the fed to start jacking up rates. >> is she ever going to have the perfect economic condition to raise rates? all the metrics aligning at the same time? >> no. that is a good point. i like that. i accept that point. i accept that amendment. at some point because this is the united states and this is allegedly the sixth-plus year of recovery allegedly, the fed will want to prove its manhood or in this case womanhood raising their target rate a smidge. if you want to look at their strategy the next 12 months i think the fed will make very few and very small interest rate target changes. i think long-term bond rates are going to be fairly stable. i think earnings will surprise

slightly on the up side mostly because they were revised too low. it's not a fabulous scenario but it ain't all bad either. >> got it. thanks, lawrence. see you later. say hi to jeb bush for us. >> out on the west coast, larry kudlow. >> oh! >> it's just a conference. that's all it is. >> i know. see you later. google reporting big earnings beat. up next fresh information from that conference call that's under way right now. stay tuned. but i keep it growing by making every dollar count. that's why i have the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy for my studio. ♪ and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... that's huge for my bottom line.

what's in your wallet?

google reported second quarter earnings a little while ago. that stock is up 9% right now in after-hours trade. they love what they heard. >> earnings beat a positive. the conference call is under way right now. john john fortt has been listening in. >> ruth porat is talking about expense discipline which has analysts riveted in this quarter. they want to hear google will be disciplined with expenses. she says they will continue to do that. she talked about things like nest, other projects they have. she is going to update the street on how they are going to continue to be disciplined about how they invest in those things. a few things i want to point out. it might look like a revenue miss at first. at least on the top line. it was except for this currency

impact. the currency impact was 1.1 billion based on the strong dollar to their foreign business. last quarter it was just $795 million. their growth would have been 18% this quarter year over year. last quarter was 17%. also interesting thing she was talking about mobile was strong for them. youtube ads and programmatic ads was strong for google. they saw 60% growth in youtube watch time strongest growth they had in two years. and mobile youtube watch time actually doubled. youtube and programmatic benefitting them adding to this growth despite the currency headwinds. >> they like what they hear. >> the google frat house has a mother now watching the expenses. >> a very powerful woman. we'll stay with earnings. regional bank bb&t beating

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bbnt out with the earnings today. the company met earnings

expectations but it did miss on revenue. >> the stock ending the day slightly higher. joining us now in a cnbc exclusive, chairman and ceo kelly king. kelly, still problems with net interest margin how much are you looking forward to high interest rates? >> well i dream about it never night. [ laughter ] >> so, yeah obviously, when rates go up it will be good for bank earnings but, you know an important point we should mention is when rates go up it will be good for savers and when savers have more income, they will spend more money. it will be good for the economy and just because rates go up a modest amount it will not hurt borrowers. it's good for practically everyone. >> in the meantime everybody is going after the fees the non-interest involved businesses but you're also making acquisitions here. are you doing that will you stop making acquisitions after rating stop going up?

>> not really we've always been a very quiztive company. we've done over 100 acquisitions so it's a core part of our business, so we will continue to do acquisitions, but frankly, when the economy is relatively slow, interest rates are challenging. being able to do acquisitions helps a lot. it helps the growth rate. it helps to be able to scale up and control expenses. it's a good part of our strategy. >> it's interesting that you're on this buying spree considering you're not seeing a lot of action in terms of deals with the rest of the industryindustry. i think you made another deal this quarter is going to open the flood gates more for other banks who have been waiting on the sidelines because of regulatory concerns? >> i do. i think from a regulator perspective, they are, you know ready to see banks that are prepared to do acquisitions.

so the real challenge now i think is not specifically regulators except to the extent they will be careful whether they acquirer isk acre acre -- acre six. whether they are willing to take the leap it's challenging because there is not many that many done. we feel good about doing what we've done and feel good about doing others. >> mr. king have to go. good to see you again. >> thanks good to see you. >> he dreams of higher rates every line. >> great line. the war between uber and taxis, uber just won a big battle. we'll have details on that when we come back.

an interesting survey finds that uber may be winning the war for business travelers. >> while uber may be winning that battle on the streets, the upstart car service is about to lose millions in the courts.

kate rogers with the latest on that. >> they might lose millions. uber got positive news on second quarters. it's the most expensed form of ground transportation for the first time. uber accounted for 55% of ground transportationreceipts. that's based on 28 million receipts in north america. the company also taking a blow on its home turf in california where an administrative law judge recommended the start jup pay a $7.3 million fine and be suspended from operating in the state because the state says uber hasn't compiled with state laws in providing rider data including rides provided for those with service animals and wheelchairs and the zip codes it's services. the decision doesn't go into effect immediately because uber is appealing and the process could take several months.

jeb bush one of the many candidates vying for the republican nomination decided to hitch a ride to uber for a startup called thumb tack that is part of the ever growing sharing economy and that this is just days after hillary clinton, democratic presidential hopeful took a swing in a speech laying out her economic agenda. very interesting. >> in san francisco, it's not likely a republican picked him up. >> i wonder what his passenger rating is? >> he tweeted he gave his driver five stars. >> i can see it being a debate question seriously. hillary clinton goes against the sharing economy on the wait. this is like a total big government, small government. >> it's a test. the whole company is without a doubt. >> everything they do will be poll lititicallitical like that. "fast money" coming up in just a few seconds. >> i got to see this two shot. >> melissa lee. >> we're wearing practically the same dress.

good taste, sarah. [ laughter ] >> nice dress, good taste, as well. >> this is ridiculous. >> ladies in red. >> ridiculous. we're trending the all time high in netflix, amazon and google in the after hour session. >> looking forward to it. we'll see you with more on closing bell tomorrow. "fast money" starts right now. live from the nasdaq market overlooking times square i'm melissa lee. tonight on "fast" earning season kicking into high gear. we have six stocks that have beaten earnings east mitts and three biotech stocks could surge next week. we'll tell you the names and why traders are so bullish. to the after hours movers tonight, google surging 10% hitting a new in the after hours session. jon fortt is monitoring the call. john, what is a big upside here? >> the big upside is google's growth frankly, despite the currency head wind