world that has a separate vote over whether to pay bills that we've already agreed to incur. and i think the united states has never defaulted on a principle or interest payment and never should and i think doing so would be, you know, something i'd really hate to see and could bring very significant consequences >> well, i appreciate your articulating that. you also said raising the ceiling is only the first step the job that must be attacked is deficit reduction and addressing the cost associated with mandatory spending and we heard a similar thing from chairman greenspan -- >> we've been listening to jerome powell speak in front of the house services committee you can see the markets fallen from session highs dow was up 90 and down 73 as yields ticked higher following the comments that his own

outlook for the economy is strengthened since december. greater confidence that inflation will rise. additional headlines, mike and morgan, about nbs, the agree to which they were a success says the new normal for a balance sheet to be around $2.5 to $3 trillion >> and the emphasis by powell on the strength of the economy, the tail winds, the fact that perhaps the low inflation is transitory that was a take away too >> in response to representative maloney, she asked if we're on pace for three rate hikes? he said we'll see over the next couple weeks what is submitted in terms of projections. but since the last round, you see continuing strength in labor market stronger economy, signs that inflation could be moving closer to target. more stimulative physical policy that's really when you saw markets begin to move lower. >> let's bring in our senior economics reporter steve liesman who can help us understand what this may mean for the march meeting as we watch the odds

closely today, steve. >> good point. the ten year definitely did spike on a comment win i went back and looked at the comment and when the ten year spiked at 10:40, he is talking about a variety of things. he said little chance of recession. he said tax cuts could lead to higher productivity and that could raise wages and greater confidence inflation is coming back you're right to point to the march meeting. i'm not sure he is teeing up any kind of change here. does he say that fed officials will come back and look again at their outlook as they do every press conference meeting for the year he seemed to still be on track for three rate hikes with the possibility of a fourth kind of hanging over it that he will respond he did actually say in response to a question that, yes, fiscal policy does have an influence on rates. and that -- i mean he wouldn't call it profligate as the congressman wanted him to but does say it has an influence on rates. they'll take that into account as well. that word overheating is the one

that kind of looms over the whole testimony today. that's a new word introduced by the new fed chairman >> steve, he also said that in the past the fed had to raise rates quickly ahead of recessions to combat inflation and that was not necessarily in his view the situation now >> right >> there is always the risk of recession. it's not seen as high. >> right so if overheating was the new word, further gradual rate hikes is the old phrase. he's adopted that wholesale. en that is the outlook of fed chairman j. powell of how he feels rates can rise you know, i've heard this phrase i think it was from isi. he said three plus three is the outlook, three rate hikes this year, three next year. i continue to say that the bigger question is 2019, guys. i think this year is pretty well set. i mean i guess there is some odds of that fourth rate hike this year. but more likely it's the idea that 2019 could see little more

action especially as we start to understand how the tax cuts affect the economy >> ten year, 291 let's get back to the fed chair with congressman meeks >> but i believe that in looking at cra, you sh yould take in consideration racial z discrimination and i'm asking you, sir, what is your position on that? >> you know, i haven't taken a position on that i want to see the overall work that comes out of this and evaluate it on that basis. i may well come to the view that you v but i really haven't thought carefully enough about it >> i just want to remind you, sir, that the cra was congress' response to widespread racial discrimination and in the form of red lining. that is one of the primary reasons of the implementation of cra. if you are even thinking about stripping out practice and patterns of discrimination, you're thereby gutting the

reason congress did cra in the first place. >> it seems to me that should not even be a part of the dialogue in fact, as was given to me by the ranking member, we have an article lending discrimination red lining still plaguing st. louis that all the new data shows. and we can go from city to city across america so i have real concerns about your answer just now because to even think about removing that from the cra as much as i am a advocate of renewing because i think that, you know, you look at where we are now and how banking has done and financial services are renlder services are renlderdered is completely different the essence of it is to stop red lining and racial discrimination >> let me say that we take a very serious view of any kind of

racial discrimination in lending and we look at it through a variety of our consume area fares tools and something we take very seriously. >> now i also -- let me ask this question i will have some further -- i would like to follow up with you on this matter particularly. but let me ask you this. we talk about the tax cuts how much of corporate tax savings do you think will actually go toward wages as opposed to stock buybacks? capital investments and mergers? i say this because i want to just let you know even before you answer, morgan stanley announced and estimated that 43% of corporate tax savings will go to buybacks and dividends which enriches just the top 1% of those major investors, 19% would go toward mergers and acquisitions 17% would go toward investments and only the crumbs, 13%, will go to one time bonuses and scant

