the work force also partly evolution of technology, investment i think right now in particular we had a number of years he very weak investment after the crisis because there was no need to invest that weak investment period is casting a shadow over productivity, which is one of the main factors holding down wages. these are deep, hard problems. but i mean, education is at the bottom of the pile. >> i am glad you alluded to that, my time is up, i know. we actually had productivity growth without wage growth >> over long periods of time, the only way wages go up sustainably is with productivity growth they don't necessarily match all the time since the crisis ended, productivity growth, output per hour is weak increasingly very weak. >> senator tester. >> thank you, mr. chairman thank you for being here,

chairman powell. >> you have been listening to the fed chairman testifying before the senate banking committee. stocks are higher. technology pairing earlier losses, including netflix coming back a bit dollar is stronger steve liesman has a recap of some headlines so far. steve? >> the first headline, fed rates, solid outlook for the economy. one interesting thing in q and a, said we think it will be fine for wages to move up more. i thought that was interesting we don't know how high a rate he would tolerate, but we know the former chairman was between 3 and 4% would have been fine. they're around 2.7, 2.8. he said it was early for the tax bill to help wages now, but said it is probably helping the economy. then got into the politics the eu is not a foe of the u.s. when asked that question, and said countries open to trade do better than countries that are

closed >> good recap. thank you. dow up 14. trying for a fourth straight day of gains back to chairman powell. >> in your testimony you said good economic performance in other countries has supported exports in manufacturing what other country would that include, the eu, canada, mexico? other countries with good economic performance, would that include china? >> it would include all those countries, yes >> and i know you said the tariff situation is -- and trade situation -- is something congress deals with, that you don't deal with. it would appear to me, i just want to get your opinion on this because i value it, it would appear to me all this stuff about getting out of nafta,

putting tariffs on folks, not being at the table when tpp was finally signed is a net negative on our economy would you agree with that long term short term and long term >> i'm going to try to walk that line i mentioned earlier, not comment on any particular policy, but in principle open trading is good. we don't want countries to have barriers to trade or tariffs being a barrier to trade. >> both directions. >> both directions we want an international rules based system in which countries can get together and any country that violates that can face the other countries. that system served us well tariffs have come down steadily. until recently at an all time low level. thing is, we don't know how this goes the process we are in, the administration says it is going for broadly lower tariffs. if that happens, that's good for the economy. very good for the economy.

our economy and others, too, by the way. if we wind up with higher tariffs, not so good. >> that's correct. meantime, just as a side bar, meantime, if it cuts off foreign markets for grains, for example, there's going to be a lot of people in family farm agriculture put out of business, and that's my concern. you don't need to comment on that i realize you don't play a central role in housing finance system but you play central role in our economy and the fed has a sizable balance sheet with billions of dollars of mortgage backed securities on the books in march it was announced fannie mae would need $4 billion from its line of credit at the treasury department. how concerning is this to you and the fed given the size of mortgage backed securities on your books >> so the mortgage backed securities we have are guaranteed by the federal

government there's no credit risk there i would say more generally if this is responsive, i think that the housing finance system, gscs remains one of the big unfinished pieces of business post financial crisis, it would be healthy for the economy and finance system to see that move forward. >> you answered my second question you think the congress inability to address fannie mae and freddie mack could impact the economy? >> it is important for the longer run that we get housing finance system off the federal government balance sheet carry forward some reform. it is important for the economy longer term. >> thank you, chairman powell. i have a couple other questions i would love to have you answer, but thank you very much. >> senator >> thank you chairman powell for joining us quick follow-up on the wage

discussion i think most recent numbers were the month of june comparison to previous june, 2.7%, nominal growth and wage number obviously a positive number. we would all like to see a bigger real growth i think there's no question we would like to see that i would suggest there's something peculiar about the arithmetic of this sometimes and maybe you could briefly comment on this. if the economic growth, as our economic growth has coincided with a significant growth in entry level jobs and people coming into the work force at entry level wages, since those wages are at the low end of the wage spectrum, isn't it the case that the nature of arithmetic is that the average wage will reflect to some degree the fact that new entrants come in at the

low end of the spectrum and it would mask growth in wages of people continuously employed >> that's right. younger people coming in, older people retiring, can be itself i am not sure it is now, but i can check on that. >> you made the point of sustained wage growth requires sustained productivity growth. we all know that productivity growth is driven by several things one of the contributing factors is capital expenditure new tools, equipment, technology in the hands of workers that make them more productive. june minutes included a disturbing observation and i'll quote briefly it says some districts indicated that plans for capital spending had been scaled back or postponed as a result of

