>> look at what's happened here since trading began. so, again, air force one just landing. you can expect to see the president stepping down very shortly. we're going to hand things over to "squawk on the street" where they will continue to pick up not only this coverage but also jay powell whose testimony begins in an hour's time we'll see you tomorrow with that, we'll take over here on "squawk on the street" as we continue to watch air force one land in hanoi. again as becky and joe and andrew just saying the president in town for the second summit with chairman kim jong-un, who has traveled there by train, actually, over the past few days, to meet the president. we'll be looking for what we expect to be some kind of formal ceremony to greet president trump. that is just one of several pots we have boiling today. powell, the fed chair, senate banking, home depot missing on earnings, double down grade at caterpillar, the s.e.c., of course, regarding tesla and

enforcement, pharma ceos on the hill it is going to be a very busy tuesday, jim. >> yeah. and i feel that, housing is going to dominate the story just because home depot has the same -- home depot was downbeat. the housing starts were terrible i would encourage people once again, rear view mirror, rear view mirror, rear view mirror. that makes me not as pessimistic as what the numbers say. i don't think jay powell is going to be saying, look, i think things are much better than expected. it is right in his face. i just refuse to be as negative as the numbers are i just think that the numbers have to be average you don't get the worst housing starts as the great depression unless there are intervening factors. >> a december number, as jim says, down 11, takes you back, the lowest in two years, 2016. as far as the president and chairman kim go, let's try to get some color on what we might expect it is 12 hours ahead, tuesday evening, in hanoi. for that, we go to eamon javers in hanoi

>> reporter: good morning. it is a beautiful evening here in hanoi as you see them rolling up the stairs to air force one the president arriving by airplane kim jong-un as you point out arriving by armored train, traveling all the way from north korea down here to hanoi in vietnam. the two leaders will be meeting for their second time here and the question is what exactly are they going to agree to we talked to some white house officials last week who suggested that they're still trying to agree on a definition of denuclearization, that may be one of the key elements for the two men to discuss here as they get under way. we know that kim jong-un is in town motorcade has been moving around the city behind me throughout the day today. he went over to the north korean embassy to visit with officials there. we suspect he might be doing some touring of the area while he's in town a lot of this summit has been put together on the fly over the past couple of weeks so we don't know exactly what to expect here in terms of the visit as you see them getting the stairs ready for the

president's arrival. we don't know exactly what to expect from this arrival ceremony for the president of the united states at the airport here in hanoi. and we also don't know exactly what is going to happen with the media. we had this interesting development over the past several hours or so in which the media, that was traveling with the white house, was scheduled to stay at the same hotel as kim jong-un. once officials realized that that snafu occurred in the scheduling, they booted the american media out of the hotel, so now he has it for himself we'll see what happens during the course of this event today as we wait for the president there to emerge from air force one. >> so many reports about the relationship between chairman kim and the president and the degree to which it pivots around their personalities and the way they interact with each other personally, whether that's in person or by mail. how much is that going to come to light today >> reporter: well, we have see this interaction between the two leaders over the course of the

past year, since the last summit president trump has talked a lot about the big beautiful letters that he's received from kim jong-un. president trump said famously last year that he would be able to tell whether kim jong-un was serious or not about denuclearization within the first couple of moments, just by using his interpersonal sense. so you do get the feeling that this is a president who approaches these things very personally in terms of his relationship with the counterpart and we'll see whether they can come to some agreements here today. so much on the table here in terms of denuclearization. and this site today of hanoi, the former capital of north vietnam, of course, country that was embroiled in a brutal war with the united states in the 1960s and 1970s now a friendly nation toward the united states, very welcoming here on the streets of hanoi for americans and hanoi has been engaged in the world economy. there is a lot of economic activity here. the united states side hoping that that can serve as an

example for north koreans as a potential model they might be able to follow in some kind of rapprochement with the rest of the world. >> keep your eye on the cabin door as the president makes his way down the stairs after one refueling stop and see how he's greeted in hanoi. >> interesting, interesting also that when you speak to retailers, speak to clothing companies, anyone who has got toys, this -- they want to build in vietnam so it is interesting that this is the country that you move to because it has infrastructure, harder to do cambodia, harder to do thailand, they have the ability to become the powerhouse because they cost less money to build and they can move ships. and those are the two issues infrastructure and labor costs so vietnam is the answer in a lot of ways to tariffs. >> interesting you say that. a new survey from the chamber of commerce, u.s. companies surveyed, the lowest rate of expected expansion in china since '16.