raises in fact, there's nine pharmaceutical companies that have already announced over $50 billion in buybacks since the tax law was passed so how much of this taxes will go into salaries and wages or how much of it will really help the income disparity to increase and grow wider >> you know, we have particular responsibilities, maximum employment, stable prices. dwoen we don't have estimates of those kind of things there are many other estimates out there. honestly, with he don't have a fed estimate for what that number would be. >> time of the gentleman has expired. the chair now recognizes the gentleman from minnesota >> thank you, chair. thank you, chair powell, for being here good to see you again. i want to go back to something that i think was touched on when you began your testimony this morning. during your confirmation hearing

you spoke about the importance of tailoring regulations to fit the specific scope and practices of a financial institution i think your quote was actually even as we have worked to implement improvements to the banking system, financial system, we have also sought to tailor regulation, supervision to the size and risk profile of banks, particularly community institutions i just want to make sure that your view on continuing to tailor regulations to the specific institution has remained the same. you're still committed to doing that zbl >> very much so. it's at the heart of what we're doing which is to focus on smaller institutions and without losing in i safety and soundness, make sure that our regulations no more burdensome than it needs to be and work our way up >> you would agree that we need everyone in the financial services food chain all the way from the largest banks in the

world to the small family community banks on main streets all across this country? >> indeed. you know, small businesses create a lot of the jobs and small banks have a disproportionate share of small business lending the bigs lend to the small businesses but we, you know, we really want that credit to flow. and we don't want regulation to inappropriately create too much burden >> right earlier this month secretary testified before this committee and he expressed his commitment to working with congress to make changes in statute to the way regulators tailor regulations based on the size and complexity of a financial institution would you also support this type of legislative effort where necessary to put these tailored regulations in statute >> yes, we would and we have so, of course, the devil's in the details. but as a general matter, i think

we could see some law changes that would enable us to better and further tailor regulation to a smaller and medium size institutions >> i want to move on to another topic and continuing the discussion on importance of getting our regulations right to benefit main street and rural america. minnesota six congressional district which i represent is home to some of the finest and most productive farmers and manufacturers in the world many of these same individuals and businesses who are making such a positive economic impact in my district are inadvertently harmed by the current formulation of the supplemental leverage ratio that fails to recognize the exposure reducing nature of initial client margin. this bank capital rule is increasing clearance costs for farmers and manufacturers making it more expensive for them to use the cleared derivatives market i hope that as you and your colleagues at the fed review the

slr, you come to the same conclusion that a coalition of republican and democrat members on this committee have that we must recognize the exposure reducing nature of initial client margin in a revised bank capital rule will you kplit tcommit to workih us and our ag committee that want to have constituents 5:00 sets to the cleared derivatives markets? >> yes, we will. we think we need a high and hard backstop to risk base capital and we think that current calibration of the enhanced supplemental leverage ratio is not appropriate. we're looking for a recalibration that would address that exact concern >> thank you i want to move on to one other topic before my time runs out. page 1 and 5 of your monetary policy report dated february 23rd, refers to the labor market there's a couple of specific entries with respect to numbers

of people that are unemployment rate is at 4.1%. it's essentially full employment but i believe it's on page 5 where it references the percentage of -- i'm going to add able-bodied working age adults that are actually in the workforce. there's about 62%. this is still abnormally low don't you have any concern about that number? well, why don't i add this you talk about retirements being part of this the babyboomers level taving th labor force. but doesn't this also have something to do with the disincentives created by our welfare system in terms of giving people an opportunity to get back into the job market >> time of the gentleman has expired. a very brief answer from the witness, please. >> we focus on labor force participation all the time it's a really important thing. and certainly worthy of a longer discussion which i'd be

delighted to have with you >> we'll do that >> time of the gentleman has expired. the chair recognizes the gentleman from massachusetts >> thank you, mr. chairman thank you, mr. powell, for being here welcome. some of my colleagues have talked about how we are where we are, the economy is getting better we all agree with. that we'll disagree on why and how. i personally think that a lot of the goods we're seeing today is a result of the actions we took several years ago to stabilize, secure, and improve the economy. it is now working its way through the system but i'll leave that debate for another day. i also want to associate myself with the comments made by mr. meeks. i would encourage you as well to keep a close eye on the cra. i also want to take that and expand it a little bit, just a little bit more. i presume that the fed would not be interested in a economy that just worked for wall street and did not work for main street i assume that the fed would not be interested in a economy that just worked for texas and didn't work for new york. therefore, i presume that the

