>> on student loan debt, i think it's important that people be able to borrow to make what may be the most important investment of their lives which is in their education. so overall, i think borrowing to invest in yourself is something we should foster subject to a couple of important caveats. first, it's very important that people understand the nature of the borrowing and the risk that they're taking and the possible payoffs and that sort of thing so they make informed decisions. the second thing is -- fed chair powell testifying in front of the senate banking committee at the top of the hour welcome back to squawk on the stre street markets have been around the block here as we were watching the fed chair's testimony on capitol hill had a bit of an uptick when he said that although wages are trending up, there is nothing to suggest wage inflation is at an acceleration point went on to say there is no evidence the economy is currently overheating. and that he wouldn't single out

the tax bill as a factor affecting the fed's desire to raise rates. but since then, lost some of the gains. session high about 152 or so on the dow. and the session low about 150 or so as well that's the one part of the story. the other big one is regarding tariffs. the president is now expected to hold a listening session with sfeel a steel and aluminum executives. we look forward to hearing some of that. legality's bring in steve liesman for a quick recap on where powell has taken us, steve. >> well, a little bit more dovish flight path today, carl yesterday he used the term overheating. he said it a little bit. today he made a strong point at the very beginning of the q&a session to say i'm not suggesting the economy is overheating. also, he suggested there is room for the job market or unemployment rate to go lower without causing inflation. and wouldn't say specifically as you said of the top there that there was any particular way that they could characterize how

much the tax cuts would prompt the fed to change rates. did he say a little bit, he gave an interesting discussion of inflation and all the reasons why it may have been too low suggesting that it may be back on the track of going towards 2% as the fed wants to. but he also said that the balance of low inflation and low wages makes sure we don't run too far past the natural rate of unemployment that is a warning from yesterday. i don't see any particular reason for the market to have reversed course from the happier times a few hours ago except for that's what the market's been doing these days >> yeah. and, steve, you know all this is also weighed against the fact we have a very hot ism number at 10:00 a.m. the two year treasury yield up is slightly from that moment so who knows how the market is kind of ingesting all this >> it's the second one in a row we had a hot ism last month. and in terms of the prices paid component as well. and the philly fed was also as was the empire state the prices paid component but we're not seeing it

strongly, mike, show up in at least the overall year over year rate of pce inflation. there are a bunch of economists looking at that three month average and seeing it above 2% and the fed, by the way, the yellen fed, also looked at it that way i'll be interested to see if powell likes that number which would be reason for more concern here that the three month average annualized inflation is 2% or above. >> all right steve, thank you for thafrmet. we'll continue to let you put the testimony into context the then there is the tariff story this one truly has developed >> yeah, carl. that's right this one is developing all morning. here's where we are. the event we were expecting to happen at 11:00 is happening at 11:00-ish. i just spotted the treasury secretary walking into the we have wing. so presumably they're getting ready for this meeting if it's not happening already. what is not going happen though

is an announcement of new tariffs that had been expected on steel and aluminum. that was on the schedule as of this morning i was told that. and then i was told it was not on the schedule jaej moanymore. this is a listening session. i just got a list of the ceos that will be notice cabinet room u.s. steel, news corp, century aluminum, tinkin steel and a number of other industry players who will be here for what is being discussed with what is being called a listening session. i'm told that the administration still is trending toward a new tariff announcement but that tariff announcement is not ready to be made today despite enormous speculation scrambling behind the scenes and that this reflects a policy disagreement and intense policy disagreement behind the scenes among some of the president's closest economic advisors we're told the event is on

it's going to be a listening session. some of the biggest ceos in the space will be here but no new announcement, carl >> is it simple as cohen versus in a rar y navarra? >> that is the headline bout but behind that, you've got the treasury secretary and you've got the trade team here at the white house. we've also got the chief of staff john kelly who has been weighing in on this along with a host of others here at the white house. so it is a bigger fight than just the two men that you mentioned. but they are sort of emblematic of the protectionists versus globalists tensions. you see the president's inclination in a feisty tweet from the president about steel and aluminum and how the united states is getting hammered by overseas competition and yet he's also sensitive to the argument that some of the tariffs can work against stock prices and the president's been very proud of the stock performance,

stock market performance over the course of his tenure in the white house. so those two tensions are sort of what is hanging in the balance here and this meeting is a jump ball starting from yesterday afternoon, last night and now we're told it's not going to be including any kind of new announcement >> all right thank you very much. and actually the market is trying to sort all these things out. take a look at some of the steel stocks he mentioned some of the companies that will be represented in this meeting. they're actually off their highs. he had started out with a big pop. right around the time that we were reporting that there wouldn't be a new announcement you look at the likes of u.s. steel, ak steel and the rest they are up on the day with the exception of arcclormittal they're not pricing any imminent but something that might ham down the road for a pricing umbrella of sorts if we get these tariffs. >> it's been a similar story for the aluminum stocks of u.s. based producers today as well. you saw it with century