uncertainty over trade policy. so fomc is saying there's already adverse consequence in the form of scaled back investment as a result of uncertainty in trade policy. if there's more uncertainty and we have threats of additional tariffs hanging over the markets now, doesn't it follow this is a threat to wage growth because the continuum includes reduction in capital expenditure, lower productivity growth than we would otherwise have and corresponding relative weakness in wage growth in other words, isn't the trade uncertainty a threat to wage growth >> it may well be. don't see it in the numbers yet but we heard arising chorus of concern. >> which is disturbing

senator from tenlz's question about what causes stagnant wages, corresponded to low productivity growth which corresponded to low capital expenditure growth we broke that with incentives in tax reform that caused a big surge in cap ex. it would be a pity to jeopardize that because of trade policy let me move to a somewhat technical matter regarding the fed balance sheet. historically the fed manipulated overnight rates and let the markets decide all other interest rates that all changed with quantitative easing when the fed became the biggest market participant in the purchase of treasury changed when the fed decided to intentionally manipulate the shape of the yield curve with the operation twist which was consciously, willfully designed to change the shape of the

curve. my understanding is now to the extent that you make purchases of treasuries, which you do when payments come back to the fed in excess of what you want to runoff, you do so basically as a set proportion of what treasury is issuing, without regard to where they're issuing. so while this is happening, the yield curve is flattening in a pretty dramatic way. some people are concerned a flattening curve or inverted curve correlates does dramatic shape in yield curve influence the trajectory you're on with respect to normalizing interest rates and the balance sheet? >> sorry, in other words are we going to change our balance sheet policies due to -- is that what you're asking, due to

changing shape of the curve? >> does changing shape of the curve weigh into your considerations at all? >> i think what really matters is what the neutral rate of interest is. i think people look at the shape of the curve because they think there's a message in longer run rates which reflect many things but that longer run rates also tell us something along with other things about what longer run neutral rate is. that's why the slope of yield curve matters. i look directly at that. in other words, if you raise short term rates higher than long term rates, then maybe your policy is tighter than you think or it is tight anyway. i think the shape of the curve is something we talked about different people think about it different ways some think about it more than others i think of it as the question being what's the message from longer run rate about neutral rates. >> that makes sense. my time expired. thank you, mr. chairman.

>> senator warner. >> thank you, mr. chairman chairman powell, great to see you again. part of the challenge coming this late, a lot of my questions have been answered i want to follow-up or comment on what senator toomey is addressing i was going to cite minutes of fed june meeting as well in terms of not seeing effects in the economy yet, but there's been a slowing of cap ex because of concerns about what i think is the president's kind of ill thought through trade war. i strongly believe we ought to take into consideration and have fair and balanced trading system i think china is the worst offender, particularly theft of intellectual property and other items. actually applauding the president when he moved strongly at first for a day or two on cte and before he folded at the first push back from president

xi i would argue we would be in stronger position with china if we would rally other nations around the world, nations that are our allies instead he engaged in trade practices with them. no need to comment on that senator tester raised an issue i wanted to make as well foreign banks with relatively small u.s. subsidiaries, large overall international assets are going to be subject to stress tests. wasn't it correct that at least since there are a variety of stress tests, ccar stress test applies to institutions that have assets at any level, relatively any level, there was a bank with $900 billion of total assets but 86 billion in u.s. assets that the stress test was applied to is that not correct? >> i believe that's correct. >> i think you've addressed this

there are tensions between chairman is a good friend of mine and all i think there may be appropriate regulatory relief for some regional banks, but i want to make sure, i think you addressed this with senator tester, that for those banks in the 100 to 250 range, you're going to have a thorough process, rule making process. stress tests are going to continue on a regular basis and that these banks fall into this category are going to be strictly reviewed before they might receive some of the regulatory relief to make sure that they -- size alone may not be the only indicator of significance to the overall market may be some institutions that have that category >> the bill gives us all of the authority we need frankly to reach below 250, down to 100, apply any standard we want, either on the ground of financial stability or safety incentives of bank companies

we will publish, thinking about it now, publish for public comment the range of factors we can consider the bill is generous, letting us consider all of the factors we think are relevant. >> one of the reasons that i was supportive of the legislation was testimony that you had given prior to passage that this was not going to be some blanket dismissal of institutions, that you were going through a thorough rule making process and make an evaluation before the regulations were relaxed is that still your position? >> we will absolutely there's one institution that's less than 250. we're not shy about finding financial stability risk when we find it. >> arbitrary lines are always arbitrary, up to you in the fed to make sure institutions based on their businesses practices that may be overall economically significant that they still will have that determination as you

