and we do regard this as a sig nif can't threat. on your question about broords of directors -- boards of directors, i don't know that we have looked at that, but i would have to get back to you on that, but we are certainly supervising financial institution's ability to address cyber threats. >> thank you. >> senator vitter. >> thank you, madam chair for being here and your service. >> thank you. >> madam chair in april the fed finally releesased the results 20115 resolution plans of eight systematically important banking institutions, and five of the nation's largest banks failed that exercise including jpmorgan chase and bank of america. i have three questions related to that. first, "the new york times" in

april described this federal lease as suggesting that, quote, if there were another crisis today, the government would have to prop up the largest banks if it wanted to avoid financial chaos, close quote, and question one, do you agree with that. and two, what do the five banks need to do by october 1st to fully remediate their deficiencies? and question three is if they don't by october 1st, will the fed take more systemic action like raising capital levels. >> so those banks over the span of the last several years in which they have been preparing living wills greatly increased their ability to be resol nevve the event of the trouble of

bankru bankruptcy oral alternative ti title ii is available. i couldn't guarantee at this point which circumstances in which a bank fails that bankruptcy would work at this point as the means to resolve one of these firms that we have identified for five of the firms deficiencies, and we have been extremely careful in e spespell out in detail what the deficiencies are that we want to see remedied by october 1st. and in addition we have listed jointly with the fdic a large number of specific shortcomings that the firms have until the summer of 2017 to remedy, and we

will be evaluating whether that is done. as i said, if the deficiencies are not remedied or later if the shortcomings are not remedied they could turn into deficiencies that would provoke us to lead us to impose higher capital standards or other, you nknow know, other remedies on the firms. we have learned a lot in the course of the years that we have been evaluating the living wills about what it take takes to actually resolve a firm in bankruptcy. the firms have learned in the process, and i do believe that we have made substantial advan e advances in doing that. >> and first to my questions, first n terms of the new york times' quote to prop up the

larnl estebanks, you would not categorically refute that possibilit possibility? >> i would not say at this point that the all of them are prepared for resolution under bankruptcy. >> and again, if they don't get are there for october 1st, soon thereafter considering something more systemic like higher capital requirements or not? >> yes. >> and madam chair, my second and last question is about the puerto reeian crisis -- puerto rican crisis. you have said that the fed should not be involved and i agree with that, but however, my concern is that the fed has authority to be involved. d do you think that the fed has authority to issue as a last resort emergency loans to puerto rican institutions or not?

>> i think that our authority is extremely limited, and it would not be appropriate for us to give loans to the puerto rico. we have very limited authority to buy municipal debt, and the auth authorities that we have if we were to buy legible debt, it would not be helpful to puerto rico, and beyond that, we ve no abili -- we have no way to make emergency loans or use rule 3 to, tend emergency loans to puerto rico, and this is inherently a matter for congress and not appropriate for the federal reserve. >> thank you, madam chair. >> senator menendez. >> thank you, mr. chair. and thank you, ms. chair and

your insights. on the side of the national discourse, there are those who want to reduce the national debt by persuading the creditors to take a haircut in the investments, and in my opinion policies like that would drive our e e kconomy off of the clif and en dajer working families in our country, and i don't know anybody more qualified than you to answer this question. what would be the consequence if the the president of the united states were to ask treasury bondholders to accept less than the face value of the assets? >> well, this is a topic several times when congress has faced the debt ceiling type situations. i feel the consequence s fs for

united states and the global economy of defaulting on the treasury debt would be severe. the u.s. treasuries are the safest and the most liquid benchmark security in the global financial system. they play a critical role in the financial markets, and the consequences of such a default while they are uncertain, i think that there could be no doubt that it would be long-run harmful to the u.s. interest, to u.s. interests, and at a minimum result in much higher borrowing costs for american households and businesses. >> and saying that you should take a haircut, does that mean a default, because you are not paying the full amount that you are obligated to on the security. just for clarification purposes, am i right that my understanding

that u.s. entities and pension funds, and federal reserve own the vast majority of the debt the at approximately 65.5%. >> u.s. sentities and foreign entities. >> u.s. and foreign entities? >> yes. >> and my understanding is that i would like to get for the record that just u.s. citizens and state and local governments and pension funds, and 40 1(k) reserves own the majority of the debt for 65.5% is owned by the the american public? >> yes. >> and so the haircuts that are proposed by mr. trump would mean that the citizens and the state and local governments -- and that is outrageous. so our economy has shown signs of indeed growth and progress, and yet many data points are far