aluminum, u.s. steel also a similar story. these are companies that basically said they're going to rehire workers and refire up some of the production capacity in the u.s. depending on what happens with these tariff talks. definitely something to closely watch there. i'd note that another group that is exposed to all this are the transports transports are up today. they're being led higher right now by names like ups, csx, union pacific. csx has investor day going on right now. they put out some of the financial targets this morning the street seems to like those we also have the exclusive first time -- sitting down for a broadcast interview with csx ceo jim foot later today on closing bell in terms of ups, that stock is trading higher there are rumors and speculation that's berkshire hathaway is building its stake in this company right now. ups is not commenting on that. it's just speculation. it seems to be driving the stock. >> all right our thanks to you. we'll be watching your beat

pretty closely let's get back to the hill and the chair. >> the ri >> i understand the rational behind creating this risk-blind rule but the question i have is ultimately, i have a hard time understanding why assets like treasury securities and funds on the positive federal reserve are also in that calculation can you defend that and answer the question if you are reviewing that practice? >> sure. so my view is that the binding requirement should be the risk base capital requirement and that takes into account treasuries and reserves and how risky they are the issue is that over time banks figured out a way to gain the risk capital we want a hard backstop should be high and hard we don't want the leverage ratio to be the binding constraint most of the time because that, frankly, encourages people to take more risk if you're bound by the leverage ratio, it is really saying you

could probably use riskier assets so we like leverage, particularly risk based capital has been vastly improved since the crisis so that's how we think about it. >> so how would you view right now in the few seconds we got left just very quickly what is your view of the general health of the entire banking industry in the united states the capital formation arm of our economic effort and a free enterprise system. what is your assessment of the health of that industry today? >> i think our banking system is quite healthy. i think we have high capital, high liquidity we have banks that are much more aware of and capable of managing the risks that they face they're much more ready to face failure if they do because they have living wills. and i think we're seeing profitability. we're seeing returns on capital. and i think it's a good time in our system >> right thank you, sir >> senator >> thank you thank you, ranking member and chair for this committee and welcome, chairman powell good to see you again.

so i want to follow up on conversation that you had with one of my colleagues, senator shelby, on the policy effectiveness and asset unit that you have created. can you speak to how many people will work in the unit and how the importance of data will inform the decisions you make? >> i think it's five or six people now i don't know how big it will be. it's going to be something in that range maybe a little bigger. but the idea is that we'll have, you know, a strong quantitative approach that is fightly focused on cost benefit analysis we already do cost benefit analysis in everything we do but we hear outside that there's interest in doing more of that and actively pursuing it >> and the reason why you're doing this is so that it can inform your enforcement and policy decisions, correct? >> well, yes and the calibration of our

regulations. we want to be able to implement regulations in the least burdensome way we can. >> and the data is key for your ability to do, so correct? >> very much so. >> i'm glad to hear you speak about the importance of data collection i always support that. the legislation we are talking about would exempt institutions from full reporting of loan data under the home mortgage disclosure act can you speak to how this might impact the abiflt tlity of the federal reserve to conduct the operations under the community reinvestment act and whether the loss of this data might behinder cra soupervisory exams >> as i understand it, they write the rules and regulations.

we use that data in what we do it is a smaller group. in addition to that, we -- sorry, lost any train of thought. what dodd-frank is took data collection and significantly increased that what is being looked at in the bill is to create a broader exemption from the dodd-frank additions. i think we traditionally get almost everything we need from the historical data. i think we continue to work on that basis >> that's my point the more data the better data is key to your decision making and my understanding is that the data that is used in this cra supervisory exams seems to exclude relevant data points

small business loans, even if they were not loans administered to small businesses, there is no analysis made whatsoever of whether lending is occurring in communities of color despite easing accessible data vee yaiae home mortgage act. have you considered broadening that criteria in the supervisory exams and what factors would be helpful in determining small businesses, communities of color and low income areas are truly receiving the support that the law intended >> are we still talking about humda data >> correct >> again, humda data is for the cfpb they were given authority under dodd-frank to write the humda regulations. we defer to them in terms of what their view is on that >> so you don't think that data is going to be informative in what you do with the community investment reinvestment act and the oversight of that to ensure