indicated, even if they fall below 250. >> yes, wide range of factors. >> let me move to a different topic. i recently sent you a letter with a number of my democratic colleagues on the community reinvestment act i think renewal of that act is very important i'm concerned that the occ has proposed a policy that will quote, only consider lowering composite or component performance test ratings of a bank if evidence of discrimination or illegal credit practices directly relates to the institution's cra lending activities the way i read that would mean that under the occ proposal which is inappropriate, you could end up with a bank still getting a good cra rating, even though they had discriminatory practices. those fell outside the cra lending processes. my hope would be for those banks that fall under the fed review

that we will not see relaxing of those cra standards. >> you correctly stated what our policy is, have every reason to continue to think it will be that >> i want to be sure we follow up with additional letters and requests on that subject thank you, mr. chairman. >> senator van hollen. >> thank you, mr. chairman mr. chairman, welcome. good to have you here. a couple of questions that relate to the tax bill because much has been said about that. senator toomey said it resulted in increased investment. what i've seen is a huge whopping increase in stock buy backs. as of today, the number is 600 billion dollars in stock buy backs. those are corporations that have decided not to invest the money back into their workers or their plant or their equipment but give it to stockholders which include one-third of the stock

holdings in this country are foreign stockholders so it is a great wind fafall for accounts of stockholders much has been claimed about the economic impact. i'm looking at the most recent projection that the fed had for median, long term growth as of june 13th report 1.8%, is that correct, for current long term growth >> yes, it is. >> are you aware of what the projection was a year ago before the tax bill was passed? >> i'm going to say 1.8%. >> i mean, the reality is despite the hype around here, it's not really going to have an impact on our long term growth surprisingly, a lot of us thought there would be a sugar high you dump $2 trillion into the

economy, you think there would be some sugar high, and maybe there will be, but i was interested in an analysis that came out of the san francisco fed. i don't know if you saw it two economists there actually said that the 2017 tax law is likely to give not even a sugar high have you had a chance to review that analysis? >> i have and i would just say that there's a wide range of estimates of the effects of recent fiscal changes and they're talking about the possibility. i think their point was late in the cycle near full employment, effects might be less. they might or might not be there's a lot of uncertainty one of the great things is we get a range of views which is a healthy thing. >> does stand to reason you have a smaller impact late in the cycle. that is why most fiscal policy in this country over the years said we want to provide stimulus

during the tough times when a lot of people are out of work but you don't necessarily want a stimulus sugar high when the economy is clicking all cylinders. that's the point the economists made we're in the ninth year of growth when you talk about some increase in real wages, not nearly what we want, that's over a nine year period, is that right? >> i'm sorry, your question is >> when you talk about some small up tick. >> in real wages. >> over the period of recovery, right? >> i was talking about nominal wages. what i was talking about is if you look at 2012, 2013, 2014, all wages were around 2% now they're close to 3%. it wasn't an overnight thing, overnight sensation, it was a gradual increase you have seen a meaningful increase. >> isn't it a fact that real wage increases were higher during the last term of the obama administration than during the trump administration

>> i'd really have to go back and look. >> i think i have the advantage, mr. chairman, of having detailed fed analysis and bureau of labor statistics and what it shows is that real wage increases were higher during the last term of the obama administration the point here really is let's not play make believe that this tax bill somehow miraculously helped a lot of people out the reality is as we heard, real wages are pretty flat. i understand your testimony about oil price increases. don't know how long they'll be with us. we also know that real wage increases were higher during the four years of the obama administration than so far in the trump administration with the tax cut and everything else. so i hope my colleagues could bring more of a discussion based, reality based discussion

to this. one thing we know that tax bill did, one thing we did know, it will add $2 trillion to our national debt, a debt that will have to be paid by everybody in this room and their kids and grandkids. and at the same time, the fed projection shows no change in long term growth projections so we blew $2 trillion, a lot of it is going to stock buy backs, and i just hope we will sort of end the happy talk about what the tax cut did. thank you. >> senator heitkamp. >> thank you for coming before the committee, beingwilling to answer our questions i want to make a point about wages and your comment on this almost 20% of the people in our country who are wage earners earn less than $12.50. i don't know how many of you