fed has some degree of interest in not in perfect equity but at least some equitial distribution of the benefits of a good economy. is that a fair assumption or am i completely off >> well, i would say i think we want prosperity to be high and broadly spread we don't actually have a lot of tools for distributional tools >> i understand. >> there are much more things that congress has. >> i respect that you have limited tools for alots of things. that sun wf the things a good economy for three people doesn't help for the 300 some-odd million people that live here. you are familiar with the new relatively new british law that has just been enacted and just being imposed that requires companies of over 250 employees to report income and wages on the basis of gender? are you familiar with that at all? >> i'm not >> the first company to do that report was barclay's

one of the largest banks in the world. and that report per sunlt ursuao british law shows that women earned 26% less than men and received bonuses 60% lower than men. i know some of the reasons might have reasons as to who owns what position but it certainly goes towards the idea of equitable distribution of the benefits of the economy. are you familiar with a rule that was proposed by the equal employment opportunity commission in 2016 that was supposed to go into effect in march that would have required simil similar reporting by american companies over 100 employees not just in the basis of gender but also on the basis of race and ethnicity? >> no, sir >> okay. fair enough. the reason you're not familiar with it is because the trump administration stopped it. it was proposed in 2016, companies were given two years to work their way in but as of last august, the trump administration said, no, we don't want to know how you pay

women. how you pay people with racial groups or ethnicity groups we don't care about that now i personally think that's horrendous i would actually say that, again, if you're interested in an economy that has some agree of equitiability, you need statistics you need numbers ashgs anecdotal numbers are good for commentary but don't address the problems something like that that is new to britain, doesn't seem to have impacted barclay's in any any particularly bad way but provides us the information we have to go forward to argue for pay equity across the board. now i'm a white male but i'm not interested in my success being at the expense of people who are not white male. and i would ask is the fed interested at all? would you be interested in pursuing something you oversee 7,000 entities some of them large, some small most of them pretty large.

would you be interested in pursuing some degree of not intrusive but some degree of investigation as to how they pay their employees if it's equitable or not >> first, again, i'm not at all familiar with either of the british bill or the eeoc proposed rule that was -- i'm not familiar with either of those. and these are the kind of things that congress should consider. you know, we have a job, we have a really important job to do that you assigned us to do and for now, we're going to stick to that and try to achieve -- >> i respect that. i want you to stick to that but as we talked about earlier, some degree of equitable distribution of the benefits of a good economy is your job not perfect equity or every aspect, but the one aspect that you can control, don't you think it's a fair thing to ask how they pay their women, how they pay their african-americans, how they pay the hispanics, if it's based on fairness or based on some degree of discrimination?

you don't think that's a fair thing for you to ask >> i don't think it's a question for the fed. i mean i think it's a question for other agencies and for really -- >> you think it will be -- >> boy, that's a great answer. i you think we'll hear more about this >> the chair recognizes the gentleman from north carolina. >> thank you, mr. chairman thank you, chairman powell, for coming before the committee. congratulations on your confirmation we look forward to working with you. chairman powell, it's my understanding that fed has been actively involved in developing a potentiality earntive to libor and secured overnight funding rate has there been a robust cost benefit analysis conducted by the fed regarding the potential economic impact to consumers and commercial borrowers relate irto switching from libor to sulfur >> well, i would say -- let me say that the situation with libor is such that the financial conduct authority in london has said that they will no longer

compel banks to submit their submissions to, you know, the libor panel after the end of four years and at that time the fca can no longer guarantee the continuation of libor. now if libor were to stop being published then, there are 300 plus trillion dollars of libor backs in the world that is a stability problem. so solving it is a very high priority for us and i think for financial regulators aren't world. there will be costs to doing so. but they would be trivial in comparison to the failure to be ready for this change should it be necessary >> what type of borrowing kofco do you project for businesses as a result of the impact of this change >> so we're actually seeking a lot of input from businesses that will be subject to this at the moment

but honestly, though, the cost of failure to act would be potentially quite high >> yes, sir. >> since rates go the opposite direction to libor during market stress, do you anticipate any new systemic risks that arise in the banking sector from shifting to sulfur? >> do you expect any systemic risk in moving in the banking sector shifting to the sofur >> yes, i do i think systemic risk would be decreased. libor spreads blew out during the crisis i think a risk free rate which is really used to price the vast derivative markets and not so much the bank lending markets. it's really much more in a derivative space now would be important to have -- it will be an improvement this perspective to have sofur over libor. >> when it was selected through the process of the alternative

reference rates committee in '14, were community banks and regional banks a part of that process? >> some of the regional banks were i mean it's principally affecting the derivatives business, at least in the first instance so we had a lot of different groups around the table. and at this point we're very much broadening that circle to include other financial institutions including community banks and other parts of the financial system >> do you anticipate any potential cost of relative to the community banks in this shift? >> i don't think -- there shouldn't be meaningful costs and i'd like to know if there are. >> if banks do continue to participate in the libor panel, would you encourage multiple rate approach that was driven by market choice? >> yes >> or would you support libor for banking lending through -- for sofor for derivatives?