that act is being enforced under the law to protect communities of color to make slur theure there is no discrimination and make sure that loans are being sent to small businesses and the money gets to where it needs to go that data is not helpful for you? >> i don't say it wouldn't be helpful. first of all, that's an issue that the cfpb has the lead authority on in addition, we will still have -- my understanding is we'll still have under this bill the information that we traditionally relied upon and everything we do under humda we don't have the additional data from some institutions. but we think we'll be able to function >> i don't have time to answer -- ask the questions that i want to ask you. let me just say this as a former attorney general in the state of nevada, my concern was discrimination against certain communities of color ensure that money is going to

where it was going to be going under the act in federal authorities. and so i don't understand while we're rolling back that data and those data criteria, if we need -- if you said it yourself, to be better informed, you're creating a data unit for analytical purposes to create and collect dat yachlt a. it informs us in everything we do how with he can say we don't want the data whether we know it informs every decision that we're making particularly to ensure the money is going where it's going and there is no discrimination >> we've been talking about data let me take a step back and say that any kind of discrimination by race or gender or any other unfair basis in lending is completely unacceptable. and we are committed as an institution to finding it and using all of our tools to stop it >> thank you >> i know my time has run out. thank you very much.

>> senator kennedy >> thank you, mr. chairman good morning, mr. chairman >> good morning. >> do stock buybacks contribute to economic growth >> well, if i can trace that out, you buy back the stock, the money goes to the shareholder, they lose the stock date they can take that money and do with it what they will they can spend it. they can reinvest it it doesn't disappear there should be some effect. i asked this question. it's essentially impossible to really track that on a micro basis. but i would think intuitively it would go back in the economy and either be spent or reinvested. >> well, if a company buys back its stock and the value of the stock goes up, then somebody has extra money, right >> that's right. there will be a wealth infecteft >> and they kin vest that money?

>> they could. they could spend it, invest it and a wealth effect. >> and the stock going up is better than stock going down in terms of economic growth >> it is, although i'm a little his tanlt hesitant i want to say it's not our job, as you know, to stop people from losing money or making money in the stock market >> right the last 60 days, bonds markets have been going down a little bit. what's that telling you? >> well, i think longer term interest rates have been going up and, you know, there are many reasons behind that. and i would just offer a couple in my thinking it's the expectation of higher growth it's probably the expectation of inflation moving up a little bit closer to our target it's probably also a realization that growth around the world is quite strong so we've seen strong recovery in

couldn't nent continental europe and in asia so we're not the only game in town now there are other -- if money goes to other kinds of safe assets that will tend to mean higher rates here but these are all generally positive signs so -- >> could it be a sign of inflation? >> it could be inflation is below our target since i joined the fed six years ago. >> you talked about us being at or near full employment. we're not at or near the optimum labor participation rate are we? >> the truth is we're not far from the longer run trend. we have models that paper is published eight or ten years ago and pretty much tell that you the labor force participation rate is here labor force participation by prime age males has been declining for 60 years

we as a country -- we may be on our longer run trend, but the trend is not a great trend. >> the labor force participation rate in '08 was a tad over 66% today it's a tad over 62%. that's not good for the economy. right? >> it would be great to have labor force participation at a higher level as most advanced economy countries do our labor force participation rate is now, you know, not even at the median of comparably wealthy countries. >> why is that

>> it really is this trend of prime age workers leaving the labor force. a lot of them -- a lot of the burden has been born as senator cotton is pointing out by people with high school educations and below the lower less skilled and lower wage jobs. and it's been going on a long, long time. it's, as i said, a 60-year decline. >> but why in your opinion >> i think it has to -- it probably has to do with, you know, with the evolution of technology u.s. educational attainment went up for many, many years and flattening out in the '70s right about that time, u.s. wages flattened out and labor force participation starts to get weak so we kind of reached a point as a country where we couldn't increase educational attainment

and really many things started happening right about then the stagnation of median incomes, for example. >> if we can jack the rate up to pre-'08 levels, that would be an enormous stimulus. >> there is an underlying trend, too, of the aging of the population so older people -- even though older people work more thn they used to after the crisis, older people still work less than younger people so as the economy -- as the population ages, that's going -- that's why labor force participation goes down. >> thank you, mr. chairman thank you, mr. chairman. >> senator warren? >> thank you, mr. chairman it's good to see you again, chairman powell. as you know, a few weeks ago on chair yell en's last day in charge, the fed issued a con sent order against wells fargo pro hiblting them from growing any larger until they made certain improvements now the fed also effectively forced wells to remove an

additional four board members this year. i pushed the fed for real accountability on wells fargo and the board for repeatedly cheating its customers i was glad to see the fed take action i want to understand how the fed intends to enforce the consent order now that you're in charge. the fed requires wells to submit two plans for approval by early april. one on improving the effectiveness of the board and one on improving the board's risk management practices. this is not clear from the order. will the fed board of governors vote on whether to accept these plans? >> so we have delegated that approval to, i believe, to the head of supervision. but, of course -- force. >> to staff? >> but that will take place, i assure you, that will take place in serious consultation with the board. >> consultation but the board is not going to vote on this?