think you can live on that, but given that you're working a 40 hour week. 32% earn between 12.50 and $20 an hour. $20 an hour is barely $40,000 a year and the next 30% is 20 to 30 much of it heavily weighted on the lightened. i have seen one survey that told us that two-thirds of all wage earners in the country earned less than $20 an hour. hourly wage earners. if you don't think that presents economic challenges if that doesn't change, you're wrong i think we're seeing more consumer debt. the response and i think appropriate on interest rates is going to drive increased costs we look at, we've targeted, linked the student loan rate to

what you do, thereby exacerbating those people attempting to take that next leap forward i want to make the point where your job is to look at macro, we visit with people every day who are struggling, struggling to make ends meet i want to transition to the next place for me on north dakota struggles, and that's trade. i have been asking about trade for two years now. if you look at the minutes of the fed meeting which i think senator toomey talked about, businesses across the country from steel and aluminum to farming have been telling fed officials about plans to offshore their business. we have pork producers talking about moving their pork production offshore to basically avoid what has been happening in the pork industry. these industries have good reason to be concerned economists across the spectrum, including economists in private

specter, morgan stanley, goldman, sachs, european bank. imf are raising alarms with tensions if they plan to escalate tariffs by trading partners, i think it will have serious damage to the economy, in particular to producers and consumers in my state. north dakota is the ninth most dependent on imported steel. you think about our base industry what's one of the primary inputs in drilling and moving oil, it is steel what's one of the primary inputs in large equipment manufacturing, it is steel i heard from my equipment manufacturers that what amount they got in tax savings has been gobbled up in the first two, three months of this fiscal year then we aren't even talking about farmers with the double whammy of being hit with steel tariffs, they're large steel

users, and seeing their commodity prices being challenged you offered a that the president's trade war results in other countries lowering trade barriers, that would be a positive outcome i don't disagree historic and economic suggests the opposite is likely to occur. if you look at efforts like smooth holly, we can go back there, i believe history will tell you it contributed significantly to the depth of the great depression i didn't say it causes it, but certainly did not assist in early recovery would you agree with former chairman ben bernanke when he said in a speech on trade, restricting trade imposing tariffs and other barriers is exactly the wrong thing to do for the economy? >> i would assuming you're talking about them remaining in place over a sustained period of time, absolutely. >> i get a little frustrated by

this short term paying for long term gain. i think we're going to have long term consequences in agriculture, we'll have emerging markets in a competitive space that we haven't. the chinese are subsidizing farmers to grow soy beans. brazil and argentina amping up soy beans, could be buying american soy beans, marking them up and enjoying the market as we struggle in the same speech, he cites studies that show protectionist policies almost invariably lead to low productivity in u.s. firms and lower living standards for u.s. commerce. is there any reason to think these studies are no longer valid in. >> -- valid? >> not that i know of. >> we can't afford to put our head in the stand and ignore the trade policies impact on our

economy. i have been probably one of the most outspoken on this side of the aisle about his trade policies if we want to improve trade, expand trade agreements, not impose reciprocal tariffs. i am deeply concerned. and i know at this point you are taking a watchful eye, but i am deeply concerned about long term ramifications of the so-called short term policy, and certainly if we see the next 200 billion and beyond that, see tariffs on automobiles, we will, in fact, be in a full on escalated trade war. i don't know where that end. if this is a game of who blinks first, best thing to do is get to the negotiating table i'm over my time i'm sorry. i want to make the point that i'm going to stay on this. i'm going to stay on macro

effects of this trade policy because this is not good for our economy and we're going to look back at this time perhaps in a year and say that's the point at which we turned the corner and the economy started taking a downturn. >> senator warren. >> thank you, mr. chairman good to see you again, chairman powell so before the financial crisis, banks loaded up on risky loans while regulators looked the other way. when those loans went bad, taxpayers were left holding the bag because big banks didn't have enough capital to stay afloat dodd-frank included two major reforms to make sure this never happens again. first, rules that make big banks meet higher capital standards so they're better equipped to handle losses. second, that banks take annual stress tests to be sure they aren't taking on too much risk since you have taken over, chairman powell, the fed rolled back on both reforms

i want to explore what that means for our economy. in april, the fed proposed an amendment that lowers the enhanced supplementary leverage ratio, that's the special capital requirement for the too big to fail banks. the fdic claims this reform will allow banks to maintain $121 billion less in capital. but the fed disagrees with the fdic assessment. why is that? >> we actually think the effect of that proposed change which is under consideration, looking at the comments, would be close to zero as relates to the firm itself and also we think, in other words, if you look at the entire entity, it would be less than $1 billion. i wouldn't say zero, i think the estimate was 400 million. >> you think the fdic estimate is made up >> they're talking about the bank, we're talking about the