this would be one beneficiary if they follow through. >> oh, yeah. there is a big issue which is that china is set up to send things to san francisco and to long beach they're just set up. they have been -- they have worked on the supply chain issue forever. they're deeply embedded. one of the things that the president does by stalling on the tariffs is develop this infrastructure a lot of the guys are moving as fast as they can only restoration harbor, rh, said we need china we need it everybody else, you talk to brian goldner at hasbro, he's try ing so hard to get hasbro of of china moving the old jardine to mexico and i'm is surprised more companies aren't moving to mexico once we get a trade deal. it is just incredible how quickly people want to get out of china and how great it is for the manufacturers if things stall. playing for time is working for american manufacturers and i think the chinese know that

>> back to this country and these numbers this morning when we look at macy's or home depot. you talk about housing home depot shares -- >> a bit of a bummer. >> we're talking about five bucks on $190 stock right now. premarket. we'll see how it actually opens. revenues 10.9% they were a bit below at the street anticipated >> margins >> same store sales, 3.2%, street was looking for higher. u.s. same store sales, same story, up 3.7% street was looking for higher. the guidance was also appeared to be slightly below what some had anticipated as well. again, i'm looking here at particularly from a note from jpmorgan, which is below what they anticipated. >> let me give you the other side okay, typically they should have bought -- they were going to buy $4 billion in stock. they bought $4.4 billion and i think that those of us who -- i know frank blake better than i know this fellow who runs it now, but remember that their

christmas is not macy's christmas. their christmas is about to start in four weeks, which is their garden season, and i like the possibility of a bounceback. i think they have set the year now at a low and that therefore when it is down 6 or 7, i like it lowe's i think is doing a lot of good things. >> like the $15 billion additional purchase -- buyback >> doesn't that say something? look at autozone, by the way they bought back 8% of the stock. buyback means something. money being put to work. >> we're going to watch home depot. big part of the growth story there is the president coming down the stairways of air force one in hanoi we'll watch to see how he's greeted here and once again, quickly turn back to eamon javers, maybe a little ticktock, though i know it is late there, what happens tonight >> reporter: well, not much is going to happen tonight as you

watch the president disembarking from air force one, being greeted by officials there on the landing strip. we expected the president is going to simply make his way to the place where he's going to spend the night tonight and catch up on his sleep. it is a vicious bit of jet lag for those of us who traveled over here. we're 12 hours upside down from u.s. east coast time the president will have an opportunity to settle in here. and adjust to the time zone before we get under way tomorrow and then we'll see a full schedule of events tomorrow. and you see the president shaking hands, greeting some of the local officials and we do expect that the president will have dinner at some point with kim jong-un. but they have been keeping the schedule fairly flexible here, carl we don't exactly know exactly how all this is going to unfold. so this is going to be something to watch and follow it along >> any sense as to how much of the runway here has been paved by secretary pompeo, the piece out today about how he's managed to help reassure allies who are

concerned about the president's isolationist tendencies and yet still remain within the good graces of the president himself. >> reporter: you know, officials have been trying to give us some sense of what to expect here but reporters ask that exact question in a briefing last week at the white house and said how much has been preagreed here oftentimes what you see in these sorts of environments is that officials at a lower level have already agreed to a lot of the key details and then they get the principles in the room and it is effectively just a signing ceremony, where they put their signatures to a large document that officially ratifies things that the lower level officials have done in the run-up to the summit we don't get the sense that that's what's happening here it is much more of a freewheeling affair here in hanoi this time around we don't know whether any details at all have been preagreed by both sides. white house officials declined to answer that question last week so we'll wait and see whether they unveil something here of

