have impacts on economic growth. and the economy's growth potential. so it is not a simple matter to evaluate, but i do think it is worth pointing out that fiscal sustainability has been a long standing problem, and that the u.s. fiscal course, as our population ages, and health care costs increase, is already not sustainable. >> agree 100%. >> you gave a very fulsome answer, and i understand how the feds fund rate is more tolerable and accurate. but just allowing the maturity, just to allow them to mature and rolloff, it is hard to understand how that would create vagueries, if you will, relative to monetary policy that would be hard to predict. could you share why?

>> yes, i'm sorry i did not mean to say that it would create a problem. we want to allow it that process to occur in a gradual and orderly way. >> it wasn't just allowing them to mature. when they mature they roll off. >> yes, it is orderly, and that's why we intend to do it that way. >> but you have not started yet? you're reinvesting now. i'm just curious why -- it doesn't seem to -- >> i agree it is orderly and that is our dire to have to be an orderly process which is why we intend to allow those assets to run off as principal matures. we recognize that allowing that process to occur results in some tightening of financial conditions. and so before we turn that process on, and start it, we want to make sure that we have

adequate ability through our normal overnight interest rate moves to meet the needs of the economy, particularly if it were to weaken some, which would be a long process if it is running off we want to make sure we have enough scope and the economy is strong enough that runoff would not create a problem for the economy. >> i just want to close with a statement. i know when you were coming in and interviewing for this post, you mentioned to me that when times called for it, you would allow interest rates to rise and you're known as being a dove, but in fact you are, i know, some people are criticized the rate at which the rises have taken place, probably me included, but i want to thank you for allowing that to happen, hoping it will continue as we return to more normal circumstances.

hopefully the balance sheet will roll off, and i hope you will continue to criticize us if deficit spending continues. >> thank you, senator, i think allowing that process to take place is something that will show that the economy is doing well, and the increases have been a reflection of the strength of the economy. >> thank you for your leadership at the federal reserve. of course that is fed chair janet yellen testifying in front of the senate banking committee. the reinvestment strategy, the balance sheet, the relationship between wages and inflation opinion the fact that she will finish her term that ends in 2018. we're at post nine. equities in a tight range, but yields have crept up and the dollar is at a three-week high.

steve leisman has been listening to all of it. >> first it was putting march back on the table saying it will be discussed at upcoming meetings as sarah underscored earlier. also i opponent out the issue of whether or not she agrees with president trump on a variety of things including, by the way, regulatory reform. she said she supports the principals laid out as well as the idea of reducing regulation, carl? >> steve, what is interesting is the equity market response. that is the center of the action right now. with stocks, discretionaries are higher. and then we have a classic split, which is why the push and pull bringing the dow to the flat line. jp morgan, goldman sachs driving

up the dow, and then you have some pulling that yield lower. that bodes well for financials and not so much for the high dividend payers. >> gold lost it's gains of the morning. crossing into the red. does it fit, we talked about this at the outset of the system, but is the net effect net hawkish? does it justify the yields? >> i maintained that the market was under pricing the of the heavy hitters. i think you need to look at the february employment report that comes out in early mark, and ta -- march, and whether or not the wages in january, causing them to price out, if that was an anomaly. a lot of economists thought it picked up the trend of higher wages out there. janet yellen talked about it a little in her testimony today.

so i think you want to be closer to 40 or 50%, not down to the 20 20% or the 25% where it has been. i think yellen's test today, and we'll see if she end tup there, and tomorrow, she doesn't want a front runner committee on this or the data. >> sounds light a tight rope walk, and that there is not much of a shift here. maybe more of a likelihood for march f is there -- >> i just like to think like a long-term sane investor. the idea that the fed moves a quarter in march and not in june will not manage very much. there is a lot of folks on the

street, a lot of folks in the pits of those markets, and frankly using a little bit of money, the really overriding question becomes if they go in march, that gives them the hik . but you're right, the average person, the average investor, should count on the idea that at the end of this year we're going to be 50 or 75 basis points higher on the fed funds rate. >> as you know the feds independence is critical, it is something they hold on to. they're trying to stay out of the politics. what will it be, the financial reform? >> i don't think she can stay out of politics on the financial reform. there was a comment that maybe some folks missed that she made