whole firm within the whole firm, at the firm level. >> the banks we have to worry about, and banks that get bailed out here. >> enhanced supplemental leverage ratio, the problem is we don't want leverage ratio to be the capital requirement if you're bound on that, you're called upon to take more risk. we would rather not have the bank bound by that. >> let's look at this in terms of trying to strengthen banks so we don't have to be in position to bail them out second thing you've done, you put a lot of stock in stress tests. last week you called the stress test the most successful post crisis innovation for bank regulation but under your leadership the fed has weakened the stress test regime one example. reportedly three banks, goldman, sachs, straight street and morgan stanley had cap levels

too low to pass the test i wrote about these a few weeks and and appreciate your response to be clear, after they flunked, did you give too big to fail banks a failing grade? >> we gave them what we call conditional nonobject. >> that's not a failing grade, right? >> they suffered the same penalty, which is to have to limit distributions to prior years. >> that's what i want to ask if you didn't flu, did you givee new plans that make them pass the test. >> we don't require them to resubmit. >> you don't require them. >> many times we used that tool over the years, we have not required that. >> in other words, the fed looked the other way you let banks off with what you call financial nonobjection, letting them distribute capital to shareholders instead of keeping it on their books. in fact, because of your action, morgan stanley, goldman, sachs

investors took home about $5 billion more than they otherwise would have that's a nice gift to the bank, mr. chairman on top of that, the fed also proposed a rule in april that would make the stress test less severe effectively reducing capital requirements at the 8 largest banks by a total of 54 billion according to a goldman, sachs analysis so chairman powell, by your own account the economy is doing well we all know bank profits are gigantic banks got huge tax breaks. three fed presidents have suggested it is an ideal time to raise capital requirements, to strengthen banks, instead of siphoning off cash to shareholders, so why is the fed under your leadership persistently seeking to reduce capital requirements and weaken

stress tests >> with respect, senator, we're not doing either of those things in fact, the stress test in 2018 was more stressful, amount of loss and capital to pass was the highest by far of any test. >> you know, look, i don't know what to say. the fdic doesn't see it that way. goldman, sachs doesn't see it that way, the data don't seem to back you up on this. the feds' capital requirements and stress test are like a belt and suspenders you can loosen the belt, rely on suspenders or take off the suspenders and rely on the belt. but if you do both, your pants will fall down chairman powell, we learned in 2018 that when the big banks' pants fall down, it is the american economy, american taxpayers, american workers who get stuck pulling them back up it looks like to me the fed is

headed the wrong direction here. thank you, mr. chairman. >> senator shots >> chairman powell, thank you for your service and thank you for being willing to engage. i understand the need for you to stay in your lane. i'm going to ask a question. i want to have as constructive an exchange as possible knowing that some of this ground has been covered and i don't want to turn it into a partisan conversation banks are doing well they had record breaking profits in years 2016, 2017, 2018 will be another gang buster year. they increased dividends by 17% in 2017, 12% in 2018 community banks earnings are up. household credit is up in april, after your speech to the economic club of chicago you said, and i quote, as you look around the world, u.s. banks are competing very successfully, they're very profitable.

they're earning good returns on capital, stock prices are moving well i am looking for evidence that regulation is holding them back and i'm not seeing that case as made at this point the data backs up your statement, banks are the most profitable they have ever been so what's the motivation for weakening dodd-frank rules. >> we want regular as efficient and effective as it can be regulation is not free good regulation has positive benefits, avoiding financial crisis, consumer harm, things like that. nobody benefits when regulation is inefficient we have taken the job, particularly for smaller institutions going back, looking at everything we've done over the last decade to make sure we are doing it the most efficient way. we want the strongest, toughest

regulation to apply to biggest banks. and then we want to tailor appropriately as we move into regionals, sub regionals and large community banks and smaller ones. >> fair answer what would you say to someone back home who says why would the fed focus on this, why would the banking committee focus on this, why would the federal legislative branch focus on maki making life easier for banks, given income inequality, these are the most profitable institutions in american history. i get that it is always better to make things more efficient, it seems like you have limited resources, we have limited political capital to spend on priorities for the fed what do i say to someone back home who says why are you taking care of these guys that seem to be feeding at the trough pretty nicely >> i think you have to