significance or not. these two leaders met last year in singapore and the president declared at the end of that summit there was no more nuclear threat from north korea. and the president has said that he is content with the fact that there have not been major launches or tests of nuclear weapons since that singapore summit he says he's in no rush to get to a final deal. so the president sort of ratcheting down some of the expectations for this summit in the run-up to this event last week as you see in getting on board the beast here in vietnam. >> eamon javers, thank you for setting us up. we'll monitor any developments tonight. a lot of it will happen while we're sleeping here in the eamon javers in hanoi covering the president's trip for us. we do expect to get comments from the fed chair and then testimony not long after that in front of senate banking today. so much of the pivot, jim, has been telegraphed what new could we possibly learn even though tomorrow in front of

the house he'll face democratic leadership for the first time in seven years. >> i don't expect any fireworks. that's kind of the point to not have fireworks i think that certainly don't want anything that throws more negativity of what we're seeing today. it is day to day yesterday we had so many good numbers. today, a conference call last night that was really kind of very confusing to me the etsy call. the etsy call, blew numbers away great company. i love using their stuff they said january was weak this is prevailing theme that january was weak etsy talked about the macro. the macro for etsy is that -- can i order some etsy cuff links now. see the mustache. >> love the mustache. >> the kids love mustache. it is millennial fyre fest. i think that, wow, i'm surprised, january, i mean, and

macro. >> gennette's comments at macy's, it is noisy. >> that's the problem. the minus, the plus and minuses cancel each other. it is not -- walmart, which was really pretty good look, just so incredible how this is what etfs are bad for retail because some retailers are doing great, some are doing terrible. >> i know. we have moved on, what we have chosen to completely ignore the retail number we got for december. >> yes. >> is there some read, though, from that to now >> i don't know. on the home depot conference call, the ceo said what we did not plan for is the expense of -- unfavorable weather, we experienced in all regions throughout -- all regions, and it was cold, snowy, it was wet now, i think a lot of bad management, i would say, are you kidding me snow this is home depot they get the credibility >> they do but aren't people

going there to buy shovels >> david, you're killing my mojo. >> snow blowers. >> you're killing my mojo. why don't you kill my mojo >> that's what i'm here for. >> we're not here to back up your mojo. >> i'm trying to create a narrative that the spring could be better. they're blaming the weather. it is home depot >> you would be like, like, oh my god, guys, please. >> any other company, other than costco, i would. blame the weather, macy's blames tourists give home depot some credit. this is home depot for heaven's sake this is the depot. this is the -- >> you say they benefit from a lot of credibility. >> yes i think, again, you go to home depot, you speak to management, they're gearing up right now for their big selling season and if it is good, and you sell the thing down six, i think you will be perturbed two months from now when carol tamay talks about, wow, i can't believe the comeback the housing start numbers,

mediocre could be weather has to be weather. has to be. it has to be. >> new home sales at a three-year low the other day not that far off >> look, we have a combination of the powell storm and the weather storm. powell did say some things that were upsetting they were upsetting. talked about the -- the one in three, remember, on the -- on "ellen", what was he on? was he on "ellen"? >> making the rounds on oprah. >> terrifying. 25 basis points in the best economy in the lifetime. >> honestly -- >> how can he do that? >> i don't know how he can do that i don't know look i remember that's what i would have said on the mike douglas show who was the producer nothing you can put past this guy. >> there is, but -- >> tell me powell created a firestorm and put it out we had a bear market in the month of december. there was a terrible wealth effect you did not feel like fixing up

your house if you thought it was going to be bad. by the way, the statement, it started to reallyhit. >> that i believe. >> now you feel carol tamay talks about your house is going up in value, you feel like it is an investment. when your house is going down, it is an expense during the month of december, it sure felt like an expense. because who wants to move in this environment the environment, we forget, the environment of the day before christmas all through the house, powell was killing us. >> you raise an interesting point open the lack of the salt deduction. i wonder -- by the way that could have people moving to one extent >> do you think -- do you think it -- at what point -- >> it could be hitting the fact you're no longer going to get the result you once did, not getting that deduction of -- >> the kids have graduated