earlier on. she was asked about the affect of putting the new vice chair of spf supervision on the board. that is janet yellin saying you can put one, two, or three folks on the board, but it takes the full board to vote on the regulations. the vice chair has more authority, more things they can do to put things on the agenda, but that person alone is not enough to change. that someone thing that janet yellen was very strong about. >> we should mention financials leading whatever action there is in the dow. goldman is $2 away from the lifetime high set back in '07. >> i think it is important to under score that she said she agrees with the core principals of donald trump's executive order. you note those core principals were different from his rhetoric calling for drastic cuts, but

she said she agrees with the core principals. that means a possibility that some reform of dodd frank could take place under janet yellen. >> we'll get back to senator menendez and the fed chair. >> not one of those 134 m presidents has been african-american or latino. that is outrageous. it is my hope that we begin to change the reality. these are two communities that have an enormous part of contributing to the nation's gdp. for them to not have any representation whatsoever, in the process of these banks, is not acceptable. i hope that we can begin to change the reality. >> increasing diversity is a critical priority, and i share your hope.

>> senatoor toomey. >> thank you for joining us madame chair, yet again. i want to briefly ask you about the fmoc forecast for growth at the december meeting. as we all know, we had an election in november in which a president and a congress were elected, and a very, very central part of the message of both the president and the congress included a commitment to tax reform, a commitment to a very different regulatory approa approach, including a lighter regulatory touch and roll back of existing regulation, and there was considerable discussion about a stimulus in the form of a infrastructure bill. i don't think anyone disputes that the president campaigned on tax reform and lighter regulation. it seems that most of the world responded to the view that

increases the likelihood, no certainty here, but increases the likelihood that we would have stronger economic growth. they respond made -- it suggests that tax reform alone would a add .8%. but the members had no challenge in their opinion at all about the prospect for economic growth. the upper bound, the highest estimate decreased. so just looks on the surface like the fmoc members either believe it is unlikely that any of those things will likely happen, or they think that they

are not progrowth. >> we don't yet have clarity out what economic policy change -- >> i understand there is no sere serety -- certainty, this is about likelihoods. >> most colleagues said they would not speculate on what policy changes would be put into effect and what they're consequences would be. a few of my colleagues mentioned that in writing down those frac forecasts, they assumed there would be a middle fiscal stimulus. but most of them have taken the view that we want greater clarity about the size, timing,

and competition of changes to fiscal and other policies before trying to incorporate those into our forecast. >> okay. that's what i expected. let me move on to the c car. i sent you some of the concerns last week. i'll touch on a few of them briefly. compliance is enormously expensive. they suggest that the c car models ployed by the fed and testing procedures are not transparent. i think that is generally acknowledged. the fed does not engage in sufficient risk management of the models it uses. the g.o.a. reports that they have not assessed if they are procyclical. i'm concerned that c car might

actually increase systematic risk in one important respect by behavior of bank behavior. and the come police sit risk weighting, that we have to confer, are verying with very different from those of the banks. they are not required by stat e statute. and you mentioned earlier there was a huge increase in the capitalization of american banks post crisis. and the fed already has other ways of boosting capital requirements like the counter cyclical buffer and the s

surcharge. isn't it dupliclitive? >> it is a key part of our regulatory process. it is detailed and institution specific and a forward looking assessment of the risks and the firms balance sheet. and i think it has been a corner stone of our efforts to improve supervision especially if the largest banking institutions that -- whose stability is critical to overall u.s. financial stability, the gao and they're assessment found that the stress tests have been useful and played a useful role. they did not recommend that we end them. they made a number of specific recommendations which we agree with and are working on. and we will of course continue

to review our practices as we recently changed c car to exempt most of the institutions under $250 billion from the qualitative part of the c car review. but i do think that stress testing has greatly strengthennstrengthen strengthened our process. >> in the absence of c car, that doesn't mean the end of stress testing. mr. chairman, if i could make one quick closing comment, that is that as we all know, we have had a de facto acting vice chair of supouupersupervision that ne through the process and exercised the powers of that position. it is my hope that the president will soon be able to nominate

individuals to complete the board of governors including a vice chair for supervision who will go through the process, be vetted by the committee, and until such time i hope the fed will refrain from issuing major new regulations that would benefit from the input of the new people. >> senator shelby had one quick question. >> i'll be quick. we have not talked about this madame chair, but the current account, our trade imbalance, what would you -- would you share with us and you share this with person people, the long-term danger of an imbalance in trade that we have been running for years and years as opposed to short-term and so forth. where are we and you're an economics professor, but we were taught that's not a good thing in the long run.