distinguish between different kinds of institutions. i don't think that the smaller community banks are feeling quite as healthy as you're saying i think they are healthy, but i think we want them to be devoting their efforts to making loans, invest in their community, supporting economic activity in their community. >> lending is up, profitability is somewhat of a proxy for efficiency of the regulations. i won't belabor this i take your answer in good faith. recent interview with marketplace, you were asked what keeps you up at night, one of the things i enjoy about your frank responses while trying to stay in your lane. you said we face some real longer term challenges again associated with how fast the economy can grow and also how much the benefits of that growth can be spread through the population i look at things like mobility, if you judge the united states against similar well off countries, we have relatively

low mobility if you're born in the lower end of the income spectrum, your chances of making it to the top or middle are lower than they are in other countries understanding the fed cannot address these issues squarely. can you talk about income inequality, what ought to be done, and then my final question around income inequality is whether to the extent you expressed this view, a tax cut that provides about $33,000 for individuals in the top 1% of earners, 40 bucks to the poorest of the poor, whether or not that helps or hurts in terms of income inequality. >> there are a range of -- the question i was answering in that interview and that you're really asking is really these are issues the fed doesn't have the tools or mandate to fix but nonetheless involve significant longer term economic challenges. so i just would, i pointed out

low mobility which is the research of a professor at harvard now and stagnation of median incomes labor force participation among prime age males, you've seen decline over 60 years. these are unhealthy trenlds tha we don't have the tools to fix, you do these are things for the legislature to work on it comes down to things that are easy to say, hard to do, like improve education, deal with the opioid crisis, things like that. balanced regulation plays a role in this in enabling capital allocated freely, and people to move job to job. all those things go into it, but these are long run important issues another is potential growth rate of the country which looks like it slowed down because of aging and demographics and things like that these are big issues

we can't really effect them with monetary policy. >> thank you >> senator cortez. >> chairman powell, thank you for being here and thank you for answering our questions. i appreciate your comments earlier in the introduction and noting what you admit aggregate numbers look like. i also noted in your presentation that there's a quote you say. while three-fourths of whites responded they were doing at least okay in 2017, at least okay, only two-thirds of african-americans and hispanics responded that way when it comes to financially whether they were doing okay i think that's what this comes down to. it comes down to those individuals that are living out there who are struggling, how much money is in their pocket,

how much it can pay for. you talked about wages are up .27%, price index up 2.3% in response to senator mendez's question about steps for broad based wage growth, you answered several things let me ask you this. is it your opinion it is the fed's responsibility or role to do something about wage growth, broad based wage growth, to play a role there >> i think what you assigned us is maximum unemployment, stable prices and financial stability we have an overall responsibility for that. maximum employment, it is not just one measure, it is a broad range of measures. i think we worked hard to provide support for labor markets. wage growth comes into both those things, into maximum

employment and into inflation. >> glad you said that. here's the other thing you said that concerned me. you said one way to address and increase wage growth was incomes need to go up and they only go up with higher productivity. and that's what you said needs to occur but let me ask you this. i have looked at some of the economists and studied some of the reports in the last 30 years or so, i know that was true probably from 1950 to 1970s that they were both going up together we also have studies show from 1973 to 2016 it was just the opposite, they're divergent. productivity went up 73.7%, but hourly pay went up 12.5% only 12.5% 5.9 times more productivity than pay. so knowing that, how can you say that we need to focus on higher

productivity because that will also increase wages. >> what i said was that over a long period of time, wages can't go up sustainably without productivity also increasing it is fferent to say higher productivity guarantees higher wages. i didn't say that and i don't think it is true i know well the charts you're talking about. >> what tools, what are you doing to ensure we are increasing wages because here's what's happening if you're in your community, hoping you are, talking to people across america, you know that wages have been flat since 1973 that means people that i go home to, in general struggling, don't have enough money to pay for housing costs, for health care, for education, for prescription drugs. and what do i tell them that you're doing to look at out for their interest to help them improve their lives with the tools that you have. >> the tool we have is monetary

policy >> i appreciate that let me ask you this. can you put it in terms of you're talking to a constituent in my state, to explain what you're doing nevada was a place we had the foreclosure crisis, people lost their homes and jobs, had 15% unemployment at one time, underwater in their homes. what would you say to those individuals that you're doing to ensure it doesn't happen again, and to improve wage growth for them >> we're doing everything we can with our tools to make sure if you want a job, you can have one. >> having a job, having a liveable wage are two different things. >> over the long term we don't have those tools, you have those tools. congress has tools to ensure stronger wages over time we can support hiring, we don't have tools to support higher productivity, for example, which tends to lead to higher wages, without guarantee. >> as an economist, you can tell us the tools and things that can