from the full recovery in the labor market. in the past, you have advocated for the federal reserve use of a metric called for by the labor index, and that data is going to be pulling data from 18 sources including the labor force participation, and those who are classified for part-time, and quits and so forth has fallen nearly 15 points over the last five months. and in fact, the index has fallen to the lowest level since 2010. i understand that every other time that the index has turned negative for the five months or longer over the last 25 years, the fed has moved to ease the monetary policy and not tighten it, and so i am concerned for the plan that the fed has laid out for rate increases, the fed will not have the ability nor the will to slow down the impacts on the market, and shouldn't the fed wait to have additional fed hikes until we

see additional growth in the market. >> well, so, the numbers released on the labor market conditions index don't refer to the index, but rather the change, and the move that you have mentioned in that index suggests that the labor market is operating at a good level according to the level of that index which we don't publish, but there is a loss of momentum and that is what the negative numbers show, and we see the same thing in recent job reports thatey are refer to in my testimony. so without a doubt in the last several months a number of metrics suggests a loss of momentum, and not a deterioration in the labor market, but a loss of the momentum in terms of the pace of improvement, and that is an important consideration as i

mentioned. we believe it will turn around, and expected to turnaround, but we are taking a cautious approach, and watching carefully to make sure that the expectation is borne out before we proceed to raise interest rates. >> ms. chair, one final point and not a question, but i want to echo what senator brown has said, and in the het letter that i and senator warren and murphy and 125 other congress members have sent to you for improving the representation of regional bank, and 83% of the federal reserve board members are white, and 92% of the regional bank presidents are white, and not a single president who is aft african-american or someone like me latino, and that is fundamentally wrong. i would hope that you would share some diversity effort, because leadership on this issue always comes from the top reg d

regardless of the institution, and with your own experiences as a woman, and in that regard, we seem to be doing a lot better in the system, but we are not doing that much better with people of color. i hope that you will be seriously considering such an effort. >> i agree with you, it is extremely important, and i will do everything that ki to see that our performance improves on that the dimension. >> thank you, mr. chairman and chair yellen. chair yellen, your predecessor chairman bernanke both before this committee, and the columns that he has written discussed the limits of what monetary policy is capable of. >> and chairman yellen, and the topics of the negative rates, and what would happen if the u.s. defaulted on the debt. and steve liesman listening of course. >> what we are hearing is a fed chair who is no hurry to raise the rates. she is using the term headwinds

and suffering she said of the repercussions of brexit, and the long-term optimistic view, carl, but it is a fed not in any particular hurry to raise the rates, and wait for things to clarify the economic situation and the foreign situation before moving forward here, carl. >> thank you, steve. we will listen in, as the fed chair's testimony continues. >> the impact of the state of demand, and it is not only a t matter of shifting purposes early by having more accommodative financial condition conditions. there are repercussions that are longer lasting than that. >> and my consensus of the academic consens is -- conksenss

of the economic activity that is taking place at that time. >> you are acknowledging, there is some of that phenomenon? >> well, it is not the only thing. >> so to what extent is this unprecedented accommodative monetary policy for these many years part of the reason that we have had relatively anemic growth today? isn't it likely that the case is that some of the economic act e activity that would be occurring today was dragged forward in years coming by and it has occurred in the past? >> so, it is very hard to know how large that the effect is, but i continue to think that the our accommodative stance of policy for xexample low mortgag rates is continuinging to boost activity in the housing sector, and it has not only pulled the activity forward to suppress it now. i believe it has --