and they're moving to florida. my wife suggested move to florida. look, we'll pay lower taxes on no salary. >> the ones i know are having trouble unloading the northeastern home. >> might be a little bored. >> i could be bored. >> you can't be bored. >> i would not be bored. i'll test drive lamborghinis all day. look, rates went up. housing prices stalled wealth effect bad. the ellen testimony, wasn't really ellen, of course, it was judy >> yes >> judge judy? >> highest paid person in television we're here now and we're ending february and we're heading into the spring >> i'm liking it. >> so -- >> wealth effect, nine straight weeks up, people are feeling really good. >> back to where we were. >> the market isn't lying. we had some breakouts here, david. have you seen shopify? >> i haven't

>> xilinx? >> twilio. >> twilio was up people thought they missed the quarter. i had jeff lawson on, he said we didn't miss the quarter, went up 15 straight points >> it does raise -- >> john donahoe, i stole him for my show. >> we fell 21% from october to december then we -- we rose 21% so are you feeling better than you did on october 3rd or not >> remember it goes down, we're not there. i do feel that i see many signs, many more positive signs than negative signs you do not get a deal like ge, both stocks go up. if you do not feel better. watch caterpillar rally off this buy and sell ubs it is the evidence lab it is cis, my friends. ncis. >> danaher, to your point earlier about home depot gets the benefit of the doubt when they do deals. typically the history is having done very strong deals this was the largest deal danaher has ever done, doing a

small equity raise too but they did both go up. >> they did. >> i don't know if you can say that's a sign of confidence on the market. >> do you think kraft is one off? >> yes in some ways. >> really? you sure >> i don't know. >> did you read the affidavit? it is all right. i meant kraft heinz. >> i blame our executive producer for that one. >> kraft heinz, kraft heinz versus mondelez. should have bought mondelez. should have bought mondelez. >> anything they possibly could have >> really? >> yes because now kraft can buy nothing. >> campbell soup >> they have to spend more money at kraft because margins are under pressure. >> i had velveeta last night, i got to tell you, mouthwash and velveeta, they go together with scope will they buy scope? >> jell-o to finish it off. >> i couldn't have jell-o. it was too hard. i had an oscar mayer weiner,

speaking about -- never mind >> don't go there. >> never mind. >> don't do it. >> never mind. our executive producer is in front of us, never mind. >> when we come back, mad dash, we'll count down to the opening bell still plenty to talk about including tesla and the s.e.c., these pharma ceos on the hill today. look at the premarket, "squawk on the street" is back in a minute

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welcome back to "squawk on the street." we're going to get started with trading here in seven minutes or so on this tuesday time to squeeze in a mad dash ahead of everything else caterpillar. >> now, look, i want to first of all, some evidence that was very good when they do this here's the issue they're talking about 55% of cat's business have peaked or will peak in 2019. so this is again is that prevailing thesis that people have gotten caught on with the nine straight weeks up, the 2019 is supposed to be a bad year that has peaked. and they're pointing to oil and gas as approaching peak demand and pointing to north american construction and china construction here is the issue. what happens if we get a trade deal with china? check that one off, it is going to get positive. north american construction, when you listen to what jpmorgan is saying in the conference call, you don't feel that north

american construction is going to peak. i disagree with the thesis and think the stock is very cheap. now, it has been in a downturn, a lot of that is china i am reluctant, they went interest a buy to a sell that always scares me. >> ubs >> that scares the heck out of people a double downgrade i've been doing works -- work on the double downgrade, have not worked so much they haven't >> you've been doing work on the double downgrade. >> yes, i have been. look, these guys are csi, i'm ncis. >> you are >> i remember when my daughter met ll cool j, hi, ll cool j, you can just call me cool j. so cool. i think the caterpillar, if you sell the stock here, i think you may regret it that's my point. i was going to talk about thc and how well they're doing, but now thc is is the hottest thing on earth >> it is it is. we'll talk about that after the bell. >> i think we should because the same store sales weren't that good, but good margins, good

earnings. >> other earnings to get to. we'll keep an eye on etsy, look at shake shack, discovery out with numbers too, come back to macy's, home depot, so much more to come. and chairman powell too. >> how's he? >> he's good