>> yes, sir. we've always said that if people want to keep using libor, that's fine as long as it's continuing to be published. we're preparing for the risk that it wouldn't be push lishno. we have to be ready in case that happens. >> on another subject, what do you anticipate will be the any change that's you'll bring to the fed relative to transparency in the fed >> well, i think, you know, we're committed to being as trans parent as we possibly can about monetary policy and about regulation i think if i remember what it was like back when i was an undersecretary of the treasury in the 1990s, the fed didn't even publish a post meeting statement. and now you look at the massive number of things we publish. we're much more transparent. i think we can continue on that path we're never done with. that in regulation, i think it's very important that we be -- that we be transparent in fact, we're working across a broad range of issues there including i would point out stress testing we have a package of

transparency regulations and in general, i think this is appropriate for us to always be working on that. and it's just -- >> one last quick question i have 50% fewer banks in north carolina today than we had in 2010 do you foresee fed policies that would enhance and assist community banks in particular? >> time of the gentleman has kpird. a very brief answer from the witness, please. >> it's a long running trend and we don't like to see it. we don't want to make it any worse of i'd be happy to continue this with you >> thank you >> the time of the gentleman of north carolina has expired the chair recognizes the gentleman from missouri, mr. clay >> thank you, chairman for holding this hearing and that you recollect, chairman paul, for your testimony today chairman powell, do you agree that the u.s. housing is in a recovery mode as far as

transactions and housing market in general is healthy? >> yes, sir. it's been a gradual recovery but on going >> along those lines, i want to pick up where mr. meeks questioned you i share with your staff a recent article from my hometown newspaper about black home buyers continuing to be denied conventional mortgage loans at a much higher rate than whites even when controlling for income, loan amount, and neighborhood and as you -- in the st. louis metropolitan area, african-americans who apply for conventional mortgages are 2.5 times more likely to be denied than nonhispanic whites. and that's according to two years of recent data

and as you know, where there is loan activity, houses have a chance to sell where houses sell, people move in where bpeople move in, restaurants, community centers and grocery stores are built and none are very little of that is happening in low to moderate income neighborhoods in st. louis or elsewhere in this country. so my question is what can the federal reserve do to ensure that applicants for home mortgages are treated equally and the bad actors who steer and red line communities of color are eliminated from this process or change their policies and you give me any direction in that area? >> i'd be glad to, sir first of all, racial discrimination in mortgage lending and in any kind of lending is completely

unacceptable and wherever we have authority, we'll use it to stop that from happening and punish it when it does happen. we have some authority here. the cfpb has quite a lot of authority in this area as well but where we have it for the banks that we supervise, we supervise carefully and aggressively to try toind foo the probsz and address them. >> and as you know, the fair housing act of 1968, a law that's been on the books for 50 years, pro hebthibited the prac of steering and red lining i share with you this article because i want you to -- a more extensive response from you on of what action we can take against bad actors like u.s. bank who is cited in that article. the fifth largest financial institution in this country who have denied mortgages across the

board in the community that i represent. and that stymies economic activity it doesn't help it so i would love to collaborate with your office on how we stop these policies and practices that aren't discriminatory let me ask you hopefully you will be willing to work with me on that >> yes, sir. >> while trpresident trump trie to take credit for december unemployment numbers showing african unemployment at the lowest recorded level, this too is part of a long term trend that started under the obama administration which african-american unemployment has steadily declined for the past seven years in addition, racial disparities continue to persist.

with the unemployment rate for whites at 3.5%, unemployment for african-americans is at 7.7% with the african-american unemployment more than twice as high as white unemployment, clearly more progress is needed. share with us your vision for the fair attacking persistent unemployment among african-americans. >> what we can do on that front, sir, is we can take seriously our obligation to pursue maximum employment and we understand fully that while the national unemployment rate is low and while in many regions the unemployment is actually even lower than 4.1%, you made a lot of congressmen and senators that come from places where, you know, where unemployment is in the twos >> i'd like to explore that with you. >> time of the gentleman has expired. the chair now recognizes the gentleman from oklahoma, mr.

