favorite charity will be getting a little bit of gift i'm thinking i'm just going to -- the sorekin family will make the contribution -- >> whoa. >> just hold on because it's a flyer, right maybe it will go up. >> and fun to track, anyway. that does it for us today, make sure you join us tomorrow. time for "squawk on the street." ♪ this is how we do it ♪ this is how we do it >> good morning. i'm carl quintanilla with david faber. jim cramer is back another run at the record after the major indexes failed to hold interday highs on monday it's a big morning for us, jerome powell heads for the confirmation hearing oil is down a bit and case

shiller numbers up too the president's pick to head the central bank prepares to testify on capitol hill. plus. >> crypto coin with 10,000 in sight this morning. >> house ways and means chair kevin brady will join us live this hour as the final details get hashed out as stocks look to set new record highs the president's choice to succeed janet yellen heads to capitol hill this morning. the fed governor will appear before the senate banking committee and in his prepared testimony propgsed continuity if he's confirmed we must be prepared to respond decisively and with appropriate force to new and unexpected threats to our nation's financial stabilit prosperity, we'll bring you live coverage a lot of questions whether he thinks qe should be a permanent tool what he thinks of asset prices and inflation and regulation.

>> i think you're going to hear answers you would have heard from janet yellen. i think one of the things that is surprising here is that the pick itself is very neutral it's not like when you see -- you've got the consumer financial protection bureau where there is a war. this is the opposite this man repeatedly has been confirmed. i think it will be less sir couple inspect than greenspan. i think he's very seasoned not a newcomer. >> no, as the gray hair to show it. >> that's what you conclude, huh? what do i have to show it? >> some wrinkles maybe. >> thanks a lot. i'll go get would tox -- >> you're not getting it already? >> no, i'm doing some other thing.

>> powell was first nominated in 2011, confirmed in 2012. there was a moment there where there was a bit of a gop pushback on the hill that they felt his views on regulation maybe were not what the gop wanted >> i think his -- a lot of this has to do with the guy already picked bought it was turulo that was tough on jp morgan and bank of america that toughness i think will be replaced with what a lot of people would say is reason, i would would say it reason coming from wall street but elizabeth warren might say he's too conventional, therefore he wants to get rid of the most onerous stuff, he's on record saying he doesn't want to give away the most onerous but it's how you enforce it that matters. elizabeth warren, she's getting provoked. >> yesterday by the president? >> yeah. >> you dismiss that? >> no, i don't dismiss it.

>> i don't think it was random by any stretch. >> what is she going to do, listen, i think he's great i think she's going to correctly point out everything he's ever said that is anti-community. she is best to be a sleeping dog. but if the president is going to provoke, they are going to make it so this hearing is -- or whatever she's going to issue statements and i think it's a shame. he gets the brunt of what the president triggers. >> right. >> on the broader regulatory front, beyond just the fed or what will change if anything from yellen to powell, there are c con strikss also being taken off the banks. on the front page of a couple of newspapers. >> look at the lending the lending numbers have been bad. >> they have been bad. >> i thought that was incredible. >> corporate loan growth has not been strong and people are scratching their heads about it. >> worst 12-month stretch since

2013. >> how much is regulators and how much is demand >> hard to say regulators anymore, hard to continue to make that case one would expect. given we're almost a year in. >> the executives i speak to are basically saying look, we'll do anything, there's not a lot to do yet we have all of these mergers in your world. i -- >> we have the possibility of a number of big deals. >> we got a small one today. >> yeah. >> barclay's advised roark on arby's. >> i'll give you a thesis, what do these have in common, tyson, the buffalo wild wings and popeye's >> chicken. >> protein >> millennials millennials love protein as opposed to other people

>> millennials love protein. >> why are you laughing? >> that was funny. >> millennials love protein. i've done so much work -- you don't even know the things i've about -- i'm going to blow you away. >> i have no idea mr. cable cutter, what did i discover over vacation firestick. >> the amazon firestick? >> you know what it does. >> it's a jail break, ever heard the term jail break. everybody is jail breaking the millennials. they can't get high def which i think is a must but -- >> particularly if you're going to watch football or anything else. >> exactly and you have a team in contention and it's 9-1 but the firestick, these are millennials, do not underestimate their ridiculousness they like mexican beer i know that from my receipts at

bar san p sam miguel. >> protein and mexican beer and amazon firestick. >> and selfies. >> you think the new beef jerky is -- >> companies are coming up with new jerkies, very hot thing among millennials. >> millennials are also watching bitcoin. >> oh, my gosh. >> they love the bitcoin. >> every generation loves bitcoin. when you're bored, are parents giving you a bit coin? we used to give a little silver. >> i wish i had given it to my kids when they were born i don't think it was around. >> i wish that you could have did $250 what i recommended on good wife as an expert >> the new record is 9920. back the year under $1,000, if you put $100 at inception, awfully early, it's worth $11 million. >> isn't that funny, because it looks like the qualcomm chart,

looks like the cisco chart. >> from when, the 1990s. >> 1990 to 2000. really march of 2000 isn't that interesting >> march of 2000. >> it looks a little nasdaq like. >> yes we were talking about this yesterday parabolic. >> but they go on longer than you think. >> a lot longer than you think do you understand block chain. that seems to be the one way everybody talks about -- >> i don't know about bitcoin but blockchain is for real. >> ibm, block chain. block chain. iot. iot. >> do we have the capability, watson >> i don't know. possibly. >> block chain, if you're taking avocados and shipping them from mexico to bar sam miguel, block chain, you can find out where everything is and ability to do transactions without anyone knowing it again, ransomware, he says,

listen, this is what you do, you get the e-mail and it says you need to call 1-800 whatever and pay $500 -- now bitcoin and we will not give this stuff to wikileaks. now you've got targets that are awfully crazy. the former fort tres manager, listen to what he says. >> bitcoin could be at 40,000 at the end of 2018, it easily could. and i think just touch 500 is getting close could be triple where it is as well. >> 40 k, he didn't rule out the possibility of 50% corrections between now and then. >> you know what's interesting a lot of times people come on air, i remember this call and that call. novogratz is a heavyweight. >> his performance at fort tres is not particularly good over

time but somebody to listen to sorry he wasn't wearing the usual orange blazer, a much more muted color. >> from university of kansas city where they shafted shean no, a great die. >> guy. >> sure it could go to 40,000 and could be 400 by the end of 2018. >> do you think it was that kind of offhanded. >> does anybody know anything? >> jamie dimon, i was with people from jp morgan, i wanted to talk loan growth. but the call, the call, the bit coin call where he questioned it and then lloyd blank fein was much more noncommittal. >> he was. i'll keep coming back to block chain. i'm reading a morgan stanley report that says block train and freight transportation is in its early days.

>> you want to ship mangos to walmart, go to -- go look. there's a great thing about walmart, we did a great piece. our network did a great piece. go launch that it was really one of the best pieces on bitcoin i have seen. it did not make we ksh that was block chain. >> security, automation, transparency and trustless operations. >> like our operation. that's us. we're block chain. >> we are block chain. >> a bunch of block chains, you're almost -- you're the head guy. you're the block head. >> that didn't -- excuse me. sorry there. you give the guy a long weekend and we have no idea what was going on. >> coming in hot >> coming in way too hot block head >> except that buyout offer, while emerson electric withdraws its bid for rockwell automation,

later on this hour, house ways and means chair kevin brady, we'll talk tax reform and push to get the bill to the president's desk by christmas. we'll see if the s&p 500 hits a record when the opening bell rings in 20 minutes. excuse me, are you aware of what's happening right now? we're facing 20 billion security events every day. ddos campaigns, ransomware, malware attacks... actually, we just handled all the priority threats. you did that? we did that. really.

we analyzed millions of articles and reports. we can identify threats 50% faster. you can do that? we can do that. then do that. can we do that? we can do that.