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you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in just about two minutes on this rather busy tuesday. we have covered home depot and the cat downgrade. the president, of course, landed in hanoi for his summit with chairman kim powell and senate banking and then there is tesla and the s.e.c. asking a judge to hold musk in contempt for that february 19th tweet in which he said we'll make about 500,000 cars in 2019 he's actually responded in part on twitter today >> the problem here is, you know, what do you do if you've been shown up? the s.e.c. -- their reorganization, the agency is tough. historically when you have a lawyer and you're involved with the s.e.c., the lawyer says, listen, here is the thing you must never do, you must never

antagonize the s.e.c this is about as antagonizing as you get. i've seen the s.e.c. remove ceos i think people don't understand that what they do, they call down the outside directors, okay, and they say, hey, guys, we're done with that ceo, which one of you wants to step up to be ceo i don't think people realize this, but that's the way it works. and i think they're going to call the outside directors down and say, which one of you wants to be tesla ceo? >> they could just say he violated the terms of the agreement and they could go after him again. now, it doesn't appear that necessarily will be the case, it seems unlikely at this point but it is not impossible >> right it is the outside shot. >> once again, you'll have the questions as to whether or not he could be removed as a officer director of a public company, again, highly unluke unlikely n he wants to put himself in that position. >> do they say one more and we're going to appoint an outside director and ceo

or do they say we're appointing one right now? this is not an s.e.c. that is as active as others >> the journal quotes a former enforcement director saying he's unlikely to face the most extreme punishment because he corrected a tweet. but stock is down. >> i find it -- when i listen to -- i look at the tweets, they do feel like that he should get -- i was mentioning earlier, there are devices where you can -- where you can't dial or text when you're inebriated, like shuts it down >> parental controls >> i thought that was supposed to happen. >> that was. >> what happened >> i don't know. >> general counsel resigned a day after the tweet was written. >> what does he think he is, the president? >> listen, with tesla shareholders, i think there is more focus on the actual cash position at the company, the fact they are going to have to

spend $950 million to redeem that convertible as of march 1st. that's probably more top mind for them this doesn't help. >> he's making a lot of cars got to hand that to them i was at the -- i was at the lamborghini factory, they made 5 1/2 cars a day i was there. >> at the big board, chemical company huntsman celebrating a new range of advanced structural adhesives. nasd nasdaq, silicom solutions. ge will be up again today. another 3% >> there was a midday cooling because there was an analyst report that came out and said it wasn't as good as we thought i think that the first, it was up 8%, at one point danaher was up and ge was up i think ge should have been up that much. you talk about the company, they're saying bring on tussa, bring on the -- bring on the long-term care i think it is power.

if colt can get his arms around power, wow, you're going to resent, regret you sold it. >> going to take a while you can't dismiss the idea that eventually you're going to have a company that is separated in some fashion, whether power or maybe parts of power that are sold and they keep just -- the most important part, which is gas. but and then health care now, no longer necessarily going to be separated. >> right. >> doesn't have to be. >> right >> everything is about optionality is the sense i've gotten when it comes to this and now they have time to consider things, and they have more leverage when it comes to any negotiations they might enter into with the potential buyer of an asset or in that fashion because they are going to be able to reduce leverage significantly as a result of this deal. >> how about the flexibility my thesis was larry -- larry colt, the ceo, he wasn't going to stick by the plan as outlined and everyone kind of said, wait a second, he's got to stick by