>> so we have a current account deficit that is -- >> tell the people what that is. most of the people here know, but you have a nationwide audience here this morning. >> it is, the difference between the amount that we spend on goods and services, that we import from abroad -- >> import versus export, isn't it? >> correct, of goods and services. so we have a current account deficit. it increased in size. and ultimately it leads to a build up of our indebtedness to foreigners, and so it can be a long-term concern if it's not on a sustainable course. >> what is it roughly now? >> i believe it's -- >> just roughly. >> i believe in 2016 it amounted to about 2.6% of gdp.

>> in dollars what is that roughly? >> close to $500 billion, the deficit was a little below that. >> that's in one year, right? >> correct. >> what's our total indebtedness. >> would that be in the trillions? >> yes, i'm happy to furnish you with that figure. >> would you call that a troubling thing? long term? >> it depends on what the long-term trend is. it also depends on what we earn on our foreign investments versus what with pay and historically we have earned more on our assets that we hold abroad than we have paid to foreigners who hold our assets. but the trend there is important. >> when is the last time we had

a surplus, a small, i'm sure, in our current account? roughly? >> i'm not sure. >> can you furnish that for the record? >> certainly. >> has it been a number of years? >> it has been. >> thank you mr. chairman. >> thank you, senator. senator rounds. >> madame chairman, thank you for being here today. you have a difficult and important position. i look forward to working with you in promoting sound economic policy in our country. i'm sure you're aware of thing a sector of our economy is sufferi suffering. the wall street journal points out there will be 2 million farms in america for the first time since the louisiana purchase. commodity prices are singing, the ag department said that those who continue to farm will see their incomes drop by 10% by

2018. our nation's farmers are being left behind. my question to you is, recognizing they need access to capital, they need access to literally being able to borrow money nanny a time in which we made it more difficult to borrow money, a lot of folks are seeing an nend which they, because they work in an industry that is seasonal, some years they make it and some years they don't. is there something that -- could you just suggest what you see in terms of economic headwinds for our ag economy, and what we as policy makers should be focusing on if we want to help them make it through the next couple years. in colorado right now they're setting up an emergency hotline for suicides for the farming and ranching communities. this is not something that will go away quickly. clearly it is gathering momentum. could you just talk to us in terms of what you see for things

that we can do to perhaps take some of the burden off of these farming families? >> so i can't give you recommendations for what congress should do to address the ag issues. we are focusing on the fact that there is pressure on commodity prices and particularly on food prices, and after a number of years in which conditions were really very strong and land prices were pushed up. so in some cases, we are seeing increases in delinquency rates. the dollar increating substantially around mid 20146 at pressured farmers and putting

pressure on agriculture as you indicated. >> i think more specifically farming mauoves year to year. you can have a drought, you can have excess sieve moisturivexce year you're consistently successful. what about their ability to loan or carry debt, shouldn't there be understanding in the policy at the federal level that the ability to survive, not just a 12-month cycle, but a 20 month or 36 month cycle. doesn't that seem like a policy that is worth continuing to explore. would you see some value in that? >> honestly, this is something that is really up to congress to consider and to look into. it's not, you know, it's not something that the federal reserve has the ability to

mandate. >> but fanl institutiinancial i the source of that ability to borrow money, and in a year when you have a bad year for crops, or commodity prices, it may be down for awhile. it seems rather illogical to simply pace the ability to borrow money from a financial institution on a 12-month cycle. what it seems to do is talk about from the one year to the next, should a loan be extended. wouldn't it make some economic sense. the segment of the economy, perhaps a different cycle to be considered without having their loans being considered nonperforms assets in the auditing of the financial institutions. for more than a one-year or short-term period of time. >> it is something we look at,

and financial institutions are trying to use safe and sound lending, and we want to be careful to protect them from losses. >> thank you, senator. senator cotton. >> thank you mr. chairman and madame chair. i would like to discussion with you today wage growth. or maybe i should put it better, lack of wage growth. the federal reserve tracks wage growth as an economic problem. they have been largely stagnant. we have seen a few positive trends in the last few months. but i want to look back beyond the last few years. starting in the 1970s. i think we have a congratulateic to display that.