>> the housing sector has not recovered the previous highs. >> well, it has undergone substantial shocks. >> have you attempted to quantify how much of the economic growth that would be occurring in 2017, and 2018, and 2019 is happening now because of the ongoing activity of having these extremely low, unnaturally low interest rates? >> we have not tried to determine that. we have in the past looked at whether or not low rates have is had less impact on spurring economic activity than in the past, and namely whether or not there might be some attenuation in the impact of the policy, but in the past, our analysis suggested that it is not only a matter of shifting the timing of economic activity, but also

stimulating the investment, and spending decisions. >> even if that is so, and my guess is that the principle effect is shifting the timing, and you may disagree with that, and i got the impression from the predecessor that his view is shifting the timing. and it is certainly in effect, and it is something that the fed ought to be looking at. and to the extent that it is a significant effect, and what you are doing is damaging the economic effect to to a certain extent. and let me touch on a concern that it seems from the many, and from what you and other thes have said, there is a great focus on the demand side of the effect on the monetary policy and not so much on the supply si side, and one of the concerns that i have is the danger that first of all, you have been missing the estimates on the supply side as well as the economic growth overall, right? i think that we are now 12 con

s consek youtive years in which the fed has systematically overestimated economic growth, and overly optimistic on the supply-side phenomenon with worker res turning to the workforce, and returning to proare ducktive ti levels to the extent that the fed had hoped and one of my e concerns is that the inducement to expand capacity, and the unnatural capacity that comes from the unnaturally low interest rates could get the fed into a vicious cycle where all of the excess capacity creates excess commodities and the downward pri pressure on the prices to hit the 2% inflation goal, and so is there a danger that the ult ra low interest rates are going to contribute to that. >> and investment has been running at a very slow pace. we have really not had the creation of a lot of the excess

capacity. >> global ly we have. >> and the reason that the productivity growth has been slow, and disappoint iingly slo is that we have had very weak inv investment in the aftermath of the crisis, and more recently in recent months, it is turning negative and it is extremely low even outside of the energy where we have a substantial cutback in the drilling activity, and so i don't think that an impact of the low interest rates has been to stimulate investment or a boom in the capacity. >> and i think that is largely true in the united states, but globally where this experiment has been going on since everybody is in this business of ultra low interest rates it seems that certainly, if you are talking to the people in the steel industry, there is massive overcapacity, and not just steel but in other commodities as well, and i do worry that we have encouraged the companies to

the take on massive amounts of debt, to create the overcapacity, and one of the many distortions, but i thank you for the time and thank you, mr. chairman. >> thank you, chair yellen, for being here. i have a couple of questions that i have asked before, and i will do it again. sen is or the crapo and i sent a letter about the forward process, and i'm concerned about the community banks, and the levels to match the risk that they pose to the e kconomy and the depositors, and the borrowers. we are seeing consolidation in montana and across the country with small banks. that is not good for capitalism or rural america as we are seeing the small banks combining with the bigger banks combining with the bigger banks. so is there a problem with the

process of regulation on the smaller banks, and if so, what are we doing about it? >> we are heavily focused on trying to find the ways to releave the community banks of undue burden. tailoring the regulation and supervision systems to pursuit of the proper supervision. so we have done, i think that made very meaningful efforts to reduce the burdens of our examinations on the community banks, and to reduce the complexity of the capital requirements that they face. the gripper process we are taking seriously, and coming out with meaningful proposals for relief. we are looking at something that

might be a significant simplification of the capital reregime for those community banks. >> i think that simplification is important. are you happy where the fed is right now in regards to the community banks? >> we have made progress, but we will continue to focus on it. >> and do you believe that the consolidation in the banking industry particular is applies to -- well,ing a cross the board, and it does not matter, but it is not a good thing? do you think that the regulatory issues have contributed to the consolidation? >> there are a number of factors that have contributed to it. this is a challenging environment for banks, although with the low interest rate environment, and the profitability is important, also. >> right. in some cases, some of the small banks are putting out literally, and small banks millions of dollars to meet the regulatory

issues that are brought up in front, and i want your commitment that you will continue to work, and the consolidation piece is something that bothers me big time especially in apply iing to stas like montana, because it forces us to if boig guys, and and i don't necessary think it is good for the consumeer down the line, and it should be their choice if they want to go that direction. and the international insurance rules of the fed proposed rules for two on in the banks, and pleased that the fed is moving forward the international insurance rules, but do you have an idea when these might be complet complete? >> well, i think that there are some ways to go in terms of the international work that is ongoing. we put out a few weeks ago in advance of the proposed rulemake ing the framework that we intend to take here in the united states, and you know, we are in discussions internationally, and in advancing the ideas, but i