the plan he demonstrated, you mentioned the flexibility, i think this guy, the fact that he kept back the mri business with the service stream, what a home run. and i think that people who are -- there are people who miss this ge move and they just want to keep fighting it. i think that, you know, there is 20,000 people. how many people are in their headquarters and staff >> not many. it is small. >> really slim. >> they slimmed down. >> i think larry has done a really good job. there isn't anybody that seems to be -- that isn't saying he's a miracle worker. >> gaining confidence and a bit of momentum there. continue to wind down capital. >> are you going up there? are you going up there >> scale back power. no i wouldn't tell you anyway >> i know. i think larry is the number one -- i want him here the day that he battles tusa. i want it done here. he'll be at jpmorgan how about getting those two together in the same room? does tusa know you had to wear a jacket and a tie. >> i never met tusa.

>> he's fabulous you know who thinks he's fabulous is larry culp. >> jpm, investor day today, marianne lake making comments. talking about rates. we expect a long pause this year, but we believe it is more likely we'll see another couple of hikes from here over the next 12 to 24 months rather than an ease makes some good comments, constructive comments about the consumer too. >> that's what i like. it has a 3% yield. i felt that it is out -- the kind of overall not as good as last year -- this is a peak, this was a peak statement. and i am surprised that jamie dimon, the ceo, really kind of authorized a peak statement, which is -- when you given what he said when he reported, i didn't feel peak now i feel peakish i do feel peakish. >> you look okay. >> thank you >> you like the suit

>> guys and dolls, that's what i think when i see it. >> oh, my god. are you kidding me harry the horse? that's what you think i am i could be frank i always wanted to be frank. >> not too late. can put on a little -- >> i'm taking the suit off you will not see it tonight. >> a handful of consumer names doing really well. smuckers the lead up almost 8%. >> i was shocked >> autozone before >> oh, my. >> mattel and nordstrom too. what is happening? >> you got to give rich -- you look at what mark smucker's done, he made a series of promises he was going to come out of this, doing it with a lot of innovation. actual innovation. i think he's showing there is innovation, a terrific guy, 3% yield. and i think he's finally turning it around. it is a buy. it is a buy. mccormick, had been so good and missed the number so badly, but starting to come back. but smucker was the big

surprise >> i'm looking at the discovery numbers. i don't have -- i don't have a lot of insight right now i didn't get a chance to focus on them. discovery stock is down 5.5% >> wow >> what is that about? >> i don't -- usually i would be able to answer that question with some vigor. >> did you see there was a downgrade of foot locker, talk about foot locker last night. >> caterpillar, the big downgrade. >> it is not going down, in part, because i think nike is so good nike is a good analog for them nike is very, very strong. how about the way nike bounced back from the fact that one of its stars had a shoe that broke. they get the benefit of the doubt. >> higher two days later. >> how about the fact, can we say the kaepernick campaign turned out to be maybe one -- maybe the strongest ad campaign since steve jobs had someone swing a hammer. >> only aired that once. >> you know what else was a great campaign

my baloney has a first name and -- >> maybe they should bring that back. >> good luck >> i haven't even looked at kfc today. i am looking at newmont mining. >> how is that going >> well, it is going to be an interesting battle between barrick and newmont, barrick trying to own -- buy newmont unsolicited offer, all stock, no premium, focuses solely on the ability to deliver the synergies under the leadership of mark bristow, the man who ran randgold before it was bought and merged with barrick, now runs that combined company jim, it will be interesting. they're looking at the 40, the eight holders who own 40%. and they're going to be talking to those eight holders in newmont and saying, listen, we can deliver on these synergies much better than the benefit of buying goldcorp for you, newmont. newmont was fairly strong in the language yesterday and saying no thank you. and it will be interesting to see how this develops over the next, let's call it month.