>> that's not the plan >> well, you know, i don't understand this. the fed has issued a major unprecedented consent order against one of the biggest banks in the world and the fed board, the people who are actually appointed by the president and confirmed by the senate aren't going to vote on whether the order is actually being followed >> well, of course, we did vote unanimously on -- >> no, it's whether or not the order is being followed. because that's the big question here you know, in my view, staff is not good enough, chairman powell fed board members are supposed to make the big decisions and fed board members are supposed to be accountable for the decisions. will you consider requiring a vote of the fed board before these plans are approved >> yes >> good. thank you. i appreciate it. the next step is that an independent third party must review wells implementation of

the plans by the end of september. will you commit to making that independent review public, redacting any information that is necessary i think the public deserves a chance to understand how wells is working to fix the mistakes that it has committed. >> i cannot make that commitment to you without discussing it with my colleagues and with staff who are implementing this thing. >> will you -- >>i'll look into it. >> will you urge your colleagues to consider making this public >> if it can be made public -- >> i'm fine about redacting sen sensitive information. the american puck lick hblic hat to see this and all the wells customers have a chance to see if they're following through on their promises you can see why some people might lack a little confidence

in that? >> if there's a way to do that, it is faithful to our obligations, then yes. >> good. lastly, the con sent order says that the growth restriction remains in effect until wells fargo "adopts and implements the plans that were approved by the fed. so i want to be really clear on this to lift the growth restriction, the fed needs to see that the plans have been fully implemented, right it's not enough that wells is taking some preliminary steps toward implementing the plans. is that right? >> no. i don't think that is right. i think the thought was that once -- we've approved the plans and began to implement them. we see them on track there is no guarantee there. we would then be prepared to look at it >> i'm actually -- then tell me, how much progress along that line is enough to remove the growth restriction

>> i think we'll be happy with the plan itself. we have to be assured that the company is made these really significant measures and suffered a, you know, a significant period of growth cap. that's our understanding >> the growth restriction is your really big stick here and i hope that you won't consider lifting it just because wells makes some marginal progress the consent order sent a powerful message to big bank that's there could be real consequences including consequences for senior officials if they break the law. that message will be lost if they don't show the public and the banking industry that they mean business. thank you. thank you, mr. chairman. >> senator tillis? >> thank you, mr. chairman

chairman powell, thank you welcome. congratulations on your confirmation can you just explain, because i was watching a lot of the hearing in my office before i came up here and you talked about global slack a couple times. can you explain to me what that really means >> the thought is it has become over the last 30, 40 years possible to make just about anything just about anywhere technology has enabled that and rising living standards and capabilities in emerging market countries has created that opportunity. the thought is that capacity outside the united states is in a sense a form of slack. so that if you're, for example, a worker bargaining for higher wages, you're held back by this overhang you know, you can -- you can lose your job and that kind of thing. the issue is that globalization,

most measures of globalization plateaued out at the time of the crisis and, yet, it doesn't -- that story makes a lot of intuitive sense. it doesn't link up very well with the path of wages over the past few years so it's something we looked at and gets written about a lot >> actually, i think that is a very important point there's a lot of latent productivity that could be globally deployed that as we talk about wages and we want to do a good job of moving wages in the right direction, they reach a certain point to where that capacity -- where we could plateau again because that capacity -- that capability to deliver could go outside of our jurisdiction i think that's a very important point. but productivity, a couple years ago i met with former chair greenspan. he was talking about the one thing he is most concerned with at this time was the kind of static growth and capital investment he was saying i helped the

percentage of gdp is around 8% and we were trending down in the 4% range do you view that as a key indicator? what if any trends are you seeing that give you some sense that we're getting to a healthy percentage of capital investment as a percentage of gdp >> so we don't know how to predict productivity growth very well but we do think it links up over time there is also investment in plant and equipment and r & d and that kind of thing and unfortunately, what the financial crisis did was generated very weak demand conditions for a long time and that created weak investment and that then furthers weak demand so it's kind of a bad self reinforcing cycle that we had there for a while. that's why it is so heartening to see investment, business investment moving up last year