billion ex-debt. majority owned by roark capital and emerson has withdrawn the 225 share bid to acquire rockwell citing their unwillingness to engage in merger talks. >> 9:00 conference call, there may be more coming from emerson. i pointed this out last week in a faber report there was never a path in terms of being able to go directly to shareholders of rockwell they were trying to get those shareholders to pressure management to come to the negotiating table starting at 2:00 and 215 and ended up 60/40,

not enough rockwell does seem to have had a significant faith amongst shareholder base overall and last week we did get a very long and detailed rejection from rock well, noting any number of different concerns it had whether it be increased leverage at the combined emerson rockwell or ability of the company to consolidate rockwell or job cuts potentially coming and result in loss of talent as so many different things they cited, jim. they succeeded there was no path for emerson anyway, they just figured they would give it a shot now the question some people have, why some people felt this was the time they needed to go down this path, even though they probably knew it was going to be a tough one. >> i mentioned protein, talk about something else we talk a lot about. there is a lot of chatter that there are companies that ge might have bought or might buy if they get better this is one of them. when you go over what greg hayes

said about rockwell collins, remember he sted you have to pay up for beach front property. i thought that was code you have to pay up now for beach front property because if ge gelts the balance sheet in order, this is what they would buy. i think we have to think about that, the ge will not be hobbled forever, when it goes back to being in a mode where they fix the balance sheet, it might be a buyer of these companies. >> rockwell's answer would be the same, bigger is not necessarily better, which i thought was one of the more interesting points they made in their rejection letter from last week. >> look, i mean, this is also a company that's storied reminds me of -- do you remember air gaz -- >> like geno's philadelphia pretzels. >> haven't talked about sally smith. >> when she left, that left the

door open. mike darden, ron stayed with panera when she left, we've seen this we've got to go. >> we've got a lot to get to this morning cramer's mad dash and count down to the bell. stay tune for live coverage of jerome powell's confirmation hearing in front of senate banking. take a another look tathe premarket and more squawk on the street will continue in a moment driving specific sectors of out performance. where a rising middle class powers a booming auto industry. a leap into the digital era draws youthful populations to mobile banking and e-commerce. trade and travel surge between emerging markets. everyday our 1,100 investment professionals around the world search out opportunities for alpha. partner with pgim, the global investment management businesses of prudential.

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[ clacking continues ] good questions lead to good answers. our advisors can help you find both. talk to one today and see why we're bullish on the future. yours. it's tuesday, because you were after on monday we're going to talk about a small company, does a little retail occasionally, tend not to discuss it too often. >> the one is about the special that you did, amazon

goldman sachs has a note that is very common sense, which is they've got amazon web services -- david, you're probably missing it, begins in las vegas this week with key notes from the ceo who never hear from, andy -- >> who's coming on. >> cnbc. >> we have him >> yeah, john forte tomorrow. >> then can we just -- this guy is a genius, he's doing a lot of the technology, plus we do need to talk how amazon could be losing business to azure >> microsoft's azure. >> pace of innovation, increasing pricing flexibility i thought they were cutting prices but what does that say. we have -- we have andy jassy? >> yeah, why not promo it right now. >> that's going to be about what you see is a business behind the scenes that many retailers can't live without, vm ware announcing

a special deal, very easily can go from cloud to cloud, really smart company. this -- a lot of this is black friday, monday tuesday -- a lot of it is the recognition that amazon web services might be worth $250 billion. >> $250 billion. >> it is growing at the rapid rate it is very profitable. >> extremely -- great leverage. >> the multiple you're throwing on to get to 250. >> understood. >> don't forget, as scott has been doing, the second headquarters if it's got this, it's going to be a major, major plant. >> yes >> one of the biggest. >> kewe'll keep an eye on amazo' shares, to see if mr. bezos' net worth can exceed the $100 billioititesrd ghafter thisay i think it's terrific.

your kids go to college and you start trading. >>yeah, 5 years already. 5 years, hmm. you ever call your broker for help? >>once, when volatility spiked... and? >>by the time they got me an answer, it was too late. td ameritrade's elite service team can handle your toughest questions right away- with volatility, it's all about your risk distribution. good to know. >>thanks, mike. we got your back kate. >>does he do that all the time? oh yeah, sometimes he pops out of the couch. help from real traders. only with td ameritrade. you're watching cnbc "squawk on the street.

busy morning as jerome powell heads to the senate confirmation hearing. we'll talk to house ways and means committee chairman kevin brady in a couple of minutes we have haven't talked with you about black friday or cyber monday. >> i'm glad. one of the things i thought that was really significant was that you saw an announcement yesterday from jeff gannette, the ceo of macy's, he's trying to get everyone to recognize the company has tremendous cash flow i think that's important they did have -- according to some reports, some price register freezing. i can't confirm that i can confirm that macy's is capable of paying down -- they are paying premium for some of these pieces of paper, just to emphasize, look at us, we have the ability to pay this debt back that we don't need to pay but we're doing it so you should have even more conviction about our dividends. >> 7.12% as of this morning is

the yield sf why would they buy this debt at the premium when they don't have to they ended up saving money but it is brilliant to launch this tender offer a tender off for $400 million in notes. i thought that was basically -- i've looked at black friday and i'm very confident why do it now. i looked at black friday and receipts are great look, it could all be a show but that's not the way you do a show when i talked with gennette i have to bring up the bonds and the wrap is the same, they are at the big premium, why would you buy them i think you buy them to show. >> really? >> why bother sending that message. >> very high coupon. >> retiring high coupon debt. >> so it's good but the dividend, makes me feel better about the dif end.

i really do. >> then you have these metrics out of adobe, mobile transaction set a new record up 47% of visits interesting, the average order on an ios device, 123 bucks. on an android device, 110 bucks, adding to the myth that apple users have a little more money to spend. >> geez, that's very different from what you would expect i think it was -- so far my contact says good holiday season and the way you can measure a good holiday season is through pvh and vf, tommy hilfiger and calvin klein and north face. look at those, look how vf is doing, that's incredible that's -- all time high. so vf does have a huge percentage of business in europe but you wouldn't be getting that if you didn't see good department store sales, jp penny

is harder because of sephora and iff is doing well which tells you about the fragrance industry i'll bullish about what happened i'm not -- sears, i don't know home depot, i do know. fabulous >> square yesterday gets hit with the downgrade, it's down again in the premarket this morning. some people wonder if jack's master plan is to take square's payment interface, put it on twitter's social profile, merge the two long term. >> it would make a lot of sense, also, we're talking with becky about this i mean, i think that square -- one of the things that jack dorsey did, i had sara fryer on, fabulous cfo and i mentioned about built bitcoin, we're doing it but it won't be important. >> then literally the same way, jack dorsey said it would be

important. that's when the stock went from 35 to 48 knocked off that -- >> he's not a control shareholder in square though, is he he's not on prit twitter, i kno that. >> square is becoming like paypal but i don't think that's really right. paypal has gigantic business and square got touched like overstock, by bitcoin. and when you're touched by bitcoin it's fire. that analyst yesterday was telling the trunl which is please do not make the judgment that this is bitcoin but novogratz, bitcoin. >> 40k. >> when -- >> you're looking -- david has got a kind of one of those faces he does with me, which is, basically says it's quiz cal by the way he uses his eyebrows

it's quizical. >> there's the s&p at the bottom of the screen. i shares by black rock celebrating the etf at the nasdaq and cloud software company, a founder partner of #giving tuesday. unh will lead the dow here we have mixed guidance yesterday on 2018 earnings investor meeting today. >> it's fabulous, that whole group is unbelievable. and there's nothing in this tax bill that i think will set them back you know, who knows what cvs is going to do. >> cvs aetna is interesting, i have no updates and my reporting there is not done much to unearth anything, other than i will say time warner, at&t, department of justice, it's a vertical deal. cvs aetna is a vert ical deal. you can't -- look axans at the

fear they may have for doing a vertical transaction given the department of justice came out of nowhere with the opposition to a vertical transaction which those as we pointed out so many times are not blocked at least haven't been in some time. >> what's interesting, if you can't do a horizontal and can't do a vertical, what can you do you know, let's say is dow chemical going to buy campbell's soup no the only deals you can do are deals that are stupid deals. if you can't do horizontal and vertical, what can you do? >> they would say you can do vertical and even horizontal and it depends on each deal is its own unique set of circumstances. >> i just feel like the message is a chilling message. i mean, tmobile has been going up and an upgrade yesterday. i'm looking to see where they say who's going to buy them. they say it's going to be in earnings a lot of people if they buy t-mobile believe there will be a