lucas. >> thank you, mr. chairman and chairman powell, thank you for being here and before i ask general question and a broader question, i do note that i think you're my fourth chairman to be able to visit with in this environment since i've been a member of this committee. and i'd like to discuss an issue with you today that you and i have already discussed and my good colleague subcommittee chairman has a bill regarding and that's the supplemental leverage ratio clearing margin and i know that blaine's bill has strong bipartisan support from the committee and the ag committee and it would offset those margin amounts for purposes of slr because margin is the a risk management tool and legally must be kept from a bank's own funds the fed can affect this change of that legislation, however, and your predecessor showed a willingness to look at the issue. i was hoping you might be willing to consider that situation, that sort of a fix yourself

>> thank you so we're taking a careful look at the enhanced supplemental leverage ratio and i think our view is that leverage ratio is very important requirement for banks but it should be a backstop, a high and hard backstop to risk-based capital and i think that the enhancement to the supplemental leverage ratio that we put into place in i guess 2013 in that range went a little too far and it unfortunately seems to be deterring some low risk wholesale type activities that we really want financial institutions to engage in and one of those is client clearing. and particularly not counting margin i think our way of addressing that is going to be, i think, to lower the calibration of the enhancement to the supplemental leverage ratio and that does seem to get done what needs doing there >> clearly, something needs to

be addressed now let me ask a more broader question i represent the northwest half of the great state of oklahoma it is ag and energy and main street business. so we're a economy driven economy. the price of commodities is reflection of both supply and demand and while supply is not an issue for the fed to be concerned about, i represent industries where technology advancement has been used amazingly and very successfully whether it's precision agriculture and increasing the output of our farms and ranches with fewer inputs or on the energy side of the equation. 3-d and horizontal drilling, the most amazing technological advances of the last ten years that's increased supply. but my producers see since 2014 that whether it's oil and gas or wle wheat and cat that will prices are half what they were in 2014. let's discuss for just a moment

expand on your comments early better where you think the fed projections would have economic growth and demand in the year or two or three down the road in the united states. because we've got a supply equation that's our challenge but if demand picks up, life gets better economically at home >> that's typically the case as you know i haven't updated my own projections. i'll just say generally that it does feel to me that we're -- the next couple of years look quite strong and you should see strong demand from consumers you should see businesses investing. i would expect the next two years on the current path to be, you know, to be a good year for the economy. and labor markets continue to improve and inflation moving up to 2%. i would think thafr should create a good environment for people in your district who are in the commodities business as well >> the old adage about the rising tide raises all ships thank you, mr. chairman.

>> thank you >> would the gentleman yield to the chairman >> of course, mr. chairman >> in the minute and a half that he had remaining, i had a question, chairman powell, dealing back on the interest on excess reserves. i asked your predecessor this question and the answer was not clear to me. i think as you know, under statute that the rate must be -- and i'm trying to find the exact language -- cannot be above the usual level of short term market interest rates and, yet, we know that the fed has been paying a price over the

fed funds rate and paying over libor and certainly i think it's currently paying 150 basis points yet our constituents typically receive about 10basi points on their savings account. and so i'm just curious on what does the phrase above the usual level of short term market interest rates mean? in your 2012 rulemaking that implemented ioer, it allowed you -- it allowed the rate to get pegged to your primary credit rate but that's an administered rate which means you can set it where you want to set it so legally is there any cap to the interest rates you can pay in ioer? you could pay 300 basis points 400? 500? >> i think as you suggested, we're not permitted under the law to pay above the -- i think the language is general level of short term interest rates. that's something like that

so i would look at that and i would see commercial repair, money market funds, things like that and less than a year. i think where they set is the whole idea of oier is to use the tool to move the interest rates around and they tend to be highly -- >> but you're paying 150 basis points and our constituents are getting 10 basis points. >> retail deposits, as you know, are sticky on the way up and they generally come up with a lag. >> time of the gentleman has expired. the chair now recognizes the gentleman from massachusetts, mr. lynch. >> thank you, mr. chairman thank you, mr. chairman. thank you for your attendance. appreciate that. a couple weeks ago there was a story in "the wall street journal" around etfs and i want to get your thoughts on this the particular story noted that shares of everything from manufacturers to banks to oil production companies are all

rebounding together after tumbling in unison earlier in the month. the article noted that one factor contributing to the close correlation among the s&p's barous sectors is driven by the growing popularity of exchange traded funds i know that the etfs uche lyn vest in wide sprawaths of the market when that is all correlated, it can sometimes increase the volatility at least that's what the data would suggest. does the fed think there is risk associated with the complex etfs and is the fed concerned about that >> that's an interesting question i saw that article o of course, we looked after the volatility came and thun subsided we looked carefully to try to understand what did happen it seems the markets were orderly through almost all of