think that we are ahead of the process here in the united states. >> okay, one more run at it because i may not have worded it correctly. do you know when it will be done? >> no. >> will it be done in this administration? >> i will have to get back to you on that. you are talking about the the international ones? >> yes. and how that is going to be impacting g.e. who is a nonbank entity, and curious ho figure out how that is coming down the pipe? >> well, g.e., we already published -- >> it is a sife. >> a rule. it is not insured. >> it is not an insurance company, and what happens to those the guys, and this insurance rule will have no impact on them, and what happens to those guys going forward? >> well, they not an insurance company? >> no, but they are a sife, and

they have invested their banking part of the business, and what happens to them moving forward? >> there is something that the fsok will take up. >> fsoc will take up. >> i wanted to talk about what you were talking about the advanced rules of proposed industry, and i'm speaking of large firms like state farm, and illinois state. and we want to make sure that the fed understands the vast difference of banking and insurance, and the sad vanced rules of proposal making is heading in the right drirection there, and we would ask you looking forward to this, as i look at the snpr, it seemed that the case stress test was a 90-day window of liquidity that if i am looking at the details, i would say, and if you are

looking at state farm it affects 80 million american families, and you would is say that the stress would be be given that 2008 drop in the various sales of the various products, do you have enough money to over 90 days to the sustain the enterprise? i wanted to explore this with you commonsense way of letting people know, because this is the way that we should go, and what i would urge you to follow in the direction of senator collins and they makings sure that the normal fed culture of a bank regulation does not impinge on the insurgency of the insurance industry. >> well, we have tried to do that very much in trying to develop the proposal, and we have put forward some conceptual frameworks to be look very carefully at comments before we proceed with more detailed rules, and the collins' fix was

very helpful to us in having the flexibility to design something appropriate for insurance, and not bank centric. >> thank you. i would -- because i think that we have 60 days to comment now coming up on, that and i will be -- >> yes. >> i will be approaching members of thf committ -- of this committee to also provide comments to have a robust, and strong insurance sector. >> yes, we will look at those carefully. we are trying to proceed in a thoughtful and careful way based on the great deal of consultation with the regulator and the state reg yu ulators ane fdic. >> and we have heard that the anpr is receiving the collins' fix nicely. >> great. thank you. >> and senator warren. >> thank you, mr. chairman, and chairman yellenly try to get

three questions in to make sure that all of the colleagues get a chance to ask questions. i want to go back to senator re reed's about cyber, and this is increasingly going to be a challenge for every institution. senator reed raised the question under provincial regulations that we can make shure that ban boards and others have cyber expertise, and i would hope that you would move forward with that, and i want to move slightly on the question to the issue around what happened at the new york fed with the bangladeshshy incursion through swift system. the swift system by evidenced by this cyber attack has challenges, and enormously important to the international banking regime, and does the new york fed or the overall fed, do you feel that you have enough ability to work with swift to

increase their cyber protection protections? we are part of oversight group of swift which is led by the national bank of belgium, and many supervisors of many countries participate in the group, and we also participated in the group. swift and the new york fed are working with the bank bangladesh to understand what happened there. >> and i urge you that this is an area that is going to be, po nen shally growing in terms of the importance and the fed's internal expertise, and insuring that we are working with more closely with the overall banking industry, and to up the game is critically important. and now sh, a number of us have talked about how we can generate additional job growth. one of the concerns that i have is to particularly with the

public markets that we have seen an enormous rush over the last decade plus starting in the 90s, and over the last decade and last few years toward short termism in terms of the views and the long-term creation, and many ways this is undermining, basic tenets of the american capitalism as more and more people choose, and more and more financial institutions can choose to invest in financial institutions rather than lending institutions, and some data as low as 15% of the financial institutions activities are actually geared towards the supporting businesses in making inv investments and communities, and we have seen among the public companies that in the 1980s that 50% of the profits were reinvested back into the plant and equipment, and the employee's r&d, and more

corporate profits, and used for stock buybacks and dividends, and we have seen some of the largest iconic tech firms with huge balance sheets going into the markets to be used for billions of dollars for the r & d and the share buybacks. i believe there is an increasing consensus among the ceo oz tr the more sophisticated investors that it is long term destructive to the real value increase in business and job growth, and has the fed and you individually have any views on this challenge about the short termism, and is it a challenge and some of the movement amongst the public companies away from investing back into their businesses and stock buyback and dividends prognosis here? >> well, we have looked closely at the investment spending and trying to understand why it has been so depressed in the