transaction. again, i think that the justice department is saying be weary, there's no transaction we won't -- we'll stop it. >> on that one, you had plenty of people scratching their heads, the idea you could reduce from 4 to 3 the number of wireless players in the country. that is a true horizontal deal taking a competitor off the field of play so to speak. i think the reaction in verizon stock price said it all, going up sharply the day that sprint and t-mobile abandoned their talks. >> wasn't that something. >> there was the belief that -- excuse me, going down sharply after they abandoned their talks because of the belief that prices would continue to be very competitive. >> until the justice department antitrust division recognizes facebook, amazon and alphabet for what they are, which is i wake up one day and decide, rather than fire stick creating a jail break, i'm just going to go buy a major cable distributor. why amazon -- you know, there's the example about the justice

department, they say, that's okay if you're cbs, channel 2, if you're t-mobile, if you're time warner, you know very well that you could get to knock on the door from anything -- from any one of those, it's so easy to envision one of those companies knocking and saying, listen -- you think that google wouldn't do that to whoever is in charge of youtube >> they haven't. >> they haven't meeted to and they've been able to get access to content though "washington post" today has a story about hbo saying look at their inability to sign up huge deals because apple comes along and signs up a content deal and pays more and in front of so many other providers of content. >> yes. >> i don't know they need to buy these things. >> multiple of hbo >> hbo is all licensed and

you've got these directors -- >> apple is spending a fortune now too. that name comes up more and more often. >> the breaking bad people. >> when it comes to content -- >> they could easily -- >> they don't need to. they can go to the content providers directly as they are. >> right, you go to the studios, write a check to time warner, look, i think the justice department is living in a world, antitrust is living in a world where i think the only thing they know is how to follow twitter, that's the thing they follow maybe fox, good morning -- good morning whatever. >> coming back to cvs and aetna, you have to wonder whether they are wondering about any risk if they do announce that deal in terms of anti-trusts. >> you want risk, who here wouldn't want to stop going to the pharmacy, where i had to beg for a drug and said do you care if i'm going to die? do you think amazon -- if you

brick me do i not bleed? my doctor hasn't come through, quickly comes through. not this woman i had to beg. do you care if i live or die no, you've got to get the doctor to approve i've it it for ten -- get it approved let me ask you, do you want me to die >> i'm sure she cares deeply. >> she was like -- >> i'm so sorry -- >> she treated you that way. >> no i don't want you to die. no, i don't want you to die but i can't get authority. what is that about do you think amazon and bezos wants me to die? >> no, he wants you to live. i don't want musk to get in the business. >> he thinks you are dead. >> he thinks i'm a hologram. >> we know he's not the founder of bitcoin he could have taken credit, he's a bigger guy than i thought. >> guys, i did want to get to other m and a action out electric, thithere, this incredible effort by

broadcom to acquire qualcomm a bit of news there. >> what? >> which is simply, we talked often from day one here, reported that they were likely to go after the board of directors. what i can tell you now, that effort continues and broadcom, the deadline is coming up. they are going after the entire board. they are going to be filing -- >> hock tan is going after the entire board. >> full slate of directors, yes, it does appear that would be the case at this point. >> apparently the three directors put on by -- i think. >> why not, those people want to bring -- they are very heavyweight. the names in the jana people are very independent directors. >> they are. and the broadcom side is sort of hoping those three director will help them in their effort. it's unclear why they would be doing that but finalizing candidates for a full qualcomm slate should come as early as

nex next week. not much else to offer there approvals for nxp continue to roll in in the not to distant future qualcomm will be faced with the decision whether to increase the offer there. broadcom doesn't really want them to do the deal but not going to stand in the way at the same time when do they choose to raise their bid for the company, that is for squall comqualcomm a message. not clear they have the necessarily feel as though they have pressure to do that near term. >> that's a great story. >> want to keep an eye on that. >> broadcom was up yesterday. >> one company in the mid of the of buying company and going after the entire board of directors and hock tan is one aggressive guy. >> you know i told you hock tan gets his man what's really interesting, david, we look at this and we say to ourselves, okay does qualcomm know what league they are playing in

they go after apple. their largest customer they anger so many companies that hock tan is saying, i have a good relationship with apple -- he will, has a great relationship, not allowed to talk about apple but he has the best relationship with apple of any ceo i would argue. you've got this team that if they come in, the whole litigation risk thing goes away. what a -- geez you're on to something, that's great news people even understand you broke news -- >> it's not that important. >> it is important, block head. >> it's really not. >> let's get to rick santelli and check in on the bond pits, good morning, rick. >> good morning, carl, you know this could be our 11th day settling between 2.32 and 2.38 in 10s but we are dabbling breaking underneath that we traded down at 2.31

look at november 1st, very interesting chart, we've really consolidated at this level and consider 2s are unchanged and 10s minus 2s continues to flatten. look at november in the spread euro versus dollar, one week chart it seems to be backing away as it gets ever close to a very significant level what is it let's go back to a 7-year chart, 1.20 is the number they are paying attention to. carl, jim, david, back to you. >> thank you the president wants a tax bill on his desk by christmas and we'll head to capitol hill this afternoon in a lobby to holdout gop senators republicans can afford to lose two votes, losing three and the bill is dead several already voicing concerns like bob corker this morning on squawkbox. >> at the with could take the entire individual side of this and throw it in the trash can

and take it directly to the insufficiecinerator i would be d >> joining us this morning, an architect of the plan, committee chairman, texas republican congressman kevin brady. good to have you, welcome. >> thanks for having me. >> so you've got corker and ron johnson, both on budget, both with different concerns. how much of this is sort of routine wrangling and how much of this could really make things complicated? >> look, the ball is in the senate's court change it as they will and make it better at every step. that's the way the house which has delivered looks at this, let's make it better at every step i'm confident the senate will find a way to stand and deliver on tax reform and then when the house and senate moves to a conference committee, we're going to make it even better so every step is about improving the -- getting rid of this current mess of a tax code

>> corporate brought up this trigger that would -- economic growth -- is that something you could sell on the house side >> look, let the senate do their work my request is this, make sure you measure all of tax reform, state and local, pay diagnose checks increasing and jobs coming back from overseas, make sure you're measuring productivity and everything good that comes from tax reform done right. so the senate, look, again, i encourage them, do their best work looking forward to working with them in conference committee we start, carl, with a lot of common ground. i think we're going to find even more common ground in a conference committee. >> mr. chairman, jim cramer here, thank you for coming on our show, terrific to have you. >> thanks. it's terrific. mr. chairman, i know that there's some people in the senate that want to do even bigger breaks for pass throughs, i've started four businesses, sir. in the first two years i almost

always lose money. why would a tax break help me. >> we in the house start with the super low rate with the first $75,000 what type of main street business you are. that's important in the startup years. limited expensing which is really complicated for the startup businesses, we've had local businesses that get caught in that defrerks schedule end up with two tax billings they never anticipated and then having the low rate itself, zero tax rate on new investment, all of that we think makes startups and existing businesses dra mamaticl more competitive. >> chairman brady, david faber here i want to take a step back and consider the bigger effects you're hoping for from this bill, namely higher economic growth, a corporate spending more here in the states, potentially increasing hiring,

wages. we have as you know a number of ceos from multinational companies who join us every day. chuck robbins, came on we asked him quite a few times in a lot of different ways, what about the money you have overseas at cisco. are you going to increase spending here in the states? like a lot of ceos, he didn't necessarily come down and say specifically that that would be the case my question, in a long winded way, what gives you the confidence that this is going to result in the end effects you're hoping for of increased spending by corporations that actually increase jobs and wages? >> yeah, you know, here the certainty is this. we know what doesn't work, which is the current tax code, which is uncompetitive and locks out dollars and punishes companies like cisco and others for bringing revenues back to be reinvested in the united states. we now will have under this new tax cut and jobs act a

competitive code, zero rate to bring products back and be reinvested in the united states. strengthening the bottom line so you can compete and win. we know with the new tax code the ability to bring revenues home will be greatly enhanced. i'm confident that grows jobs here in america and makes us more competitive. >> you know, with corporate profits at an all time high as a percentage of gdp, some would say our corporations have plenty of flexibility already to make the investments where they think they are best made and that yes, bringing the money back is certainly helpful, no doubt and territorial system is but that it won't necessarily translate into investments that otherwise wouldn't have been made anyway given our companies are creating great deal of cash flow already >> yeah, so i see a difference between this -- the old tax system, that locks dollars out and a competitive system to be