the shareholder vote is the key here would be the key sort of in play arbiter. they are trying to lower the threshold for calling a special meeting, as low as 15% but this is going to be an interesting battle. >> an interesting, we often hear about deals that are synergistic. i haven't seen one more synergistic than this one. >> no. >> you've got a clear demarcation between the two outfits. only need one. >> it is all about one state i'll say correctly now, nevada. >> nevada? >> nevada. yesterday i said it incorrectly and i was -- >> i pronounced cannes cannes the other day. >> nevada. >> nevada? >> we talked about weakness in housing, wayfair, down today, up almost 80% there is stories out today, a billion dollars in losses for shorts >> well, wayfair is interesting because it shows you how bullish the market can be.

they had a loss that i really didn't like. and it was something that the short sellers, even in italy, the short sellers were, like, look at this loss. it is revenue growth that's what the market wants those were revenue growth stories. i had this company called live person on yesterday, if you ever -- i want certain shoes, they come back, what color would you like that's not a person. that's a live person and their numbers are just extraordinary. so if it is on the web, it is interesting by the way, didn't warren buffett stumble on the idea of the cloud? >> yeah. >> the cloud is doing fabulous including wayfair. and i don't know if you used wayfair, my daughter uses wayfair and it is basically, like, hey, i don't like it, i can send it back i tried to take a care intereha williams sonoma one block to try in our house, a deposit, anything, no

wayfair, they bring it to your house, you don't like it, chuck it >> they probably take it and throw it away. >> because it is damaged. >> yeah. it is great. ends up in a land fill >> everything ends up in a land fill except brunello i missed the sale by one day brutal just brutal. geez >> finally, guys, a couple board stories, nooyi to amazon and nominatingnikki haley. not sure whether she's replacing or adding. >> i want to congratulate indra. i think this is a board that you want to be on because think about how indra could have been instrumental, i think, involving the queen's debacle, can i call it a debacle. >> it is more than a debacle it will go down in history as the most bungled economic development idea that we have had -- >> sound like cuomo. >> i feel like it. >> makes him feel sick to his stomach. >> sick to my stomach too.

but, yes, she might have been helpful there. she might be helpful in india too with flip card flip card is walmart amazon's operations there and how to deal with the new law. >> 500 companies in the s&p. i think that's the one that she chose. there are 500 that wanted her. she picked the right one >> dow is down 93. led lower by home depot and cat. to bob pisani. bob? >> you're right, generally we're down today but not much, this is a potentially important day for the market because two potential issues are going to be potentially discussed or being discussed, brexit and the possibility of whether or not the u.s. might enter recession in 2020. mr. powell will be asked that several times. look at the market worries, what we had, the wall of worry we had decline and the issues that are out there. number one, aggressive fed, well, we were all worried about that in december that seems off the table now trade war, acceleration, maybe that, but sort of seems very unlikely at this point now we're faced with the brexit,

now we hear today a possibility of a delay or even a revote on brexit may be in the works well, that would be a major issue, delayed or off the table. and then the question of the u.s. recession, because that would impact obviously the earnings situation remember, economic data has been weak recently in the fed recently and its report on friday implied the trade wars were having some impact. so mr. powell is going to be asked, can you explain the recent spate of weak economic numbers, what is causing that, and if the trade war is actually abate, will the data improve if he says, yes, we think it will improve, well, all the people talking about earnings recessions, negative numbers and believe the stock market will have a hard time might have to stop those downward revisions and all of a sudden, earnings revisions might move upward. say in the midsingle digits. all the people say zero% earnings growth this year might have to go to 5% earnings growth a lot depends on whether or not you think some kind of recession

is coming and the fed thinks some kind of recession is coming if the market levitates into believing that ain't going to happen, then the earnings numbers may be too aggressive on the downside change in the attitude, that's very important meantime, today, if you look here, retailers doing a little bit better earnings reports numbers this morning not bad with the exception of home depot. but industrials and banks and emerging markets like china, that have been real market advances in the last few weeks a bit on the flat to slightly downside today the retailers, dillard's moving to the upside, autozone is up, macy's to the upside, home depot down 3%. but i want to concentrate on the buyback announcement because 15 billion is a lot of money. that's about 7% of the shares outstanding, the buyback they announced. if they reduce the shares outstanding, that's what we care about. home depot is one of those few i call them buyback monsters, what is a buyback monster this corporation that reduced their shares outstanding by more than 25% since 20 10