that time. and etfs are particular form of fund and i don't think they were particularly at the heart of what went on on those days but it's something we're talking to our fellow agencies it's a question that we're looking into >> okay. thank you. on a completely different topic, in your remarks you talked about the historically low unemployment rate among people of color but again you acknowledge that the rate of unemployment for people of color is much higher than -- and for white workers. given the fact that participation rate is fairly constant, does the fed have any suggestions to the trump administration about if the wind

is at our backs now and putting more people to work, how do we kplo close that gap how do we get more people of color into the workforce so that, again, we close that gap >> as i mentioned, mr. lynch, our part of it is to take seriously our obligation to achieve maximum employment i think we're doing that we don't have tools that are good at addressing these kind of disparities and those -- >> i'm not asking you to do it i'm asking you to suggest recommendations to the white house. they have the power to do it they have the tools to do it >> right you know, i wouldn't want to, you know, presume to recommend policies that are away from our general mandate but i'll justcy say generally -- >> let's say we're trying to reduce unemployment. that's part of your -- >> i think the constructive thing in this area is really to focus on -- and it's a long run problem bushgts to focus on education and training we want everyone to have opportunity. we want this to be a society where everyone has opportunities

to succeed and part of that is reaching people through the educational system and i would point new that direction >> very good thank you, mr. chairman. i yield back >> the chair now recognizes the chairman from illinois >> thank you for your work thank you for being with us today. on june 22 nnd, 2017, you testified before the senate banking committee and said "we believe the leveraged ratio is an important backstop to the risk based capital framework but that it is important to get the relative calibrations of the leverage ratio and the risk based capital requirements right. doing so is krit come to mitigating preverse incentives and in safe asset markets. change as long the lines could address concerns of customer bank that's the business model is disproportion nally affected by the ratio.

>> i worked with members on this legislation passed out of the committee 60-0 that would provide relief from the supplementary leverage ratio for institutions predominantly in the business of providing custody services the treasury department's june 2017 report recommends changes to the supplementary leverage ratio for cash on department with central banks which is in line with legislation reported by the committee i wonder, do you support the treasury's department's recommendation and how will you work with the occ and fdic to make the changes >> i agree with you, sir, that the leverage ratio can deter banks and -- from engaging in low risk wholesale activities, particularly the custody banks and so we looked carefully for some time now at how to provide relief our preference is recalibrate the ratio. and the custody bank was feel

significant relief because they have the smallest surcharges so that is our preferred way to do that. >> following up on that, as you know, with the considered changes to the leverage ratio, they only cover the g sibs do you believe the leverage ratios are only necessary for the g sibs or would you support changes to the larger supplementary leverage ratio >> the regular supplementary leverage ratio based on my conversations with financial institutions including the custody banks is not particularly binding for them. so our plan is to roll that back. >> one last thing. cbo recently provided a cost estimate for the implement of hr 2121

they rely on input from the executive branch i wonder if can you commit to sharing the correspondence with my staff and with the committee of determination of costs for implementation of 2121. would you be willing to work with us on that. >> i have to look into how we would do that. >> that's great. and my concern for this is that the bank and regulators are only looking for providing relief to the g sibz they're subject to the enhanced slr and the less large banks are subject to slr northern trust is important in chicago. amazing institution, 120 some years, more than that, that they've been around. but they're not a g sib. and thus not subject to the eslrs, however, they're subject to binding capital constraints it is a concern of mine. moving on, similar to my question regarding adjusting to basul leverage ratios, i want t

talk about the cleared options that they report on capital markets notes the current exposure method model for example requires options, contractses to sized in their face value rather than allowing for a risk adjustment to reflect the actual exposure associated with the derivatives, especially cme does not permit delta adjustment for the notional value measurementes. it also notes the cme may be responsible for kponcorrespondin a bank's willingness to access for the makers and clients and the liquidity providers in the markets. i understand this concern was realized by some market makers during some of the volatility incurred by markets in recent months i wonder if you agree with the treasury report's recommendation, specifically do you believe there slu be a risk adjusted approach for valuing options for purpose of the capital rules to better reflect the composure such as weighting