reinvested in the united states. we saw $300 billion come back to the united states, companies here in america, invested in new manufacturing and buying new companies and expanding. we see that in a permanent way going forward as very positive to the economy again, at the end of the day, no one has convinced me a dollar left stranded overseas is better than the dollar brought back to the united states for any reason >> mr. chairman, i totally agree that if that money came back, it would be terrific, i do believe a lot of it would be spend on dividends and buy backs because that's how ceos are rewarded in this country i'm also concerned that all that's happened -- i have seen in the last decade, is the richer have gotten more rich amazon's wiping out so many small businesses, walmart wipes out small businesses the minimum wage is wiping out small businesses and making it so you don't want to open a new business i mean, these forces are -- all

you're doing is maybe accent waiting first two, allowing these companies to have so much more power over these smaller companies that we know can really produce the jobs. >> i do agree on this area that the minimum wage and other government interventions have really hurt local businesses and families in a big way. i'll tell you this, while a lot of focus has been on profits, i think this tax code's incentive is for productivity, that's why this full and limited expense i have beening -- tax free new investments in plants, equipment and software technology, drive those paychecks. they drive productivity. as you know they drive the economy in a major way my view is that we're looking at the wrong "p" word, profit the real focus should be productivity of workers. that's where the tax code hits a home run >> there's a lot of discussion in the early days of this bill, mr. chairman, as you know, that

should have just tackled corporate, do corporate and leave the individual side alone. we played that sound bite from corker a few moments ago, where he said you could put the whole individual part in the incinerator and not be thrilled. does any part of you wish you could have done that >> absolutely not and here's why. with our corporations, we did just that, leave small businesses and paththroughs behind the big job creators, that's not acceptable. secondly, we get growth when companies keep more of what they earn and paychecks increase. that's what a new pro-growth tax code is all about. we can lower the rates temporarily and it would be like putting super charged fuel in an old klunker of a tax car it would go faster but can't compete with newer models on the road today we know the models that china and europe and canada and mexico and others use to beat us. we have to be competitive with

them that's wihy an overall pro-growh tax reform is completely necessary. >> we'll watch the budget today and see what the week brings us. we appreciate your time and hope you'll come back. >> yes,sir, happy to be back thank you. >> kevin brady joining us. when we return, fed chair nominee jerome powell arrived on capitol hill for his confirmation hearing we'll bring you live coverage of that records for the dow and s&p out of the gate with the blue dhchi up 69. don't go away. you always pay

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jerome powell has arrived for his confirmation hearing in front of senate banking. we'll bring you his testimony and q&a aewin f minutes we're back in a minute

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live shot of the senate banking committee. holding a hearing on the nomination of fed governor jerome powell to be the next leader of the federal reserve. we'll take you there live as soon as he begins testifying there's sherrod brown, ranking member on the democratic side. good tuesday morning welcome back to "squawk on the street." i'm carl quintanilla with melissa lee, david faber at post nine of the new york stock exchange sara eisen is off today. record highs for the dow and s&p at the open where blue chips up 75 a lot of corporate news, but powell will be the story of the morning. >> of course, a big day for jay powell the fed chair nominee will face tough questions from the senate. our senior economic reporter joins us with more on what to expect >> testimony for his

confirmation hearing, fed chairman nominee jerome powell won't be telling wall street or fed critics in congress all they want to hear steven stanley at amherst points out i expect powell to closely guard his views, and he will likely take ovaz chairman with the markets knowing very little about whether he's a hawk or a dove or how he will lead the fomc despite some republican criticism of an overactive fed, powell will tell the committee, quote, we must be prepared to respond decisively and with appropriate force to new and unexpected threats to our nation's financial stability and economic prosperity. and while president trump has criticized the dodd/frank financial reforms, powell says the financial system is no doubt stronger than a decade ago, and he added, we will continue to consider appropriate ways to ease regulatory burdens. a couple other things. powell also apparently pushing back on those in congress who want the fed to make monetary policy according to rules saying the fed must retain flexibility

and he supports the current structure of the fed which pushes back on those in congress who want to restructure the central bank on actual policy, he sticks with the status quo, saying he believes rates will rise somewhat further and the balance sheet will gradually shrink. >> a nice discussion on squawk this morning, the degree to which the conversation today will be about tax cuts and how powell thinks of stimulus coming this late in the business cycle. >> first, the question is whether he wants to address it the president would obviousl hope for his nominee to certainly not criticize these tax cuts that he's put forward, but maybe even promote them or otherwise support them it's not been typically done by the prior two chairs, to sort of step in to the political debate. the other question becomes a question of policy whether he allows or abides what are considered by conservative economist to be supply side tax

cuts the thinking is it wouldn't necessarily raise inflation because they're adding to the supply or the resources of the economy. >> other lines of questioning, steve, we'll get to in a moment. joining us, former fed governor randy joins us professor of economist at the chicago booth school of business great to have you back what do you think the senate committee members are going to lead with, randy >> well, i think they're going to get at where policy is going, where monetary policy is going are you going to be just a clone of janet yellen or are you going to do something different? lead with that and then i think we'll go to the regulatory side. the same as janet or different than janet >> randy, how does jay powell stay apolitical when it comes to questions about tax reform and tax cuts >> i think the way to stay apolitical is say the fed doesn't take a position on the tax reforms. what we will do is we will wait and see to see what actually is passed we'll analyze the impact on the

economy, whether they're the supply side effects that steve was talking about or whether that's not going to be a primary impact to the tax reforms. and we'll take that into account in making the best policy for maintaining growth in the u.s. and low inflation. >> i would imagine a pressure point, randy, is going to be his stance on inflation. janet yellen had interesting comments at nyu last week saying she expects inflation to pick up in the next year or two years but it'sit's really a mystery. is that going to satisfy congressional leaders today. >> if he does say that, it's not going to satisfy anyone, but it's close to true because there's a lot of debate in the central banking community and the economics community as to whether this is something totally different than we have seen wfr or if we're going to get back to our normal state we're not sure my guess is he will say much like the fed has been saying we

expect a gradual increase in inflation. >> randy, steve liesman here how are you? i spent obviously the last several months going through things that jay powell has said and a bunch of them obviously in cnbc interviews. i haven't been able to find out what he thinks about current market valuations. i don't know if you saw yesterday what the dallas federal reserve president robert kaplan said, but he made comments about concerns markets are currently overvalued and i'm paying more attention to this is what he said what do we think powell will do when it comes to market valuations and monetary policy is he a guy who could lean against the current stock valuations >> i think at least alt this point he's going to dance around that i don't think a fed chair nominee want to say markets are irrationally exuberant or undervalued. he'll say we're looking at financial conditions and taking those into account in our

monetary policy. it might be later on he'll take a view that he is seeing certain markets as be frothy it would be unwise and highly unlikely he would do that at the moment >> steve, as we're talking, there's elizabeth warren as they go through housekeeping procedures prior to the statement and q&a. we're in a week where the consumer financial protection board has been in the news the white house just last night filed a response to leandra english's lawsuit saying a restraining order would be extraordinary against the president. mick mulvaney and ing rsh try to run that how much is regulation going to be a talking point today and how much different is powell's view on regulation from yellen, and to what degree does corals change that >> it's a little different we have to say the tale of the tape there was angling and agitating or lobbying, if you will, for a somewhat more radical fed

chairman maybe somebody along the lines of kevin warsh, who sounded like he wanted to do a lot more reforms at the central bank. maybe something along the lines of john taylor and meanwhile, there was a pretty good case to be made for keeping janet yellen the white house went with jay powell who is sort of a compromise candidate between the reform people in congress or those who support reform at the federal reserve and those who want to sort of keep the status quo. so jay powell steps forward and says you know what, we need to make changes it's not unusual to pass a sweeping dodd/frank reform act and make changes also, what he said, if you remember the quote i put up earlier, he wants to keep the core reforms remember, president trump said he wanted to do a big number on dodd/frank, that is not what jerome powell wants to do, and also, randy also seemed to be a lot more moderate than the president suggested might happen with dodd/frank when it comes to regulation >> reasonably balanced approach.