workers without college degrees have declined. it has grown by 17% and all inflation adjusted terms. could you comment on what is driving the recent wage growth, but also what is behind this phenomenon that we see on the chart behind me? >> over long periods of time, the general average nationwide trend in individual growth depends on productivity growth and in recent years the growth has been relatively depressed. incomparison, say, with a very long period. productivity growth was probably a percentage growth a percent or so higher. for different groups in your

economy, as your chart focuses on. changing in wage growth depend on trends in the labor market and in the economy. and what we have seen, importantly, because of tech technological change that raised the return to skill, raised the demand for skilled workers, and the people able to use technology. i think coupled with globalization that made it easi easier. and they have jobs that outsource work, and place that's are subject to technological change. we have seen different trends for much faster wage growth for higher skilled individuals and which slower wage growth for those less skilled. the gap between the earnings of

college educated and high school educated or less individuals continues to grow. and this has been a major source of the trend that's you're chart. >> the labor market is pretty tight. and the wage growth picked up, average hourly earnings were up 2.5% in the 12-months ending in january and that compares to 2% from 2011 to 2015. some other measures rising somewhat faster. there's not a dramatic increase in wage growth in recent years. there is some evidence of a pick up, but not dramatic.

in part i think you're seeing a reflection of a healthy labor market. tight labor market conditions, but the in fact it remains so low is also related to weak productivity growth in the economy. >> and what has been contributing to a tighter labor market? >> we're trying to do our job, and we put in place conditions intended to lower the unemployment rate, improve labor market conditions. you have seen the unemployment rate come down. the job growth is really strong and exceeds what is sustainable in the longer run, and the labor market is continued in a general sense to improve, always clearly the gains are not evenly distributed among different segments of the population. >> if the labor market was to continue to tighten through both

economic growth and also say through a gradual reduction in the number of unskilled and low skilled immigrants and guest workers comes into the country, would we see continued wage growth for those with a high school degree or less? >> i'm not certain, i mean i expect the labor market to continue to improve further. we have to be careful not to allow conditions to become so tight that we push inflation to our 2% objective. we will be attentive to that, but i do expect -- >> is that a serious risk at the time when the workforce participation rate is still at an envlevated level. >> the workforce participation rate has been trending down. >> historically it is still high? >> relatively high, but it is overtime going to be trending

down, and immigration has been an important source of labor force growth. so that would be reduced if i'm graduation were to diminish. >> thank you, mr. chairman. good to see you chair yellen. the 2008 crisis cost millions of people their jobs, homes, and savings. in reaction, congress passed the dodd frank act that would keep big banks from flowing up the economy again. president trump called dodd frank a disaster and said he would dismantle it. he issued an executive order on financial regulation. he put steve mnuchin and gary

cohen, who have a combined 42 years at goldman sachs in charge of rewriting the rules to benefit the banks. you have looked at the data for the economy and financial markets. i want to follow up on senator brown's questions and get your take on some of the administrations main reasons for calling it a disaster. he said he hoped to "cut a lot out of dodd frank" because "friends of mine with nice businesses can't borrow money." i'm aware of the small business survey you sited earlier, since dodd frank was enacted in 2010? >> well, cni lending at this point has grown and it exceeds

after declining, it exceeds the 2008 peak. the same is true for total loans held by commercial banks, since the end of 2010, total cni loans outstanding have grown over 75%. in the most recent period for which we have data were the recent 12 month period, cni loans grew over 7% and small cni loans, which are usually sort of small business related, grew almost 4%. so we have seen healthy growth in actual lending in the economy. the survey that i mentioned to senator brown, i believe over half of small businesses indicated that they absolutely didn't need to lend, and had no

diagnose f reason to have credit. another claim, this from gary kohn, is that banks have been forced to hoard capital, and forced to build capital instead of lending capital to their clients. chair yellen, wlen they impose a capital requirement on the bank, does that stop the bank from lending out that capital or in other words, is it capital requireme requirement. can banks do whatever they want with that capital including lending. they put it on the end, put it