and perhaps continuing a strong performance this year is our expectation. it is ultimately only productivity that raises living standards and investment is one of the keys. not just in vestment planning and equipment but certainly in the skills and aptitudes for people as well >> do you get a sense that what we've done with tax reform is a potential positive contributor to seeing that investment move up >> i do think it's a potential positive contributor in the sense that when you lower the corporate tax rate, you lower the user cost of capital, you know, like you, i spent a the love time working with private sector companies and that's one of the factors they consider it's not the only factor lower user cost of capital is something that should spur more investment over time and that should add to productivity i think it's there >> you and i talked about this once or twice in my office and in my remaining time, i'd like you to talk a little bit about the job that mr. quarrels has and post crisis regulatory

right sizing, be interested in your thoughts on basul 4 and regulatory tayloring i know people ask you, i was watching in my office, the committee some ask you about the regulatory, the banking regulatory reform bill that passed out of here which provides some regulatory and responsible regulatory relief for a portion of our banking sector what more can we expect to see that are within your authorities on right sizing regulations? the other thing i remember with mr. greenspan, he said the most troubling job creation growth that he saw was at that time, this was two or three years ago, post crisis, about 300,000 jobs this h. be had been created under regulatory reform which in my world that, is by definition a nonproductive job. so i'm kind of curious to see what kind of -- how are we going to get to a more tailored, i think senator purdue asked this

question, how with are we going to get to a more tailored plan >> i think our concern is to maintain and strengthen but make more efficient the big improvements we think we made after the crisis that is higher capital,higher liquidity. our effort then is to tailor that at every level as we move down and make sure that -- and we did a lot of tailoring along the way. now we're going back through each level to make sure that we got that tailoring just about right. not everything that we need to do need to be done by every bank and many of them have much simpler business models that are much more traditional banking and different regulatory structures should apply. >> the only thing i would say,

mr. chairman, the only thing i would say is somebody who worked in a firm that helped prepare c car and stress test results, it still sis unimaginable to me ho a properly tailored government can result in thousand paid submissions. there has to be a better way to do it, even at the high end of the spectrum i look forward to you continuing to look at it and manage the risk but right size it >> senator jones >> thank you, mr. chairman chairman powell, thank you for being here and welcome i'd like to go back to a couple questions. folks are concerned about wage growth in addition to unemployment and you said in your testimony that with the economy growing the way it, is you expect to see wage growth continue but that has been on a fairly modest trend over the last few years. do you see that wage growth increasing over the next couple of years as opposed to the very modest trend that we've seen >> it is my expectation,

senator. we've -- as we moved from 10% unemployment down to 4.1%, we have seen some gradual increase in wages but frankly not what it would have seen. i think as you look back over the last three or four years, you can kind of tell the story about why that was the case. now we're at 4.1% unemployment labor force participation is higher relative to trend than it was and i guess i would have expected to see higher wages now and i do continue to expect them to rise as the labor market continues to tighten >> well, assuming that the economy continues to grow as you expect it, are there factors that we need to be on the lookout for that could prevent that, the wage growth that you would anticipate as opposed to the very -- not flat but very, very modest wage growth? is there factors that we need to be concerned about or looking about in the future? >> i think ultimately sustainable wage growth is a function of productivity wages should equal, you know,

inflation plus productivity. and so to get wages to go up sustainbly over a long period of time, we need higher productivity that's a function of investment in people and investment in plant and equipment, r & d, all those things that drive us to be more productive. that is really the only way to have sustainable wage growth is that >> okay. well that kind of lead me to another area and i don't want to misrepresent your testimony the other day if i say -- if i characterize something wrong, you just please tell me. it won't be the first time i've been told i've been wrong about things but i think you said on tuesday to some extent that limiting immigration could limit our productivity growth in the coming years chairman yellen, your predecessor, also told this committee in the past that limits on immigration can limit gdp growth so without putting you on the spot to try to get you to wade into very specific hot button issues that we got here, can you talk a little bit about why

immigration may boost productivity and gdp growth? >> so to go back to what i was saying, you can think of growth being a function of growth in the labor force plus productivity those are the only two ways the kple c economy can grows is more hours worked and more output per hour. if you look at our labor force growth, it used to be 2.5%, you know, 25 years ago, 30 years ago. now it's about .5% as the population ages. and some part of that .5% is immigration. so i think those of you who have the decision rights around immigration, this is a factor that you ought to consider it doesn't directly affect productivity but it affects potential growth through labor force. >> all right i don't flow if this would be an appropriate question but is our current immigration policy contributing to in any way contributing to the lack of wage growth, as you see it

today? >> you know, immigration is one of those issues that we don't have -- we don't really have authority over and i can speak to it as it relateses to potential growth i am loathe to get into current policy and things like that. i think i'll follow my predecessors in sticking to our meeting on that. >> i thought that would be the answer i was going to ask anyway. going back to wage growth, what can we do to, as wage growth continues to try to decrease the disparities that women have in the labor force that minority population, you know, whether they be hispanic or the african-american population have and the labor force? >> so any kind of discrimination in our society and our labor force is, of course, unacceptable and not something that we can tolerate having said that, you know, we don't have the tools broadly