aftermath of the crisis. one reason for it is that simply the economy has been growing slowly. sales growth has been slow. many firms have seen that they don't have to invest very much in order to satisfy the demand growth that they are seeing. the workforce has been expanding less quickly than it had been, and when you have a rapidly expanding workforce, the firms are hiring the people, and they need to invest to equip new entrants with the tools to be p produckty ti that others have already in the workforce has slowing workforce is also playing a role. but beyond, that i would agree with you -- >> i would simply add that there is some level of activist investors who say that the first thing that you shutdown is the trainer work programs, and that

is a negative long term, and i will adhere to the five-minute request, but i ask for the public record that you come back, because i am concerned on the section 165 on the living wills abswrend to move the process along, and i'm concerned about the level of the fed and the f dirks c, and so i will take that for the record so that other members can get their questions in. >> thank you, senator warren. senator heller. >> thank you, mr. chairman. thank you, madam chairman. i find these so informative. i want to go back the brexit. the chairman brought up brexit, and you mentioned it in the opening comments that the eu vote to exit the european union is significant economic repercussions, and can you go more into the detail of what that means, and perhaps what the plan of attack by the feds are the if in fact that were to pass two days from now?

>> so i said that it could, but i don't know it would, because it could have significant economic consequences by a period of between the united kingdom, and the future of the european economic integration, and most of the analyses suggest it is going to have negative economic consequences for the uk and spillovers to europe more broadly speaking. i think that the financial market reaction to the uncertainties that would be unleashed by that decision could result in a sort of the risk-off sentiment that we could see impacts on the financial markets that we might see flight to the safety flows that could push up the dollar or other so-called safe havens currencies, and i don't want to overblow the

likely impacts, but we are aware of them. we will watch them. and consider those impacts as we make future decisions on the monetary policy. >> is there any reason to believe if brexit were to pass that it, that it would have an effect on the u.s. economy to the point that we go back into the recession? >> i don't believe that is the most likely case, but we don't know what will happen, and we have to watch carefully. >> what is the chance of this economy being in recession by the end of the year? >> i think it is quite low. i think that the u.s. economy is doing well. although i have end indicated that we are watching this recent slowdown in the job market carefully, my expectation is that the u.s. economy will continue to grow. we have seen a pickup of the strong pickup in the consumer

spending and growth in the economy. if the reaction is to the slowdown in growth, that is looking to reversing, and i remain optimistic in the kinds of conditions that have been associated in the past with the u.s. recessions, and often that occurs when inflation is in the economy is overheated and the inflation has been quite high, taand the fed has had to tighte the monetary policy. we don't have any such conditions in play now. households are in much improved shape and while there are negative influences in the econo economy, and particularly on the manufacturing, stemming from the slow growth abroad and the strong dollar, and the lower commodity prices, very seriously depressing hiring, causing the job loss in the energy sector,

and slowing investment and triling and mining, still overall, the u.s. economy has been progressing even with the negatives and the odds of recession are low. it is certainly not what i expect. >> chairman, thank you for the answer. and a week ago friday, i think that the 10-year yield on jap are these bonds and also -- on japanese bonds and also the german bonds were negative, and what impact is that on our treasury yields with the investors looking for any kind of return to coming and buying up our treasury bonds, and what impact is that going to have on the yields? >> well, it does tend to induce capital inflows into the united states which push down our treasury yields which are considerably higher, but in absolute terms they are quite low. differentials in the stance of

the monetary policy also put in impacts of the value of the dollar, and the dollar has gone up around 20% against a broad basket of currencies against mid-2014, and that has had a negative effect on the trade with the rest of the world and put downward pressure on the corporate profits and the hiring and manufacturing. >> are you concerned that if the feds raise rates that bond traders will ignore that and reverse what you are trying to achieve by raising the rates? >> one of the factors that influence bond pricing if that is what you are referring to is the anticipated path of rates, and there is some further increases built into market expectations and often the response of bond markets to what we do depends upon how our

actual actions compare with the expectations. >> thank you, thank you. >> senator warren. >> thank you, mr. chairman. it is good to see you again, chair yellen. i want to follow up on the questions raised by senator corker and senator vitter, and as you know dodd/frank requires giant institutions to submit living wills and documents to describe how the giants could be liquidated in an orderly and rapid way in bankruptcy without bringing down the economy or requiring a tax the payer bailout. and now the fed and the fdic recently determined that living wills submitted by five of the biggest banks in the country were not credible, and those banks must resolve the problem identify ed identified in the living wills by october 1st which is 14 weeks from now, and if the banks fail to do that, the fed and the fdic have the power to reduce the risks posed by the giant banks by for example raising higher