in a safe where it can't be used, and it is a requirement they finance the lending they want to do with a certain amount of capital and not only with debt. so the capital is used to make loans. >> good, so the president's chief economic advisor is wrong about that pretty basic fact. let's look at another statement. he said we have the best most highly capitalized banks in the world and we should use that to our competitive advantage. on the flip side, we also have the most highly regulated over burdened banks in the world. that sounds a lot like a contradiction to me. our banks either have a competitive advantage because the world knows we carefully regulate our banks, or they have a competitive disadvantage because of those requirements. so, chair yellen, which one is it? how have our banks done in comparison to their foreign

competitors since we put our new rules in place. >> i don't have all of the numbers at my fingertips, but i think our banks are more period of time are profitable. they are capturing market share from european banks, so i see the capitalizing of banks as conferring a competitive advantage on those banks and competing for business. taking away clients from other banks and our banks have thrived since we started dodd frank, and they're making literally record profits. i would like to submit the quarterly report from the fdic

to show banks of all sizes are more profitable than ever as well as this wall street journal report saying u.s. banks report record profit in the third quarter, may i do that? >> without objection. >> thank you, mr. chair. on any issue, but especially on something as important to stop another financial crisis, we need to start with facts. real facts. not those alternative facts that the administration has become known for. and the facts show that donald trump is wrong and his chief economic advisor is wrong about every major reason they have given to tear up dodd frank. commercial and consumer lending is robust. bank profits are at record levels, and our banks are blowing away their global competitors, so why go after

banking regulations? the president and the team of goldman sachs bankers he put in charge of the economy want to scrap the rules so they can go back to the good old days when bankers could take huge risks and get huge bonuses if they got lucky, knowing nthey could have taxpayer bailouts if it doesn't pay off. we had this regulation before and it resulted in the worst financial crisis since the great depression. we cannot afford to go down this road again, thank you chair yellen. >> senator scott. >> thank you, mr. chairman, and thank you chair yellen for being here this morning. about a month ago you had a teacher town hall meeting with post secondary economic educators and you had a question about dodd frank as it relates to repealing or changing it. and you said the burden of regulation is great, and i feel

strongly that we should be looking for ways to mitigate regulatory burden, and we are looking for ways, particularly smaller institutions. there could be modifications that could succeed in reducing regulatory burden for smaller institutions. i would love to hear your thoughts and your recommendations on ways to mitigate that regulatory burden for small banks and places like south carolina and other states. >> so, yes, let me reiterate what i said there. it is important to look for every way we can to mitigate the regulatory burden. we have suggested previously, and i would reiterate, that congress might want to consider exempting community banks, and some of the incentive compensation provisions that

apply to them, and those would be examples. we -- there is quite a bit that we see being able to do ourselves and we have taken steps to extend the exam cycle for well managed and capitalized banks. we're redutyiration of our onsi loan reviews. so we are doing much more work off site. we are trying to reduce our d x dmumtation requests. we put out more to the largest banking organizations and not to community banks. so we try to make clear to

community bang that's it doesn't even apply to you, you don't need to worry, what applies to the banks and what portions of our regulations don't apply to community banks. we're trying to, reduce the frequency of our consumer compliance exams for banks that are well managed and low brisk. so those are some of the things that we're doing. we are attempting, through our review with the other banking regulators to identify provisions that can reduce burdens. we have putt out provisions that reduce the amount of was that we require on our call reports. >> thank you. >> and many other things. >> thank you very much, i look

forward to seeing some of that in writing to we can fuse it together. earlier, you noted there is a -- >> we have been listening to the chairman of the federal reserve, janet yellen, she is taking questions now from the members of the committee. it is a deregulation that we continue to hear about from this administration. steve leisman has been listening too, i think she is doing her best to not get into political arguments. >> there is two components of it. one was, at the beginning, a general agreement of the principals in president trump's executive order. what is in the kpestive order is

different from the drastic changes. it was seen by several fed officials as a workable principal, and then what i thought was a devastating line of questioning from senator elizabeth warn saying the banks are profitable and lending under dodd frank, i'm very interested in hears on the rest of the committee if the republicans rebut that line of questioning to accomplish that there is a need and there would be a positive economic impact from rolling back. and the fed chair very much agreed that we have had blending, and that small business surveys don't show a lot of unmet demand. there are issues about the small banks being overly burdened, and