speaking to address those things as you can see, when we go into recession, it is the most vulnerable populations whose unemployment rates go up the fastest and highest. you can see that they come down the most in the recovery they tend to not get down as low with people with college degrees. that's how we can contribute >> all right >> lastly, there was comments made in your pm on the house side concerning the appropriation process. i would like your quick opinion on that. and also how a potential government shutdown might affect that should you have that appropriations i've been fairly critical of the

way that budget airy process here has been taking place o so we had five -- we had a couple of shutdowns in the last couple weeks how would that affect your ability to supervise >> governments all around the world have seen fit to give central banks an independent source of funding. i would say that is a wise decision the things we do may not always be politically popular and it's wise to give us just a little bit of degree of separation. of course, we're transparent of course, we're accountable this is a decision for congress that congress has made for the last 40 years. it has not stopped congress from providing, you know, appropriate oversight. i would just say that i don't see what problem we're solving here >> it seems to be working.

if it's not broke, don't fix it. >> thank you, mr. chairman appreciate that. >> i would note to our members we have a series of three votes being started in about five or six minutes. we have four speakers left here. if you are all very concise and stick to your five minutes, i think we can probably wrap this up at the tail end of the first vote and go over so please pay attention to the clock for us we won't be able to go over and come back because of the three votes. senator? >> i'm glad i'm next, mr. chairman >> five minutes. >> mr. chairman, thank you thank you very much for joining us today you're new at your job i would say listening to you in previous settings and today, you are reassuring, seemingly competent. perhaps exactly the right thing we need at the federal reserve and today's economic and political world. so thank you very much for your service to the country

i hope i don't have to change my comments about you in the future so we look forward to working with you let many he go through three things a treasury report recently indicated that the current exposure method may not appropriately measure the economic exposure of a listed options contract and that a risk adjusted approach for valuing options for purposes of capital rules such as weighing the options by their delta might be in order. i think this issue needs a quicker fix. you are in a position to make the changes that you said are important to make? >> yes, we are i think we're in the middle of a changeover from cme to the other way to do it and we're also looking at the calibration of enhanced leverage ratio. both of those things should help. >> what time frame do you believe you're on?

>> i don't want to give you an exact date let me come back to your office. there is an active thing fairly soon >> very good >> i would welcome the follow-through tomorrow i will meet with esther george at the kansas city fed and look forward to that conversation part of what i will talk to her about is agriculture and particularly the economies of our region let me highlight for you something that i think is important for you and your regulatory role to remember. farmers and ranchers often come to me and ask about the safety net that comes from a farm bill. farm policies designed to help farmers and ranchers in difficult times generally difficult economic times we're experiencing those times now. the challenge is significant for someone trying to earn a living in agriculture there is a safety net that is often forgotten. and that is the relationship between the lender and their community.

a relationship banker or financial institution. and that family farmer i just want to highlight once again the importance that we don't get to the circumstance in which the examiners, the regulations prohibit bankers from making decisions about lending or access to credit by agriculture based upon some very restrained restrictive method. let the issue of character, relationship, history between what is often a family oenld bank a owned bank and family farm continue that is one of the most important safety nets in difficult times is relationship between the lenders and bankers. and where i see the threat of that diminishing or being eliminated is through the regulatory process in which a bank is written up for making a decision they feel comfortable with but a regulator may not any response to that >> i'll just take that very much to heart, senator. >> thank you very much and then finally, let me ask a

question about education if we're looking for economic growth, it seems that a highly motivated trained and educated workforce is a significant component of that. do you have in your understandings of the circumstances that we face and the employment market where we should be focusing our support for education or where we should be emphasizing for students and adults those two things are not different. for those who need an education and an additional training where we ought to be focusing our resources to meet the economy's needs for that highly motivated educated and trained workforce >> you know, i'm probably not the right person to get down into the details of exactly where to focus i will just say though that my view is that in the long run the only way we can sort of win in the international competition is by having the best educated, most productive workforce in the world. there is no way to hide from that requirement and that's education it's also training it's no the just college

education. it's also, you know, apprenticeship programs and that kind of thing which are also very successful. tax rates are important component and making business decisions. but the workforce, meeting workforce requirements is there as well. is that true >> yes >> mr. chairman, thank you. >> senator warner? >> let the record show your timliness of starting meetings meant me being six minutes late is -- >> i noted that and feel for you. >> quite a challenge i want to stay because i want to ask the chairman two very important questions. let me preface this by saying, you know, in my first year here, one of the most important pieces of legislation i've ever worked on was the dodd-frank legislation. i think dodd-frank for all the challenges made our system remarkably stronger. and we are eight years later and there are a broad bipartisan group of us who are going to debate on the floor next week