be done like increasing minimum wage that might improve liveable wages for individuals, correct >> i would say principally over long periods of time, investing in education, in skills are the single best thing we can do to have a productive work force >> i know my time is up. i appreciate that. i'm concerned. is that based on your own individual opinion or is that research or data or information that you know that shows that? >> it is a lot of research. >> thank you >> senator donnelly. >> thank you, mr. chairman thank you, mr. chairman. mr. powell, i am worried about farmers in my state. i checked about an hour ago, soy bean prices are 8.40 a bushel. well below cost of production right now. corn, $3.48 a bushel

well below the cost of production in the last couple weeks, i visited with a number of hoosier farmers, groups like indiana corn and soy bean alliance and indiana farm bureau to hear growing concerns with falling commodity prices and uncertain trade policies which are already harming hoosier farmers in rural communities. let me tell you a conversation i had last friday. it was with a businessman that's also a farmer. and he's telling me he just bought 140 acres from another farmer he said joe, i told the farmer i don't want to buy this from you right now because i know you're struggling and i know you don't want to sell this. and i don't want to take advantage of you and the farmer who is selling said if i don't sell this, i

could start losing everything else, so you're actually helping me out this is where our rural economy is going right now i've also heard from local businesses dealing with cancelled orders because of the tariffs. price of soybeans, ten year low, due largely to chinese tariffs on u.s. exports. this current policy, what i worry about is that it already damaged foreign export markets that took decades and decades to build. so what i'm asking you is what would be the long term impact of falling commodity prices, reduced agriculture exports on rural communities which are struggling in so many ways already. >> well, i think we know it would be very bad and we've seen periods of american history where that's happened, can be extremely tough on farmers and

rural communities. >> if they lose the markets that they've developed, i was over in china talking to some of their defense leaders a few years ago about north korea and was walking through the airport and there was a group just by coincidence, flight back home, flight to chicago and then back home to indiana, a group of indiana soybean farmers who were traveling the country, developing the market. and what happens to rural communities if china just looks up and says we found more reliable suppliers >> as we discussed, it can be very tough. >> as fed chairman, what would you say to all those farmers who are really nervous, really concerned about what their future will be they look to us for smart policies, for reasonable policies

is there anything you can say about the trade war going on now? >> i should again start by saying it is not the fed's role, we don't do trade policy, that's congress and the administration, but, you know, i think if the current process of negotiation back results in lower tariffs, that's a good thing for the economy. if it results in higher tariffs, i hardly need to tell you what higher tariffs would do for agricultural producers agriculture is a place where we lead the world in productivity, great exporters, you would be hard hit by these tariffs. >> if this goes on for a couple more years, what would be the impact on rural communities? >> it would be tough on rural communities. i think we would feel that at the national level, too. >> let me ask you about opioids. my state has been deeply impacted by the opioid crisis. last summer during one of her final appearance before congress

i spoke with former chair janet yellen about the opioid epidemic and its connection to not just health outcoming, be ins but ecc outcomes she agreed there was a connection and noted surveys suggested that many prime age individuals who are not actively participating in the labor market are involved in prescription drug use. you know, i look at these people we lost the next doctors, the next electricians, the next nurses what do you see is the impact of the opioid epidemic on our work force participation and in general the economy? >> it's a terrible human tragedy for the communities, families involved from an economic standpoint some high percentage of the prime age people not in labor force,

particularly prime age males not in the labor forgs are taking painkillers of some kind the number alan kruger came up with is 44% of them. so it's a big number it's having a terrible human toll on our communities and also is matters a lot for labor force participation and economic activity in our country. >> thank you thank you, mr. chairman. >> that concludes the questioning. but -- >> 30 seconds, please. a number of colleagues have talked about the -- about productivity and nonsupervisory pay that pay has gone up 27% -- i'm sorry, 2.7%, but it's important from june to june is what one colleague said. it's important to recognize that cpi has gone up 3%, so we should really never talk about nominal pay. we should talk about real dollar pay. thank you.