>> i believe we're getting awfully close to the opening statement. by the way, back in 2014, i mean, a lot has been written about little opposition to this particular nomination, but back then, 23 gop members did vote against him, all but two are still there. >> four on the senate banking, carl four members, including the chairman, who said he did so as a kind of overall opposition to nominations by president obama >> of course, we do know favored and champions by the treasury secretary, as this process went on, steve. you've talked this morning, not an economist, and the debate will continue as to whether or not he's enough of a war-time general to run the fed in the event of another crisis. >> i think we're waiting also to see what happens with the vice chair position it's been signaled from the white house the vice chair position would be a monetary policy expert in that position >> randy, steve, thank you so

much, guys, for setting this up. before we get to powell, quick comment from rick santelli on consumer confidence came out a few minutes ago. rick >> i'll tell you what, carl. another one of these unbelievable stratospheric numbers. 129.5 was our read on consumer confidence why is it so exciting? that's the highest read since november of 2000 17 years, and the markets did respond. we saw a little uptick in yields something to pay attention to. some of these feel-good indices are still relentlessly high based on history if you look at the whole run since '67 on confidence, this is among a handful of the highest reads ever back to you, buddy >> rick, thanks so much. >> as we go to break, we're awaiting jay powell's opening testimony before the senate banking committee. we'll take you there live as soon as it begins. stocks at this hour holding steady dow up 71. s&p up to 2607 "squawk on the street" will be right back don't go away.

jay powell's confirmation hearing for fed chair under way. joining us, austin ghouls bay, liz ann. what do the markets want to hear in this confirmation hearing >> well, i think you are already seeing the markets react to so

far has been the released statement, which i think was fairly benign, and i think that was purposeful, continuity, continued focus on transparency. i think his use of the term "we" most of the time suggests he does want to maintain this continuity i think the q&a session with the senate will be probably the most important factor and could move markets, although my guess is that he will likely do as much dancing around some of the trickier questions, particularly i'm guessing they're going to have him attempt to weigh in on tax reform i think he'll probably dance around that. i think looking into 2018, another interesting thing to be mindful of is whether ultimately he ends up butting heads with president trump if he's in a position to have to steward the fed to raise rates maybe more often than what is built into expectations, if that causes volatility in the stock market, what is the reaction by president trump. that might be an interesting factor in 2018

>> austin, a lot has been made about the commonalities between jay powell and janet yellen. where are some of the divergences here we should be looking for? >> well, we don't totally know i would say that one of the most important differences thus far that i see is powell's really quite actively trying to depoliticize the fed and in a way, he can do that in a style that a democrat could not, because the partisanization of everything, not just the data, not just appointments. it has spread to the fed when janet yellen was there, she became an issue in the presidential campaign in 2016. powell's actively kind of giving not no answer, but we're back to the central banker's mumble. just trying to take the political focus off, and i actually think that's quite healthy at a moment like this,

that the markets will probably react positively that. >> the plplitatization of the fs done by then-candidate donald trump, correct >> thas my point i'm a huge -- i'm a huge fan of janet yellen, and she's an old friend what i'm saying is, because janet yellen was a democrat, it became a political issue in a way that if powell becomes the chairman, he will be able, i think, to say look, i want nothing to do with politics. if they press him on the tax cut, he's going to, in my estimation, not say a single thing. he's going to say look, it's congress' job to work on fiscal policy and the fed just looks at the economy. he's going to say nothing. and i think a lot of people are going to express some relief that the fed is not a political target, and he's actively trying to get out of the headlines.

>> liz ann, in your view, do you think he can say nothing if he's asked a question in the scope of what does this due to inflation and the fed's path for monetary policy >> i am guessing he does not veer off the playbook of janet yellen and how she has approached commentary and questions about inflation, which is maybe to talk about some of the transitory factors and some of the secular reasons why inflation is low, but i'm guessing you're not going to see much different from him at this stage in the game on even questions relating to one or both of their mandates >> we take you now to the committee and chairman mike crapo of idaho >> do you agree to appear and testify before any dually constituted committee of the senate thank you. you may be seated. your written statement will be made a part of the record in its entirety, and i invite you to

introduce your family in advance of making your statement governor powell, you may proceed. >> thank you, chairman crapo, and ranking member brown, and i will begin as you suggest by introducing my wife alyssa, without whose loving support and wise counsel, someone else would be sitting here. i'll also introduce two of my five siblings here today my sister libby and my sister monica the other three siblings are here in spirit, and all will later claim to have watched this hearing live which i'm sure will be true. we'll deem it true some stories are too good to fact check so thank you again, chairman crapo and ranking member brown, and other members of the committee, for expeditiously scheduling this hearing and providing me the opportunity to appear before you today. i would also like to express my gratitude to president trump for the confidence he's shown by

nominating me to serve as chairman of the board of governors at the federal reserve system federal reserve has had a productive relationship with this committee over the years, and if you and your colleagues see fit to confirm me, i look forward to working closely with you in the years ahead as you know, i have served as a member of the board of governors and the fomc for more than five years, contributing to our work in a variety of capacities, including most recently as chairman of the board's committee on supervision and regulation my views on a wide range of monetary policy and regulatory issues are on the public record, in speeches and testimonies during my service at the fed congress established the federal reserve more than a century ago to provide a safer and more flexible monetary and financial system in almost exactly four years ago, you assigned us the dual monetary policy goals of maximum employment, meaning that people who want work either have a job or are likely to find one fairly

quickly. and price stability. meaning that inflation is low and stable enough tat it need not figure into households and businesses' economic decisions i have had the great privilege of serving under chairman bernanke and chair yellen, and like them, i will do everything in my power to achieve those goals while preserving the federal reserve's independent and nonpartisan status that is so vital to their pursuit. in our democracy, transparency and accountability must accompany that independence. we're transparent and accountable in many ways among them, we affirm our numerical inflation objective annually, and we publish our economic and interest rate projections quarterly. since 2011, the chairman has conducted regular news conferences to explain the fomc's thinking. additionally, we're accountable to the people's representatives through twice a year reports and testimony, as well as through oversight and audited financial statements i'm strongly committed to that framework of transparency and

accountability and to continuing to look for ways to enhance it in addition, in our federated system, members of the washington based board of governors participate in fomc meetings with the presence of the 12 federal reserve banks which are deeply rooted in their local communities. and i am a strong supporter of this institutional structure, which helps insure a diversity of perspectives on monetary policy and also helped sustain the public support for the federal reserve as an institution. if confirmed, i would strive along with my colleagues to support the economy's continued progress toward full recovery. our aim is to sustain a strong jobs market with inflation moving gradually up toward our target we expect the interest rates to rise somewhat further and the size of our balance sheet to gradually shrink however, while we endeavor to make the path of policy as predictable as possible, the future cannot be known with certainty. so we must retain the flexibility to adjust our policies in response to economic developments

above all, even as we draw on the lessons of the past, we must be prepared to respond decisively and with appropriate force to new and unexpected threats to our nation's financial stability and economic prosperity the original motivation for the founding of the federal reserve. as a regulator and supervisor of banking institutions in collaboration with other federal and state agencies, we must help insure our financial system remains both stable and efficient. our system is far stronger and more resilient than it was a decade ago with higher levels of capital and liquid assets, and with greater ability on the part of the banks to manage risks even as we have worked to implement improvements, we have sought to tailor regulation and improvement to the size and risk profile of banks, particularly community institutions we tiwill continue to consider regulatory burdens while the core reforms of strong capital

liquidity, stress testing and resolution planning so banks can provide credit to families and businesses necessary to sustain a prosperous economy in doing so, we must be clear and transparent about the principles that are driving our decisions and about the expectations we have for the institutions that we regulate. to conclude, inside the federal reserve, we understand that our decisions in all these areas matter for american families and communities. i am committed to making decisions objectively and based on the best available evidence in doing so, i would be guided solely by our mandate from congress and with the long-run interest of the american public. thank you, and i'll be happy to respond to your questions. >> thank you, governor powell. the fed recently began the process of shrinking its balance sheet, which currently sits about $4 trillion. in a speech earlier this year, you cited long run estimates of the appropriate size of the balance sheet as about $2.4 trillion to $2.9 trillion by