legislation that would make some modifications. in this legislation 2155, we have not changed the requirements that the fed perform annual dodd-frank stress tests on banks above $250 billion. i think that's terribly important to maintain. we do give the fed after an appropriate period to do a rulemaking the ability to look at those banks between 100 and $250 billion this is very important, to continue to undergrow stress tests on a periodic basis. my view is the stress testing is the most important standard and that frequent stress tests are some of the best tools we have to prevent another financial crisis can you give us your views on stress testing including how rigorous they should remain and how frequent they should remain on banks between 100 and $250

billion in assets if this legislation passes >> i'd be glad to. so let me just echo what you said we do believe that supervisory stress testing is probably the most successful regulatory innovation of the post crisis era. we're strong believers in this tool including for institutions of 100 to $250 billion so it is -- it will be our intent if this bill is enacted to continue that these institutions would continue to have meaningful, strong, regular periodic stress tests, frequent stress tests again, we see it as a very important tool for the institutions >> i hope again folks will be listening to this. we're not touching anything on the largest institutions in ermz it terms of the largest institutions on folks up to $250 billion and as chairman of the fed indicated, even among the banks between 100 and $250 billion, we're still going to have frequent periodic stress

tests that are still going to be strong and the legislation lays out in some detail some of the requirements that we would have in those stress tests. my last question is this in terms of overall enhanced standards, we do move in this legislation, it's been $50 billion to $100 billion. but we give you then in the group of institutions between 100 and $250 billion an 18-month period to staltailor the standas more appropriately we already have an institution below $250 billion, it's still qualifies as sifi. i just like again for the record, for folks watching and who watch the debate next week that you will take this responsibility of this 18-month rulemaking and do a thorough examination of the banks that

fall on that category and those claiming the regulations of bank that's follow under that category or are going to suddenly magically disappear sure as heck is not the intent of this individual in terms of that legislation and i hope it's not the intent of the fed >> well, what i see us doing is creating a framework we'll be looking at all the institutions that are in that area and all the risks that might arise in banks between $250 and $100 and create a framework for where risk might be, where there might be regional risks we'll look at everything and that framework will then be in place in 18 months and if there are institutions currently in that population or that over time become systemically risky or even risky, you know, to themselves the way the legislation gives us a lot of flexibility to do that, then we'll have that in place and as you point out, we haven't been shy about finding systemic risk under $250.

we're perfectly happy to do. that we'll feel comfortable doing this job i believe. >> i look forward to a fair and spirited debate next week. a lot of members have different views. but i think it's very, very important when people go about talking about, you know, doing k about doing away with stress tests or eliminating any kind of enhanced prudential regulations, that is the no onot our intent there may be tailoring going on, but for the larger institutions, status quo is going to remain. thank you, mr. chairman. >> thank you we're 5 minutfive minutes on tho the vote senator heitkamp >> what i understand has been discussed is a clarification from you that nothing in this bill that will be debated next week undermines the fed's ability to enforce fair lending laws is that correct, mr. chairman?

>> generally right cfpb really writes these rules and you should seek comment from them, if you like. >> but you would acknowledge that our bill preserves the traditional hmda data collection on race? >> it does, yes. >> while the bill doesn't undermine fair lending, it meaningfully reduces substantial costs imposed on small lenders from hmda data collections these costs can reach into the hundreds of thousands of dollars per year one small institution estimates the cost of hmda quality assurance or their bank equals $400,000 per year. one of the things that i think i just want to impress on people is that when you don't respond to these kinds of concerns,

legislate concerns from small lenders, there's a resentment to the overall policy we tend to throw the baby out with the bath water because of the level of frustration wouldn't you trying to he that we could in fact reduce costs to small lenders and still maintain the protections provided by hmda >> yes, i do agree >> so when we're looking at going forward where i think it's important that we have a very spirited debate about this but i think it also is very important that we put it in perspective and that we not exaggerate the results here or the purpose of this bill and so, chairman powell, just one question i know you've been answering a lot of questions about the economy writ large but i wanted to just get your sense of economic growth and as we look at, again, no big surprise, i'm going to ask a question about trade, i know you guys don't always like answering