options by their delta >> i believe there is an alternative, more risk sensitive approach that we're moving to in that area. but i want to check back with our experts and i'll follow up with you. >> that will be great if you can let us know that my time is up. but thank you again. i appreciate your willing willio work us with. >> the chair recognizes the gentleman from georgia mr. scott. >> thank you very much, mr. chairman welcome, chairman powell what's disturbing me and what's remarkable and i think down right disturbing to me are the policies coming out of this trump administration in three specific areas that you as the chairman of the fed are chief economic balancing officer, shall we say, has direct input on and did you know, for example, there's three areas

particularly first the tax cuts of the president. are you aware that 83% of the president's tax cuts go to benefit just 1% of the american families that's not fair. at all if we go to his budget cuts, you know who is impacted the most because of his budget cuts it's the african-american community. and let me go to his draconian, terrible proposals to cut $17.2 billion away from food stamp recipients and then if that's not mean and ugly enough, they want to turn out and now stop food stamp

recipients from even being able to go into the grocery stores and buy groceries. just like you and i. this is mean, man. and i -- i want you -- you seem like a very reasonable person. tax cuts going to 1% the wealthiest people. and then on the same token they want to send food. we can do without a lot of things but not food. they want to send food in boxes, canned food, dried milk, powder milk to the poor people in this country. now, mr. chairman, you got to do omission of inflation, unemployment on top of that. they are crushing the most

primary group that's being crushed are african-americans and people of color. and i'm here to tell you we are going to stand up and fight this administration and i want to ask you to get on our side,ed side the side of te american people because it is clear to me that this president trump is not on the side of the american people. you tell me get 83% of the benefits of the tax cuts to the 1% the wealthiest and then turn around, cutting $17.2 billion out of the thing we need the most, food for the poorest people and then on top of that, shipping their food in boxes to

sit on their porch dried milk for their babies. you tell me, mr. chairman, is this the way you think about america? >> thank you, sir. i can only say these are very important issues i take it to heart but these are not issues that we have authority over or -- >> now, i was waiting on you to say that, mr. chairman there's nobody better suited you are the chairman of the federal reserve. do you know when you sneeze, wall street crumbles that's why i'm pointing this to you, mr. powell. i looked at your background. you are well prepared for this your experience as i have read

it shows that you have a deep compassion for people. all i'm asking you to do is to every once in a while, if you can say hold on, mr. president, this isn't right to be shipping the food to the poorest people in this country and denying them a right to go in the grocery store just like me and you buy food it's not >> time of the gentleman expired. the chair now recognizes the gentleman from pennsylvania. >> thank you, mr. chairman welcome, chairman. good to you have here. the fed supervises several insurance companies that own thrifts. and insurance company that has been designated as a nonbank, congress has taken a strong interest in ensuring that fed supervision reflects the business of insurance and the privacy of staple regulation of insurance. most notably congress passed legislation in 2014 to ensure that capital rules for insurance

companies are tailored to the business of insurance. we appreciate all your work on this rule. separate from the pending capital rule, i believe there that more could be done to ensure that on the ground supervision of insurance companies is proportionalpropore risk these companies pose in terms of safety and soundness and also reflect the existing system of state supervision. what are you doing to ensure this and what more could the federal reserve do here? >> thank you, sir. thanks for your comments so we do i think from the beginning, we've as i think you see, we've tried hard to look at insurance as a new area for us where we need to develop expertise. where it's different from banking and needs to reflect the risks of the insurance business. we've tried to be open we'll continue to do that. in developing our capital requirement. we've tried to reflect that. i think we're very open to the views of experienced insurance regulators

some of whom we've hired and people from the industry >> by my count, there were four vacancies on the board of governors. how do these vacancies impact the ability of the fed to fulfill its mission? >> glad you mentioned that we could really use more faces on the hall. i don't think we've been down to three governors. certainly not for an extended period before. so i'm eager to have more colleagues i wear a lot of hats before i took over my current role so i've handed those out to my two colleagues so we're quite eager to have more people on board we don't necessarily need all seven immediately, but would love to get there. >> we've talked about your backgrounds. i'd like to talk about diversity of experiences professor charles kalamera wants to bring people with diverseness to the table when discussing monetary policy.