capital standards or the stricter leverage ratios and these changes are critically important to avoiding another 2008 crisis, but the banks are unlikely to make them unless they believe that the fed and the fdic are serious about enforcing dodd/frank. i know that by law, you must consider increasing the capital and the higher leverage ratios. what i want today is to ask, can you commit that if any of the giant banks fail to resolve the problems in the living wills by october 1st that the fed will use the tools that congress gave you to reduce the risks posed by these two big to fail banks? >> we have been very serious in this review of the living wills, and we have clearly stated a set of will identified changes that we want to see by october 1st. >> i appreciate that.

>> and now, the decision about what we do if the deadlines are not met, those are decisions that my colleagues and i will need to look at carefully what is the appropriate sanction for doing that, but clearly, we are very serious about wanting to see the deficiencies remedied and well aware that we have it at our disposal the tools that you listed so, i can't precommit today to tell you precisely what our response will be, and we will work closely with the fdic, as we have been a all along, but we are extremely serious about wanting to see progress, and certainly consider using those tools. >> well, like i said, you are required by law to consider them, but i am asking for a commitment here, and i have to say that i don't fully understand why you would not make that commitment?

these banks have known this is coming since dodd/frank was passed in 2010. that is six years ago. and they have been submitting living wills since 2013. there is no provision in the law for all of the extension s ths you have given them so far. if any of these banks fail the credibility test on their fifth try, they need to face some real consequences, otherwise, why would they ever make changes if there are no consequences? >> well, there will be consequences. >> well, i very much hope so. you know, when you found that these five banks had submitted living wills that were not credib credible, you were saying that each of the banks remains too big to fail, and if any one of them crashed they would risk taking down the whole economy unless they got a government bailout, and the entire goal of the living wills process is to push the biggest banks to fix

this fundamental problem. i am glad that the fed finally, finally determined that some of these living wills were not credible, but it is not going to mean anything if you are not willing to use the tools that congress gave you to force these banks to reduce the risks that they are pushing off on the taxpayers. i have a second issue they just want to cover here if i can briefly, and that is that i want to follow up on senator brown and senator menendez' questions about diversity. i think that diversity is very important, and there is a growing body of research showing for example that gender diversity and leadership makes for stronger institutions, and perhaps it is not a kons dense then that there is a stunning lack of diversity at the biggest financial institution, and not a single one is led by a woman. and while the fed's leadership is somewhat more diverse, it is not a whole lot better. of the 12 regional fed presidents, 10 are men.

now, as you know, congressman conyers and i along with 125 colleagues sent you a letter about the lack of diversity among the fed's leadership and i appreciate the response last week in which you acknowledged that greater diversity can improve the fed's decisionmaking, and that there is still work to be done to improve diversity at the fed's leadership, and let me ask you, does the lack of diversity of the regional fed's presidents concern you? >> yes, i believe it is important to have a diverse group of policy makers who can bring different perspectives to bear. as you know, it is the responsibility of the regional banks, class b and c directors to conduct a search and to identify candidates.

the board reviews those candidate candidates, and we insist that the search is national and every attempt to be made to identify a diverse pool of candidates, and we monitor the searches while they are ongoing to make sure that it has been done. it is unfortunate -- >> and let me ask you then about the outcome here, because just as you say, under the law when a new regional fed president was selected by the regional fed board, that person must be approved by you and the others on the board of governors before taking office. the fed board recently reappointed each and every one of these tif presidents without any public debate or any public discussion about it, and the question i have is if you are concerned about this diversity issue, why didn't you use either

of the opportunities to say enough is enough? et -- let's go back and see if we can find regional presidents who also contribute to the overall diversity of the fed's leadership? >> we did undertake a review of the federal review of the appointments of the president's that the federal board of governors has oversight of the regional banks and the annual banks of the boards bank affairs committee and the leadership of the banks to review the performance of the presidents and there were thorough reviews of the performance -- >> you are telling me that diversity is important, and yet you signed off on all of the folks without any public discussion about it. i appreciate your commitment to diversity, and i have no doubt about it. i don't question it. it just shows me e that the