>> all right thank you. thank you, mr. chairman, again, for being here we appreciate your work and also your taking the time to come here and respond to our questions. for senators wishing to submit questions for the record, those questions are due in one week, tuesday, july 24th chairman powell we ask that you respond as promptly as you can to the questions that come in again, we thank you for being here this is very good timing we have a vote under way right now. we appreciate you helping to steer this hearing to a good conclusion with that, the hearing is adjourned. >> thank you >> all right that is fed chair powell, day one of two in front of congress. this time before the senate banking committee. about two hours of testimony in q & a. basically some headlines here saying the economy is poised potentially with the right kind of monetary policy for several years of strong job growth and

2% inflation asked repeatedly about wage growth and middle class wage stagnation in this country also talked about whether or not the tax bill -- tack cuts bill last year has affected wages said it is probably early to be seeing any impact from fiscal stimulus steve liesman, other headlines >> carl, i think it's worth while to talk about how the chairman comports himself when it comes to political issues he is definitely not out there as a booster for the trump administration in fact, i think it's worth while to point out a lot of times he goes out of his way to point out that trends in the economy pre-dated the trump administration he will say that started in 2010 or that started in 2014. even when sort of not asked. he's careful to say we may have had an impact on the tax cuts in the economy. he said it is too early for tax cuts to be affecting wages

he used this concept of staying in his lane when it comes to politics, and he did so when asked about trade. here is his response to the question about whether or not trade tariffs are bad for the economy. maybe we don't have that we don't have the sound bite but what he said was i want to stay in my lane. he said with countries that have fewer tariffs and open trade do better economically than those who have higher tariffs and less trade. he also talked about -- was asked is the european union a foe. he said it's not a foe of the u.s. he went on to talk a bit about the yield curve where he said that he's not looking so much at the yield curve as what is the real or neutral rate of interest rates out there. and just so you know, carl, during his testimony, maybe before it, the 2/10 spread went

down to the 24 range, which we have not seen in quite awhile. >> steve, thank you for that the other big story is the equity market reaction to powell's testimony mike santoli is here at post nine along with morgan brennan and jon fortt. we did see some improvement in stocks as he spoke >> i think powell utilized the advantage he has, which is a very strong economy. he said we will probably raise rates gradually from here for the best of reasons. to steve's point about the yield curve answer, i found that interesting. that was the one bit of suspense the market had is he going to say if we possibly would get it fully flat or inverted, that would be some kind of trigger for a recession or economic weakness o he didn't want go there. he also didn't want to cast magical forecasting powers he said the ten-year yield gives

you a forecast, so if you go above it, maybe you're tighter than you expect it to be that doesn't help you in terms of the next two moves. >> he was not expansive on the curve. >> not at all. part of the idea is we don't want to make this a subject of outside focus. >> i thought it was interesting, senator joe donnelly of indiana wants to get into the tariff discussion and the impact on rural communities and agricultural exports the chairman really focused on the idea that long-term tariffs are bad things and that this policy by the trump administration could be good if it brings down tariffs in the long-term does this suggest that investors expect that the trump administration will be successful in bringing down tariffs? >> i wouldn't go that far in drawing that conclusion and saying the market decided this will all resolve in a positive

outcome. i think it showed that powell is not looking at tariffs as some kind of huge threat immediately to derail the economy. i think that's a reassurance big picture this stuff moves slowly even though one component of the economy or one export category can be impacted, at the level the fed looks at the economy, it's not necessarily changing the course >> i want to bring in rick santelli in chicago to dig into the yield curve comments how is that playing out in the bond pits? >> there really wasn't much movement in the bonds. intraday moves, white noise, many people on the floor were disappointed on the yield curve amount of information. but that is not jay powell's fault, that's because pretty much every congressman was into the political aspects of the economy. he was playing it straight he's a steward of the economy

with two pillars, maximum employment and stable prices most of the questions were about things outside his jurisdiction, where they want the fed to be a nudger because congress lost all their teeth. they don't like what the president does they don't like what the fed does they're not crazy about the supreme court picks because they don't use their own power. i thought the most enlightening thing about this was how pragmatic jay powell was and how, i don't know, off the wheels most of the questions were >> it's true he was pressed repeatedly about elements on wages, mike, that fed has no power over. he said you hold the keys. >> i think we can remember a similar line of questioning at janet yellen yellen would spend a lot of time acknowledging the pain that goes along with a stagnant wage economy. but not -- also not give a satisfying answer. you know, powell just said not my area.

honestly, we don't have the levers to pull even if we wanted to >> right >> they're a central banker, not a central psychologist >> his point was these problems go back to educational achievement in this country that flattened out in the '70s. a lack of tech investment post-crisis. his words, that's casting a long shadow over wages. >> and they're global. most of these issues are long-term global trends. many people in congress just don't get that either. >> rick, mike, thank you it's noon. dow is up 30 let's get to the half. thank you very much, carl. welcome to "the half time report." we begin with fed chair jay powell delivering his semi-annual testimony before the senate banking committee the fed chair saying growth in the second quarter considerably stronger than in q1. that inflation will remain nr