the types of people getting the loans. >> she didn't say she would stand in the way to deregulate the banks and move away from dodd frank, did she? >> no, but she didn't talk about the wholesale part of it. she said it had is only one person. she said it takes a full board. i'm not sure she is on board with wholesale changes, i think it is the principal executive order and easing the burden on the somethinger regulatory banks. >> thank you, we're going to take a moment here to watch shares of t mobile. a lot of talk about the unlimited data wars among the wireless carriers. we want to get back to jim cramer who is in san francisco with a special guest. >> thank you i'm with john ledger who is ready to crow and

give me gifts. >> happy birthday, happy valentines day. jim cramer day. >> there are a lot of things going on in the market, tell us about what you accomplished this quarter b with and where are you versus last year and two years ago. >> we just announced q 4 at the end of '16. we're the only wireless carrier that had double digit service revenue growth, customer growth. we grew 11% year over year. >> dumb, dumber in yellow. minus five, minus one, minus five. the whole industry is declining. we are double digit revenue growth. 12% over the year. so that is on top of customer growth that, are you ready for

this? we had 2.1 million net adds. we differentuated ourselves for three years. for example, on the postpaid phone net side -- >> the one that we look at when we're trying to judge. >> we had 3.3 million in '16. so the industry, all of us, all of us, had 3.2. yes, they lost, for three years. >> so you took up all of their -- >> back to your other point. if you go three years, the industry, including us, added ten. on the prepaid side, 5.1 million over three years. they lost, overall they had 4. .

million. >> but they're listening to you, i know verizon -- >> ver izon has taken over as dumber. but ver ri zon woke up, and they came right at you on monday. there has to -- >> they woke up? how about this. you're head of marketing, okay, first of all, we will never, if hell freezes over, we will never give unlimited data. two weeks ago, americans don't need it, take our five gig plan. yesterday, hey, don't worry, it's unlimited. taxes and fees not included, what did we do after that did it? we hit them right back. verizon had 167 postpaid phones, they're a mess.

>> okay, let's say that they're stupid and stupider, okay? right after your numbers, he is game. you did not identify him as an idiot -- >> what's this name? it's exploding -- >> the prices go up after a year. >> but he is saying, he is under here, 60 versus your 70. >> it doesn't work. hey, jim, want to try sprint, it is only $90. someone might save us. all we need to do is get by another quarter and then they will save us, come on. >> come on, hold on, postpaid phone terms, down four basis

point points from the previous quarter. >> that's mine. that's fantastic and there is room to grow. we have similar churn to the big guys. that is beautiful. 1.28%, and getting better, with a 10% upgrade rate. >> let me go over the idea -- >> go over the cash flow -- >> you need it because you need more spectrum. you were very nice. you talked about spectrum growth. that is not enough. >> jim? we have more spectrum per person -- >> isn't that nationwide. they have 314 million. >> we deployed 252, the reason i can't give you a full answer on

this, we are in the quiet period on the most historic auction that is just finishing, the 600 megahertz auction. now there is an assignment periodokay. okay. now, i know it's your quiet period but my job is try to disassemble -- >> me and quiet don't go together. >> why is it that every time i hear your name i hear another company. i hear that it's sprint. >> yeah. >> i hear that you're doing -- it's dish. why do i always hear that these are on the verge. by the way, huge stake in you is ready to make it happen. >> you haven't heard that for a while. >> i just said it. >> by the way, i'm humored by this conversation that's going on. first of all, we're in an anticollusion period so nobody is talking to anybody. you have two factors critical in this conversation. industry standard. everybody has one of these. you have one of these. people no longer care if you're

a cable industry, contract, pick it up whenever you want. lastly, dish needs to do something, sprint needs to do something, comcast needs to do something and they all bring our name up. we can continue to grow and come back every year. >> congratulate you on the numbers. i know that when you sort through everything it's very rare that you would ever say you're anything other than smarter. we want everyone at home to be able to do the work. i got to send it back to carl. carl, back to you. >> jim, thanks so much. good stuff. jim cramer at one marked with john legere. we're going the come back with more janet yell len and the market reaction as testimony continues before the senate finance committee. ways wins.