selection process for regional fed presidents is broken. because the current process has not allowed you and the rest of the board to address the persistent lack of diversity among the regional fed presidents. i think that congress should take a hard look at reforming the regional fed selection process so that we can all benefit from the fed leadership that reflects a broader a array of both backgrounds and interests. thank you, madam chair. >> senator scott. >> chairman yellen, thank you for being here on behalf of all of your work for the american people, and you have a difficult task that is not going to be easier from my perspective. i found the opening comments from my ranking member senator brown from ohio who seemed to suggest that the failure of the

e conm rests on the shoulder of my economy and i thought to myself, that the people are not looking to assign blame of why the economy is going to be anemic, and the so-called recovery has not reached into the truth of those folks living paycheck to paycheck, but it is easy to remember that at the beginning of so-called recovery that my democrats to the good left control the white house, the senate and the house until early january 2011 and what did they do that with trifecta? well, actually, they created the most onerous regulatory state in the history of the country, and it continued until even last year when the administration proposed 80,000-plus pages of new regulations, and according to the competitive enterprise institute with the cost of the impact at $1.85 trillion said

differently that the anemic recovery is perhaps is anemic because of to regulatory burden created in the first couple of years, and i would suggest to you that the people in my home state of south carolina working paycheck to paycheck do not believe that we are actually having a strong recovery and the numbers seem to bear it out. first time home buyers are down for the third consecutive year. and that is disproportionately affects african-americans who have a homeownership of 45% and so the challenge continues. and the e kconomy grew by 1.# 1 and we saw real income since 2007 decline by 6.5%, and americans eligible are for the food stamps is up 40%, and americans using food stamps is up over 20%. last month we saw 38,000 jobs created and the labor force

participation rate in 2007, 66.4%, and 2010 -- bless you, 64. 64.8%. you have to stop to say bless you for a woman sneezing. is that all right, sir? thank you, sir. and in 2014, and we are having fun up here, because this is not a fun topic. 2014, it is 62.9%, and 62.6%. i would suggest that the numbers themselves bear out the fact that perhaps the anemic recovery is not a recovery for those folks working paycheck to paycheck, and i don't know who is to blame, but i can tell you that the american people want solutions more than blame. and so as you are looking to the rest of the year, are you anticipating more months are

where the job creation number is 38,000, and the same months where the job creation is 38,000, and we celebrated 4.7% unemployment rate only because 438,000 people stopped looking for workings and so when you take a real employment number based on the 2007 labor force participation rate, we would be at 9%? >> so we do expect further improvement in the coming year, and the unemt employment fell substantially over the last y r year -- the unemployment rate fell substantially over the last year, and there were 235,000 per month, perhaps not seeing job creation now that the economy is close other the estimates of normal longer-run ratef of unemployment. we may not see the job creation at quite that pace, but i expect

continued improvement bringing down broader measures of unemployment which is as you noted are much higher, and some include voluntary and part-time employment, and i expect further improvement in the labor market to continue to strengthen. and now, the last jobs report and the last couple of months of the labor market performance were quite disappointing. and my hope and expectation is that it is something that is temporary, and we will see that turn around in the coming months. clearly it is something that we will be watching very carefully, and my expectation is that we will see the improvement but we will watch it carefully. >> and my last question as time is running out has to do with the full employment, and how to reach that wonderful goal of full employment. when i look at the numbers coming out of the need for skilled workers as well as s.t.e.m. workers it appears by 2020 we could have a shortfall

of 3 mill oyon or 4 million people in the skilled workforce and 5 million in the s.t.e.m. labor force and my solution has a lot to do with the german model of the apprenticeship programs and i would like to know the solutions as you are look at the labor force participation rate, the number of skilled workers available, and the need to get the workforce trained in that direction? >> so going back probably to the mid-80s, we have seen a persistent shift of the employment patterns of unskilled to people with middle skills, but doing the jobs that can be offshored, outsourced to skilled demand for skilled labor. >> yes, ma'am. >> and the consequence of that has been rising inequality, and a high return to education, and

downward pressure on the wages of those who are less skilled and middle income, and i completely agree with you that education and training and perhaps apprenticeships of the type that are used in some european and other countries, these are ideas that really have to be considered if we are going to address what comes out of that which is that even when you have enough jobs, you have downward pressure on the wages and incomes of people in the middle and thet bottom of the skill distribution. >> thank you, chairman yellen. >> i suggest, mr. chairman, that we need to have a national conversation about the quality of education in our country, and the necessity of a dual track. back in my days we had shop which was an important part of the education apparatus, and perhaps we need to have that