those questions, but it seems to me that we're now looking at a potential of tariffs being imposed on aluminum and steel for which there will be retaliation. we have in fact retreated somewhat from the commitments on nafta. and we no longer have a pathway into tpp how concerned are you about the impacts of this trade policy of this administration on our opportunity for economic growth long term? >> so i wouldn't comment directly on the administration's policies but i will say about trade that i think that the record is clear that over long periods of time, for many, many countries, trade is a net positive. it spreads productivity. it forces our companies to compete. it gives businesses and people the ability to buy and sell things in the world market so overall, the studies all show and theory would suggest it's a

good thing but the benefits do not fall equally. there can be communities, there can be individuals who are negatively affected by trade, and we've seen a fair amount of that i think it's mothre of that tha was probably expected. it's important that we address that as well so we sustain public support for frayed. as chairman bernanke said, you know, sort of the tariff approach is not the best approach the best approach is to deal directly with the people who are affected rather than falling back on tariffs. but again, these are not measures that are consigned to us they're really for you and for the administration >> but these are measures that are going to have an effect on the kind of economic analysis that you do that's going to lead to monetary policy i don't think there's any doubt that trade will have a dramatic impact on economic growth. and very, very concerned about making sure that our trade policy is consistent with

economic growth, and also very concerned about the speed to which systems today can react to trade policy as opposed to maybe 20, 30 years ago when it was kind of plodding along it was okay if the wto took ten years. today, i don't think that's true and i don't think it's true that it's okay that it takes ten years to get back into tpp i think things will move a lot quicker. it's going to have a dramatic effect on our ability to be competitive in this country and to encourage investment and growth thank you, mr. chairman. >> thank you senator reed >> thank you very much, mr. chairman thank you, mr. chairman, for being here today and one of the things that we've noticed over the last many years is a decline in workforce participation of prime age men one reason is automation those, particularly the types of jobs, it seems, that are easily

replaced by some type of technology, machines and computers, et cetera, as we go forward, i would assume that that trend will continue and it raises the question of how is the fed planning to forecast these effects of automation with your mandate for full employment. we could find ourselves technically at full employment but with millions of americans who are out of luck, out of jobs, and technically not in the workforce. how are you going to deal with that >> the long history of this is, as i'm sure you know, technology comes in and it can displace people ultimately if the people in society have the skills and apartme aptitudes to benefit from technology, then technology lifts all boats. for 200 years since the industrial revolution we've faced this problem

over long periods of time it's always been the case that technology lifts all boats, in a way. i don't think there's any law of nature that says that has to continue the reason -- the part of it that we control is skills and aptitude of our labor force. to the extent people have the skills and aptitudes to benefit from technology and operate technology, they'll benefit from it to the extent they don't, it's the people with a high school degree and less who have really experienced the worst of this. that's where wages are low, labor force participation is low. it's really hard thing to do but it comes down to education >> do you think we're doing enough in terms of education, in terms of federal, state, local investment we just saw west virginia shut down for two days because their teachers felt they weren't being compensated well enough. we have a situation in oklahoma where they're only going to school four days a week because of budget problems so i agree with you, education is a key

it's just we don't seem to get that message >> there's nothing in the productivity data or the -- any other economic data that suggests we are handling this problem well all around the world, others are catching up and passing. >> and exceeding us. >> yes >> one other point, this is a sort of passionate issue with me, the military lending act the federal reserve has a responsibility among many agencies to enforce it the department of defense regulations essentially says you can't charge someone in uniform over 36% interest, that seems to me a pretty fair rule. having just come back from somalia and being with special forces people and their families back home, i think this has to be enforced aggressively can you tell me what you're doing to make sure your responsibilities under this rule are vigorous and proactive and -- >> we share your view about the importance and value of enforcing this, i assure you this is one where, as i think

we've discussed, this is a very important regulation and it will get aggressive enforcement from us >> you'll and angle the messageo your regulated agencies that this is at the top of your list? >> yes >> thank you, mr. chairman >> senator holland >> i know there's been some discussion about stock buybacks. i mean, stock buybacks are primarily a way for corporations to increase the share price; isn't that right >> yes i mean, it works in that way, yes. it's a way for companies to distribute cash to shareholders as well. >> exactly so i do think it's worth pointing out that since the tax bill was passed, which was in large part advertised as a way to dramatically increase wages of workers, in fact the

predictions were $4,000 a year pay increases, we've seen the overwhelming amount of the money that's gone to corporations used for stock buybacks, in fact $200 billion of stock buybacks just in the first two months of this year alone, including $20 billion stock buyback from wells fargo, a major financial institution that we've had a lot of discussion about on this committee primarily because of a violation of consumer protection issues i do think it's worth pointing out that over 35% of the stock owned is actually owned by foreigners and foreign entities, which is why the prime minister of norway, when she visited a short time ago, thanked president trump for the tax bill, because it dramatically boosted the stock value of the norwegian government and its