2022 will you clarify what you do believe is an appropriate stable size for the fed's balance sheet and what factors you expect to focus on in determining the pace and the ultimate scope of the balance sheet reduction? >> i will, senator so the fed's balance sheet is about $4.5 trillion now. and we know it will be much smaller than that when it reaches its new sort of equilibrium size it will be larger, however, than it was before the crisis and we have also said that it will consist primarily, mostly, of treasury securities at that time it will be no larger than it needs to be for us to conduct monetary policy. we will be shrinking the balance sheet by allowing securities as they mature to roll off passively. and that process should take three or four years before we reach our new sort of stable level of the balance sheet and the factors that will

determine that will be really in the end the public's demand for our liability, particularly cash and reserves those will be principle factors that will decide what the final size of the balance sheet will be we don't actually know what that demand will be, but my own thinking, it moves us to a balance sheet in the range of, as i mentioned, $2.5 to $3 trillion there's no certainty in that >> all right, thank you very much and the last time you appears before the committee, you stated it is very important that the intensity of regulation be tailored appropriately for the risks that the institutions present. there's bipartisan support to tailor existing regulations and laws to insure that they are proportional and appropriate are there any specific areas that you think could benefit most from tailoring? >> yes first, let me say that tailoring of regulation is one of our most fundamental principles we want regulation to be the

most intense, the most stringent for the very largest, most complex institutions, and we want it to decrease in intensity and stringency as we move down through the regional banks and the community banks. so this is something that we strive to achieve. we're taking a fresh look at that right now and i would just point out a couple of areas. i think certainly capital, we require the largest banks, higher capital and we have less stringent requirements as we move down, and more simple capital requi requirements as well i would also point out something like the volcker rule where really it can apply in its strongest form to the banks that have very large trading books and much less stringently, we believe, as we go to the smaller banks. in fact, i saw that your proposed bill exempts banks under $10 billion in assets from the volcker rule, which is something that we have been in favor of >> thank you and actually, my next question is on that bill. as you just pointed out, two weeks ago, 20 u.s. senators

introduced the economic growth regulatory relief and consumer protection act and i'm not going to ask you to get into the business of the politics of that act here with us but i do want to know, do you believe, if you had a chance to review it, do you believe that that act, if enacted into law, will provide significant regulatory relief to community banks, mid-sized banks and regional banks, while still giving the federal reserve the authority it needs to supervise and regulate those institutions? >> i do. on both counts, senator, i do. >> thank you and lastly, for me, housing reform after our economic growth mark-up next week, housing fnls reform will be one of my top priorities for the remainder of this congress. earlier this year, you gave a speech in which you outlined a few principles for housing finance reform, and in your words, do whatever we can to make the possibility of future housing bailouts as remote as possible change the system to attract large amounts of private

capital, number three, any guarantee should be explicit and transparent and should apply to securities, not to institutions. and number four, identify and build upon areas of bipartisan agreement. i strongly agree with these points that you make and believe that there is bipartisan support to seek a solution in that zone. would you commit to work with the committee on our efforts to pass housing finance reform? >> yes, i will, senator. >> i guess i'll just take my last 15 seconds to ask you one final question on that and i believe housing reform is one of the most significant issues we need to make next. that's why i said i would prioritize it. how would you rank housing fnls reform in terms of the importance we move to it and get a result >> i think it's a highly important piece of unfinished business from the financial crisis and i think there have been a lot of great proposals, and think this at a time when the economy is healthy, this is a great time to move forward i look forward to working with you on it. i thank you.

senator brown. >> thank you, mr. chairman in 2013, you stated that the fed was created as an independent agency of broad consensus has emerged among policymakers and others around the world that, and most important part of the quote, that better economic performance is achieved when it's free from political control. what will you do if confirmedt insure that the fed maintains its independence from outside political influence, especially influence from the white house and be as specific as you can. >> senator, i'm strongly committed to an independent federal reserve. and i would add nothing in my conversations with anyone in the administration has given me any ke concern on that front. i would plan if confirmed to follow in the footsteps of distinguished prior chairs and of our long tradition, really, to assure that we do conduct monetary policy and financial regulatory policy, by the way,

without a view to political outcomes but with a view solely to the right answers >> thank you the senate this week will vote on a tax bill that will reduce federal revenues substantially over the next ten years when the country fell into the great recession a decade ago, the fed had to resort to extraordinary measures in part because of the tepid fiscal stimulus provided by congress. nine years later, amidst one of the longest recoveries on recover, some of my colleagues think now is the time for a $1.5 trillion in attempted stimulus what does the fed anticipate will be the impact on gdp growth in the next decade if the tax cuts are enacted along the lines of the bill before senate? >> senator, we don't have an estimate of that and i would say these fiscal policies are important matters for you and your elected colleagues to -- >> well, with all due respect, governor, the fed's projection for long-term gdp growth is

1.8% that's the stated federal projection over the next three years. i have to assume that with the staff, the highly skilled, not tiny staff that the fed has, that you have done modeling on all kinds of different ways, different legislation, different ideas coming out of the house and senate you have an fomc meeting coming up in maybe two weeks. are you telling me the fed has not modeled any of this, any of the tax bill in these kinds of tax cuts and what it will do to economic growth? >> so senator, of course, we're monitoring these discussions, but it remains unclear exactly what will pass and so it's really in my view, it's been very difficult or impossible for us to start - >> you know, governor, that the overall arching theme of this is $1.5 trillion in tax cuts that it will cause greater economic -- it will cause a larger deficit you know that people on this side of the aisle claim, as they

always do every time there's a tax bill, that we'll grow out of that don't you have a responsibility in an ongoing sort of way to talk to us about the modeling you have done, what this will mean to the fiscal situation of our country in the years ahead >> i think the responsibility is to carry out the mandate that you have given us, which is to achieve stable prices and maximum employment and look after the financial -- >> of course, we rely on you for data all the time. >> i respectfully, senator, i don't think you rely on us to score fiscal proposals that's not really our role, and i don't have a forecast for you on that today. >> okay. we've discussed the need for an independent fed. do you believe it's important for the other independent financial regulatory agencies to be free from administration pressure the independent agencies to be free from administration pressure >> i think it's good for all supervisory regulatory agencies

to operate doing the best that they can with their mandates, and not to look at the politics of things. >> i can't tell if that's a yes or no. >> i wouldn't want to hypothetically sort of agree with your hypothetical that there's political pressure >> i'm not saying -- i'm not asking that. i'm asking, should regulators at the various independent agencies be free from administration pressure should they be free from independent pressure i'm not asking you if they are >> certainly, on individual enforcement and matters like that, i think the administration is well within its rights to express its views on different regulatory matters but as it relates to supervision of individual institutions, absolute lay >> is independence well served by the appointment of an interim able aenls head who holds another full-time position who reports directly to the president and the president's chief of staff >> senator, i have to say that's

not my -- that's not something that's in my bailey wick to deal with >> you have no opinion of that >> not today, no >> okay, tomorrow? i'm concerned as i think we all are about the administration's attempt to push out a full-time independent director at the cfpb in favor of a part-time political appointee with a history of attacking the bureau. i'm concerned about that attitude infecting other independent agencies i'm concerned about the tradition or the potential -- the way that the president could look at this and begin to do this in other places a nonconfirmed appointment like he's doing to the -- trying to do, the judge will decide, to the cfpb, and i'm concerned, too, mr. chairman, one of the first things that mr. mulvaney did as quote/unquote acting director, was to stop payments to consumers, to service

members, to veterans payments where they were wronged, civil penalties payments that they were wronged by banks and that they need to be made whole, and this director stopped it that kind of political interference, i bring that up, one, because a lot of us in this country are very unhappy with what happened. second, i bring it up as a warning to all of us that independent agencies meet independent agencies where i watched your career. you have followed things -- you have done things with integrity, but i do worry about white house pressure and a white house we have never seen the likes of in terms of not understanding the nment judiciary and the unless of the fbi and the unless of cfpb and the independence of the job you'll have at the federal reserve. >> thank you i did give the ranking member a little attitude on the clock i'm going to encourage the rest of my colleagues to please recognize the clock. senator rounds >> thank you, mr. chairman mr. powell, first of all, congratulations on your

nomination i think the first time you and i met was when you were visiting scholar at the bipartisan policy center here in washington. and i most certainly appreciated your thoughts and commonsense approach to not only federal policy with regards to the budget, but i was very, very happy to see when you had been appointed as a member of the federal reserve as one of the governors. i think the fact that you have worked with chairman yellen and that you have worked through issues with her, i think that speaks in terms of how you would handle a board and in terms of how you would approach policy. i'm curious. i was listening to your comments with regard to that which senator crapo was visiting with you on and one of the most common criticisms that i have heard about our government's current regulatory structure is that financial regulations aren't written according to the risks