conversation again. >> i agree with you. >> senator donnelly. >> mr. chairman, and thank you, chair yellen. >> when you were here in janway, we talked about the offshore drilling, and the devastating effect in indiana and the manufacturing towns across the country. the frustration remains that the decline in manufacturing e employment is one of the factors that has led to the shrinking middle class. we have two economies in the country, and the overall economy might with be doing well enough, and in the wealthier bet ter thn ever, but the middle class working families are not feeling the recovery. the wages have been stagnant for years. a recent pugh report said that since 1971, each decade has ended with the smaller share of adults living in middle income households than at the beginning of the decade, what is the state of the economy for the working families? >> well, i would agree with you that for decades now we were

discussing that there is downward pres shower on the incomes of the less -- downward pressure on the incomes of the less skilled and the individuals who have jobs that once upon a time were readily available for a high-school educated man in manufacturing, and they have gradually diminished and it is a lo long-term trend. part of it is due to the just technological change that's con s consis tently raising the demands for the skilled workers and reduced demands for less skilled workers, and globalization has also played some role. more recently, slow growth in the foreign economies, and the strength of the dollar which real areally is reflective of the u.s. doing a better onle balance than other countries

and -- >> i understand all of the reasons, but i mean, these are real people as you well know. >> i know. >> and there was an article not too long ago in the paper about a fellow making about $17 an hour at the plant. then he got fired because they shippeded his job to mexico for $3 an hour. and but the ongoing ripple of that is that his daughter who had applied to indiana university, iu got accepted. found out that her dad was going to lose his job, and she said, i don't think that the family can afford for me to go to college like this. i mean, that is devastating. that is the future of america. that is what the real impact is of all of this stuff. in the past few months, and this is not because the companies are not doing well, because they are doing really well, but in the town next to my hometown elk hearth, 200 jobs shipped

overseas. 700 jobs in huntington, indiana, and not the biggest county in the state, but shipped to mexico for $3 an hour wages. 1,400 out of indianapolis. are very profitable companies, and these folks are making, you know, $13, $14, $17 an hour, and so as long as we have the mouse trap like this, how do we ever try to get the middle-class up if even $13 is too much in these companies' minds? >> well, these are very sad situations for workers. >> they are wrong situations is what they are. >> i mean, the kind of thing that you are describing imposes terrible burdens on all too many american families. >> so how do we make america work for them?

>> part of it is trying to make the jobs we can't stop all shifts occurring across all sectors of the economy, and the -- >> do you consider that a shift? when a company is doing really well, and somebody is making $13 bucks an hour, and not much above minimum wage, but lose their job because our laws allow them to ship them to mexico for $3 an hour? is that a shift? that is not a shift? technology or anything, but that is a cold-blooded decision that americans don't count as much as the profits. >> well, those forces have been in play for quite some time. you know, for our part at the fed, we are trying to create a job market where there are enough vacancies and

opportunities that people who lose jobs in one sector are able to find them in the sectors of our economy that are expanding. and sometimes to make that transition is difficult, and may require retraining or other forms of help to connect with available job opportunities, and sometimes we know that kind of job loss does cause long-lasting income. >> and i will leave it like this, gaming the system to make your product somewhere else in the hope of selling them back to the united states, because you are hoping that other people will be happy to pay the $13 an hour, and $14 an hour wages to have enough customers yosh ru going to be gaming to pay the $3 and get your products back in here, and you will get it on one

end, and you get it on the other end, and it seems incred whether i irresponsible to me. thank you, madam chair. >> senator rounds. >> thank you, mr. chairman. madam chair, welcome. >> as i listened to the monetary policy report, it is striking me that as the productive the ti growth, and the need for public and private investment requires that the dollars come from someplace, and i'd like your thoughts on this, and just in terms of on the basis off what the joint economic committee had reported earlier in the year, and they laid it out in stark terms. they indicated that 99 -- well, this way, ten years from now, in the year 2026, which is by the way, 250th birth iday of the country, with e can look forward to undercurrent condition, and 99% of the all of the revenue coming into the federal government, highway ta