he describes the culture of the federal reserve system as academic dominated while academics need an important voice in these debates, i can also see how a nonacademic prak tigs ner perspective can be helpful can your expertise support more monetary and regulatory policy >> i strongly believe that i think we need great economists around the table and lots of them, but also people from other backgrounds. experience in business and from managing profit and non-profit institutions and from the financial markets. those people bring diverse perspectives and make our decisions better and discussions better >> as you may know, our national debt exceeds $20 trillion and continues to grow rapidly. at the same time, the fed has been engaged in a monitory policy experiment. some argued that the fed has

stepped beyond and ventured into credit policy. do you worry that unsustain bable public debts and the fed's engagement in policy may increase political pressures on the fed? >> well, it's a risk it's not a near term risk i would say. let's, i just would mention of course that we are now in the process of normalizing our balance sheet and shrinking it and so we're moving back to a more normal level balance sheet and i think we'll be there in three, four, five years. >> one thing that's puzzled me is that target 2% inflation rate as a layman and looking at this, and the suggestion seems that's benign you mentioned about 20 years if you have 100 bucks 20 years ago and 2% every year, the purchasing power went down can you educate us about this 2%

target because my count, $10020 years ago at 2%, it might cost about 150 bucks today. >> so this was a big debate which was settled around 2% as opposed to zero for central banks to aim at. it's now become a global standard around the world. central banks are aiming at 2% the reason why that was pickeded over is is that it gives us more room to cut real interest rates. if the interest rate, if inflation is zero, then interest rates would be in the one, two, three range and when a recession coming, we would have little to cut. so having 2% inflation kind of we think oils is wheels of the economy and gives central banks more ammunition. it would be hard for any bank to diverge from it. >> you bet >> gentlemen yields back the chair now recognizes gentleman from texas

mr. green, the ranking member of our oversight subcommittee >> thank you, mr. chairman thank the ranking member also would like to thank the persons who are here who call themselves full employment defenders. welcome. mr. chairman, what do you consider full employment i have the number 5.5%, but if you differ, i'd like to hear your number, please. >> you know, so if i had the to make an estimate, i'd say it's in the low fours that means it could be five and three and a half >> take the low fours or throw and a half when is the last time that african-american unemployment was in the low fours or three and a half >> i don't think it ever has been in the years we've been measuring it >> quite frankly, not since slavery. that's the last time there was full employment for black people mr. chairman, 6.8% seems to be

the lowest number that i can find since we've been keeping numbers. and for the last 47 of the last 54 years, it's always been twice that of white unemployment twice. do you agree >> do i agree? >> you agree it's a lack of unemployment is generally speaking twice that of white unemployment >> i think that's what the numbers would support. >> as the chairman, do you ag e agree? >> yes >> thank you >> statement >> thank you, it's a true statement. mr. chairman, do you also agree that discrimination still exists in the united states of america? >> i would >> do you agree that when we've had an opportunity to test banks, we have found that nvidia's discrimination exists in lending >> yes >> do you agree testing is an efblgtive means by which we can

acquire evidence necessary to show that discrimination exists? >> i do believe it is used in that way, yes. >> then mr. chairman, would you support legislation to help us acquire the imperical evidence to show that this exists so that we can do something about it you see, we now know the facts the question is, what are we going to do about it your charge is the promotion of full employment. i take that to mean full employment not just for white people i take that to mean for everyone and at some point, black unemployment has to be addressed because it is chronically twice that of white people. and we have to use terms like black people and white people. to make the point. and we also have to ask that our friends on the other side join black people in doing something about this mr. chairman, that which we will tolerate, we will not change

we have learned to tolerate african-american unemployment being twice that of white unemployment i refuse to tolerate it. that's why i use language that is clear and concise there is no question about what i say. the question is what are beweather going to do about it we know that discrimination exists in banking in terms of lending and in other areas of the economy as it relates to african-americans. the question is what will we do about it and by the way, i'm not assigning all of the responsibility to you. that's why i mentioned my friends on the other side and my friends on this side i'm a liberated democrat democrats and republicans have to do more about black unemployment and unfortunately, when a black person challenges the system such as i do, it becomes playing

the race card. so let me say today that i'm playing the race card. because we have for too long, allowed this condition to exist. so mr. chairman, i'm going to send you letter and in the letter, i will request that you explain the role that covert and overt unemployment plays in this issue of black unemployment being twice that of whites i will ask you to identify the primary factors that limit african-american's access to employment opportunities in sectors that are protected from cyclical downturns in the economy and i'm going to ask you, if allowed, would testing provide beneficial empirical data i'd ask you to put that in writing, mr. chairman.

i respect you and i ask you be of service to all americans. not just white americans i yield back >> we recognize mr. tipton from colorado >> thank you for taking the time to be here one of the big challenges i think we've faced is the policies in the previous administration had yielded a lethargic growth that impacted communities across the country. we're now seeing policies step into place that are getting the economy moving, create iing job opportunities. putting resources back into the pockets of the individuals who actually earn it and creating that opportunity for people to be able to increase their prospects for their families, for their xhubts as well which i applaud, but want to make sure they are applied across the board in the country as well. to each community. i'd like