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then why settle for slow internet? comcast business. built for speed. built for business. we're going to take you back to washington, d.c. around fed chair janet yellen's congressional testimony. >> i think that is true. and we've had to slowly growing economy in many small business essay their sales growth don't justify unsignificant expansion plans that would make it desirable for to borrow or not looking to borrow. >> to me, madam chair, isn't it problematic to have people leaving this meeting think that small businesses that have business plans, think that they would move forward with to create jobs and take risks, to make us this this is an phenomenon that only affects about 4% of all small

businesses, that else is getting the loans? i think there's a pent up demand out there. please finish your thought. >> well, i was going to say that sometimes small business loans are underwritten by banks in a way that's similar to credit card or home equity loans and small businesses neighbor row against home equity lines of credit. so one thing that may be happening to some small businesses is that, because there was this substantial reduction in some -- especially in some areas of the country, in raising property values, their ability to finance business loans in that way. >> in your professional opinion do you think that the universe of potential small businesses that could be created are businesses that exist that want to expand, that they have unfettered access to capital given the current environment? >> well, businesses that one

start up always needs equity capital and that can be quite difficult. >> do you think that when we're in an environment now -- i hear this at a community bank that i've exited any investment in since i've come on the banking committee but i talk -- i speak with them and they say that the personal relationships that they had in the past, where they could get a loan underwrited, were pivotal to them being able to get a loan. now they feel like they have to go in. and of course if you have roughly the same ability of assets you can secure the loan, you can get a loan. but there are a lot stricter requirements that have a chilling affect on small business lending in the nation. do you agree with that? >> certainly our objective is to encourage banks to lend safe and sound lending and not be caught up in bureaucratic obstacles. >> i do want to ask another question, mr. chair. i'll go as quickly as possible and i apologize to senator kennedy but i want to such on a

second subject. i think we're talking out of both sides of our mouth in washington and i'm not criticizing you for it but when i take a look at the movement on kpt tall on the one hand we say, of course, banks can lend to anybody. on the other hand, on any given day we will have regulators saying you better not lend because what i consider to be overreach is an enforcement. so to me letting a comment stand that banks are lending to any commerce is not a -- you didn't say that. it was subposition by a couple of the members here on the committee, i think is just absolutely defiant. what i'm seeing in the small business community and the community banks, particularly the community banks but big banks in north carolina, which leads me to my last question. the -- precrisis. incidentally i think there were very important reforms that had

to be imp me med with dodd-frank. i think you have a bill that's this big, that's this big, that expands into regulatory framework that was enabled under dodd-frank that's that big. and in particular in north carolina we had a very thriving financial services eco system precrisis. we had over 100 community banks. we have a couple of regional banks based in north carolina and a couple of relatively big banks in charlotte where i live. now i've seen a substantial decline in the community banks in north carolina and i think that's a national trend. you know the numbers as well as i do. and since dodd-frank regulation has been implemented we've had to de novo bank charter. one is on an indian reservation. the other one is focused on serving the amish community. so we have completely destroyed the lower foundations of the economic -- of the banking eco system in my opinion because it has to be -- because the inflexion point was after

dodd-frank was implemented and cfp dprks b and all the regulatory agencies started i think ebbs tendixtending their . do you believe that's an area we need to be concerned with. you did say one of the questions the community banks probably do need some relief. can you talk about more about that? and mr. chair, i'm sorry for going over my time. >> sure, i think community banks, i agree with some of the trends you just described. i think they have bb under pressure. you have many years of a weak economy, very low interest rates and pressure on net margins and compliance costs. i agree that it is very important for us to look for ways to relieve burden. and i am committed, the federal reserve is committed to doing everything that we can to mitigate the burdens on these institutions. they play very important roles, as you've indicated, in the economy and so many communities and supporting lending.

>> senator shotz. >> thank you, chair yellen, for your public service and also thank you for enduring quite a long hearing and accommodating all of our questions. before we get going on my questions i want to echo the sentiments of my colleagues in terms of what dodd-frank has done for the economy, for the stability of our financial system. it has, in fact, strengthened our economy and undermining dodd-frank is not, in my view, the correct course of action. i wanted to ask you, chair yellen, about climate change. it is affecting our economy in a number of ways such as prolonged droughts that reduce agricultural yields, coastal flooding, increased severity of storms, and the unpredictability of weather fafts on which many of our industries depend. in 2016 noaa ror