that they're meant to mitigate treasury secretary mnuchin talked at length about his -- about this during his confirmation hearing saying that bank regulations should be tailored to activity, not just to the size of the institution many of the recommendations in the treasury report on depository institutions that was released in june discussed this issue with respect to a number of regulations earlier this year, i was able to once again reintroduce the tailor act, which would require federal regulators to more precisely tailor the regulations they issue based on the risk profile of the institutions that they're writing regulations for. in response to chairman crapo, you agreed that tailoring regulations is important can you elaborate on this view as it applies to asset thresholds and should we have asset thresholds to begin with >> so the decision over whether to have a numerical threshold or not is clearly one for congress. and congress has tended to -- it

provides clarity, of course. numerical threshold makes it clear who isn't covered above a certain level. and that's nice. if you go entirely with the discretionary approach, then you're leaving the regulators a lot of room to decide things congress has generally come down and done both. i think maybe both are appropriate. i do think, fundamentally, size is only one indicator. and i think it's healthy, one indicator of the riskiness of a firm and of its possibility of its damaging the financial system through its failure, through its activities so the business model really matters. and all sorts of things matter i think we have a set of factors that we look at, and i think it's healthy to look at those, too. we have said that we're willing to work with you on numerical thresholds, on discretionary application of enhanced standards, for example, and we'll work with you on any of

those combinations >> sure that you're aware as the chairman has indicated a number of my colleagues on both sides of the aisle and on and off of the banking committee have recently come to an agreement on a regulatory relief package that would right size regulations for smaller financial institutions and improve our financial regulatory framework i'm pleased to see we were able to reach agreement on a number of priorities that i had, such as the data reporting relief, the right sizing of the enhanced supplemental leverage ratio, reformed the way municipal debt is treated, and relief from some of the most arduous supervisory standards in dodd/frank. from what you know about the agreement, and i understand that you had a chance to cursory look through it, governor powell, are there any additional reforms you would recommend the committee include in this agreement or in future legislation did we miss some things that were obvious and once again, this was a

bipartisan plan, and that's exactly what we want it to be. it's a first step for us but are there some things we should be addressing that we haven't really looked at >> senator, we did get the text of the bill, i guess, just before the thanksgiving break. and we have all looked at it quickly. we have agreed to come back to the committee with our technical thoughts, and policy thoughts as well i will just say in response to your question, we will be happy to do that i think generally we look at the framework as a workable one, as a sensible one, so we'll try to come back with very constructive thoughts on how to bring it forward. >> very good i look forward to supporting your nomination, sir >> thank you, senator. >> thank you thank you, mr. chairman. >> thank you, senator rounds senator reed >> thank you very much, mr. chairman thank you, governor powell, for your service as you mentioned in your introductory statement, you have a dual mandate one is maximum employment, but

right now, we seem to be doing fairly well. your comments on where we are with respect to maximum employment >> maximum employment is indeed our statutory goal and i guess the thing i would say at the beginning is it's kind of an imprecise thing you can't look at one particular measure of what that is. so we look at a range of things. i think, for example, 4.1% unemployment is at or around or even below many estimates of the natural rate of unemployment that's one data point. there are other dimensions, though for example, labor force participation really matters in particularly, labor force participation by prime age workers, particularly prime age males. and that is the one measure i think that stands out now as suggesting there may be more slack, more people that can come back to work a wide range of other indicators suggest that we're at or near or in the neighborhood of full employment we really can't be more precise

than that. the other was wages. we look at wages wages in one sense are at appropriate levels given low productivity and low inflation but at the same time, we don't see wages signaling any tightening, any tightness in the labor market there's no sense of an overheating economy or a particularly tight labor market. so that's what i would say about maximum employment >> i think those are insightful comments, but it raises dilemma for monetary policy and fiscal policy that is, as you point out, we have this large number of people who seem to be out of labor force, but years ago would be in the labor force. we have a group of part-time workers who would like to be full-time workers and wages seem to be not rising at all. and what can we do i don't think we can claim victory as you suggest on unemployment, but we have to take steps, both monetary and fiscal steps any suggestions? >> senator, i would say that really the steps that can be taken are steps for congress and

not so much for us we can manage demand through a business cycle and we can try to achieve our goal of maximum employment, but these are very long-running trends for example, among prime age males, participation in the labor force by prime age males has been declining for 60 years kind of thing, so, and you know, the opioid crisis plays a role, it's making it worse these are issues we don't really have the tools to deal with. >> you don't have to respond to this, but i think we have identified some significant problems that affect every household in this country, and the tax bill that's before the senate doesn't respond, in my view, to any of those problems of how to raise wages directly, how to get people back in the workforce. oh, by the way, how to prepare for a future in which artificial intelligence, autonomous vehicles, are going to be more and more competing with human beings for work.

so we got a lot of work to do. let me ask another question. could you explain why you think the liquidation authority is so crucial and why it must be retained >> sure. so my view is that bankruptcy should be the preferred option for the failure of institutions, including very large financial institutions we have made tremendous progress on that through multiple submissions of living wills and such much more progress than frankly i anticipated we could however, there may come a time when bankruptcy is not going to work in a very stressful situation that really threatens the economic health of the country, just like happened in 2007, 2008, and 2009 in that case, we really will need a backup in the form of something like orderly liquidation authority. isn't a perfect law or a perfect structure, but we need something like that as a backup which we can guarantee will be there for, you know, really emergency

situations where bankruptcy isn't going to work. >> thank you let me make two quick points because my time is expiring. first of ll, we talked about this i spent a lot of time, in fact, i was aided by one of your key staff members who worked for senator gregg at the time, in trying to develop the platform for derivatives, and as you widely pointed out, we have taken bilateral risk and made it mutual risk, but we still have the problem with those platforms. i would hope that in your tenure, you would look carefully at this potential for systemic risk as you indicated before it's critical. final point, which i think unfortunately defines too much of what we do around here today. cybersecurity is an issue that is not going away. it's going to be even more dramatic in your tenure. chairman clayton of the s.e.c. has pointed out in his testimony, this is something we've got to get on. i sincerely believe we're way behind and the federal reserve has to

take a very proactive position with respect to cybersecurity. if you can in a very few seconds comment upon your view of cybersecurity. >> well, i agree with everything you said it's just a very, very important, maybe the single most important risk that our financial institutions, our economy, our government institutions face. we're very focused on providing the resources to deal with it and to make sure that the financial institutions we regulate and supervise address it there could never be any sense of, you know, mission accomplished there it's just one of those things we're always going to be feeling like we're doing as much as we can but it's not enough. we're very committed, both as it relates to the federal reserve as an institution and as to the institutions we supervise. >> thank you >> thank you, senator reed senator kennedy. >> i've read those media

accounts, too, that in the past year, you have met with 50 wall street executives. how many community bankers did you meet with in that time >> i don't have a number for you, senator, but it would certainly be in the 100s, if you consider the state delegations and the other meetings that we've had. >> what did the community banks do wrong, contribute to the meltdown in 2008 >> fair to say that the community banks did not contribute to the meltdown in 2008 >> okay. then why is the governor as you repeatedly voted to punish them and regulate them half to death? >> i guess i would quibble with that characterization of my votes and of the things we have done i like to think i have been, and frank lee, my colleagues as well on the board, have been very focused on avoiding excessive regulations for communities banks. i chaired the subcommittee of

the board that its sole job was to make sure that the regulations that we put in place for the larger institutions do not apply to the smaller banks i understand that this is never a battle that you win. you just have to fight it every day. we do fight it, and we're committed to doing better. >> i mean no disrespect, governor, in saying this, but you need to fight harder i think you have been in 44 fed meetings you have not dissented one time. and the community banks in america have had to pay the price. with the overregulation and i don't understand, given your public statements that you want to help our community banks, i believe you i think you're sincere, but you have supported regulating them half to death over the past five years. >> senator, i think we're well

set up to make progress on that. i hope you'll hold us accountable for that >> do we still have banks that are too big to fail? >> i think we have made a great deal of progress on that as i mentioned earlier, i think if you think about where we were before the financial crisis, where really no one had thought, oh, what would happen if there's a run on one of these big money center banks, and really the regulators had no practical choice but to keep them from failing because they would have brought down the whole financial system with them you start from that place, in less than ten years ago, and you look at where we are now so we now have living wills. we have the banks that - >> please forgive me for interrupting, but we're limited strictly to five minutes and i understand what we have done but i want to ask you again, do we still have banks that are too

big to fail in america >> yeah, i would say no to that. >> okay. >> i want to ask you about in 1991, governor, you were working for the treasury department. and by the way, while we're on that subject, what role was secretary mnuchin have in making your -- helping you make decisions if you're confirmed? >> he would have no role in that >> none? >> i don't believe so, no. >> zero. >> i can't think of any. >> nada? all right, in 1991, while working at treasury, you helped -- you dealt with the collapse of the bank of new england. you prevented a bank run you decided to guarantee all deposits how many of the bankers went to jail >> i -- there was some jail going. i can't put a number on it for

you. >> okay. and in that same year, while you were at treasury, there was an auction rate bond big bid ridding scandal. you remember that? >> very well i do indeed. >> i do too. maybe some do, too maybe some other time we can talk about what an option rate bond is, but you were in charge of dealing with the scandal by solomon brothers, and you did iron out an agreement that penalized the bank but what about the people who did it did anybody go to jail >> indeed they did indeed they did. >> okay, that's good to here how many >> again, i'm not sure i know maybe just one, but it might have been more than one. for sure, though, one in particular did jail time over that >> isn't it true that throughout this entire auction rate bid

rigging process, which cost taxpayers in this country billions of dollars and states, that less than five people who participated in these bid -- this bid rigging went to jail? >> i'm not sure what scandal you're referring to now. the solomon scandal was something quite different than that i'm not actually sure which -- >> do you know -- >> i do. okay, the -- okay. honestly -- >> i'm over. i want to try to stickto my time forgive me for being so direct, but this is, obviously, an important job. >> thank you, senator. >> thank you, mr. chairman >> thank you, senator kennedy. senator menendez >> thank you, mr. chairman governor, congratulations on your nomination. in a speech that you gave in june, you noted that the average hourly wages are rising only about 2.5% per year, slower than before the crisis.

and while the nation has experienced the longest post-war economic expansion on record, corporations have raked in record profits, many families in new jersey and throughout the country are still waiting for a raise. some claim that if we give corporations a massive tax cut, families will see their wages rise by an outstanding $9,000. now, i haven't seen any evidence that that's credible in fact, a 2016 federal reserve board study found there is no evidence that corporate tax cuts boost economic growth, unless they are implemented in mid recession. so in reality, what this comes down to is hard working families already squeezed with rising housing, medical, and education costs, whose paychecks will now have to foot the bill for a bad deal so my question is, assuming that there is a plan in which families making less than $75,000 a year would collectively lose more than $59 billion in household income, an

income loss that would be as high as $1,350 per year for certain households, explain to us the potential negative economic impacts of such an outcome for middle class families >> well, senator, i guess i would start by saying that part of the deal when you're an economist at the federal reserve board isyou have time to do your own research, and i think the paper you're referring to, if it's the one i'm thinking of, was the research of three or four individuals, and it doesn't represent a position of the board. it's just someone's research, and so i wouldn't -- don't associate that with a, you know, position of the board. more broadly, you know, as i discussed earlier, we don't have a model of the affect of these tax bills. that's just not something that we do. we will incorporate when it's done fiscal changes that are made there will be one of -- >> let me refine my question it's not a trick question.

so what i'm asking very simply is, do you think it's good or bad for the economy, if middle class families were to lose $59 billion in household income year after year >> well, that i think is an easy one. yes, i think it would be bad >> all right now, what also do you view are the economic risks both at a household in macro level if we would add an additional $1.5 trillion in debt >> again, without commenting on any particular bill, like all of us i'm concerned about the sustainability of our fiscal path in the long run, and it's something that needs to be attended to over time. very concerned about that. >> but it would be a negative consequence to further add to the debt, which already exists >> i think we need to be concerned with fiscal sustainability over the long term >> now, in a speech you gave in june, you said with regards to monetary policy, and i quote, "the problems some commentators have predicted have not come to

pass accommodative policy did not generate high inflation or expensive credit growth, rather it helped restore full employment and return inflation closer to the 2% goal. that's not a study, that's your comments >> that's right. >> so can you explain how in your view the fed's monetary policy stands over the last five years help contribute to economic expansion, and how will this inform your approach to monetary policy decisions going forward? >> yes, thank you, senator so, you know, i think the fed remained committed after the financial crisis to provide significant accommodation to the economy as it recovered. when i joined in 2012, which is about five years ago, i think unemployment was still above 8%, and i think we've, you know, we've been patient in removing accommodation. and i think that patience has served us well i think now the economy's strong, unemployment is low, growth is strong in fact, it appears to have

picked up, and so it's time for us to be normalizing interest rates and the size of the balance sheet, as well so i think -- but i do think that policy we've had in place has generally served us well >> okay. >> served the country well, rather >> let me ask you this, finally. as you know, health care accounts for nearly 20% of u.s. gdp, including not only the delivery of life-saving, life-enhancing health services, but also fuelling patient care, diagnostic, preventive health, earlier this year i asked chair yellen about the impacts both at a household and macro level of the spike in the number of uninsured americans and she said large scale loss of access to health insurance could have a significant impact on household spending for goods and services, as well as impact job mobility do you agree with her assessment >> i think she was referring to some research, and if chair yellen was referring to research, we can be pretty confident she was accurately

reflecting what that research is sounds right to me >> thank you very much >> thank you, senator heller >> thank you thank you for being here appreciate you taking time glad to have your family here also welcome them also. you're about to become the most important economic policy maker in the world how do you feel about that >> i feel fine about it. senator. >> i'm glad to hear that historically, i did not support your nomination in a 2012, nor in 2014. worried about the wall street bailouts, concerns about new bailouts and new regulations, but what i'm trying to do, and as we talked personally, is try to figure out how to get yes on your nomination this time, and i'll continue to look for that, but i do have some questions for you. you talked a lot in your opening statement about clarity and transparency with the feds the question i have is, do you

continue to oppose the fed legislation? >> i do. and i'll tell you why. so, the fed, of course, is audited, and i was -- in fact, i chaired the committees of the board that oversee the audit of the reserve banks and the audit of the board of governors, so we are audited in the sense in which, you know, the general public would understand that word it means something very different in the current context, and in this context what it means is congress has chosen to shield monetary policy from a policy audit by the general accounting office, general accountability office we call it now, and that is in, i think, a wise choice that's been made as a way of showing respect for the independence of monetary policy i think a gao audit at the request of any member of congress would be a way for congress to insert itself into the making of monetary policy on a meeting by meeting basis this is not something i think

would serve us well. >> do you still largely support the dodd/frank reforms >> that's a big, broad bill. that's 1,000 pages of bill there. i guess i would say that, you know, if you look at -- let me broaden it out, if i may, senator, to the post crisis reform program, which is broader than just dodd/frank it talks about basel, as well. the things we've done, higher liquidity, stress testing, resolution, i think those are important pillars of reform. we can make them more transparent, more efficient, and that sort of thing i think other things, we can do more tailoring, and that's really what we're involved in right now. generally speaking, i think the financial system is quite strong >> you said on october 5th that more regulations is not the best answer to every problem. do you continue to believe is that, and if that's the case, would you work with us to consider changes in dodd/frank >> i do strongly believe that, and we'll work with you as appropriate. >> going back to what the ranking member was talking about on gdp, what do you anticipate the gdp being next year?

>> next year -- >> got to make a decision whether or not to raise rates, don't you? i'm assuming that you have some forecast of gdp over the next three years. >> i do, i do. i would say -- let me say this year i expect gdp to come around 2.5%, in that range, plus or minus. as you look forward, i would expect something pretty close to that, and the reason is, we see -- we continue to see, you know, high confidence among businesses and households, accommodated financial conditions, stock market is strong it feels like we're going to see continued strength next year >> i want to continue to push on this tax bill that we have here. i'm assuming you're going to tell me the board doesn't have a position on the tax bill >> yes, i am >> how about personally, do you have a personal opinion on the tax bill >> no, senator, i don't. >> let me ask you this question, are you going to raise rates in december and next year >> you know, i've made it