so we have 1.7 billion, now 1.1, they reduced 35% and will reduce it another 7% with this buyback announcement if they go through with the whole thing there is a small group of people, a few dozen out there, that have been able to do this this is a few of them. northrop, lowe's, gap, ibm, apple, part of the buyback debate if you keep everything else the same, the bottom line is the company like apple has reduced its shares 27%, earnings look better 27%, even withno change in anything else, any of the fundamentals and that's one of the reasons buybacks are still very controversial they're going on, though no reduction in the first quarter in buybacks here dow is down 98 points. carl, back to you. >> bob, thank you very much. bob pisani dow holding in about 97 points lower. interesting note out of deutsche today saying it is going to be tough for powell to outdove the market given what we have heard from all members of the

committee in recent weeks. >> i think he's -- he's not caught in a bind i think he can say, listen, i believe things will get better i think that the key thing is that there will be people even on our own air who will say things will get better, that means two rate hikes so that's going to be chilling he has to say, i think things get better, we have to give it a chance. >> in fact, the chairman set to testify, prepared remarks coming out now. to ylan mui. >> attributing the fed's patient stance to muted inflation pressures and government policy u. uncertainty. its main policy leader will remain the fed's funds rate. on the balance sheet, powell will say he's prepared to adjust any details of normalization in light of economic and financial developments overall, he's going to characterize the economy as strong, but he says that growth will be somewhat slower this year than last year. he said some data has softened in recent months, but he does expect some spending gains this

quarter. he also is going to highlight what he calls cross currents and conflicting signals. he mentions brexit and trade negotiations as contributing to uncertainty. he also mentions volatile financial markets and slower global growth saying the fed is going to monitor all of the issues on inflation. powell will say that declines in energy prices will push headline inflation below the fed's 2% target for a time. but he says the impact is still expected to be transitory. on the flip side, powell will highlight gains in the job market, including rising labor force participation rate, faster wage growth, and particularly stronger wage growth for low skilled workers. overall, guys, he says that employment and inflation remain close to the fed's objectives. back over to you. >> any thoughts on how the tone will differ today when he's facing chairman crapo versus tomorrow when it is chairman waters and the aoc.

>> i think the tone is expected to be fairly friendly between himself and chairman crapo he's had five contacts with crapo over the past year or so so he's done a lot of outreach to the banking committee in order to diffuse any potential flashpoints going forward. the statement is now also public and he's expected to question the fed pretty particularly on the balance sheet. he's not been a fan of qe, so he wants to understand the fed's thinking for exactly how it is going to continue this winddown and how it is going to finally end the normalization process. >> good context. thank you. a great piece yesterday looking at the way powell has kissed the ring on the hill in -- >> spent a lot of time as she reported going up there. much more so than his predecessor, janet yellen, which i thought was interesting. >> right. >> look, he said exactly if you're a bull, he's held the economy with so weakness, i don't think he wants to be part of the weakness. isn't that what a bull would

want didn't he just give you exactly what you wanted? >> the chairman now, taking his seat, a bit of a round of photography here as he grabs some coffee and we'll see how the -- >> maxwell house. >> how it develops. >> no. >> jpmorgan should be higher, okay i think they threw cold water on the growth i listen to what powell, what ylan is reporting, i wouldn't sell -- i'm saying a lot of stocks i wouldn't sell i'm sure david is thinking jim is just so rosy because -- right? >> i don't think of you as that rosy >> really? >> you've been all over the place. >> when you got worried, you got worried big. remember >> i did a bear market, right >> you were on it. >> take back that mink. >> you were on it. >> i was on it i got it right >> you did get it right. >> blind squirrel, i was cold today. i would not normally wear this old -- but i think that you're

getting a situation where there is a lot of good and remember yesterday was so strange because we were up so big and what drove us down? the decline in oil that's what turned the market down i think powell actually can -- >> the president wants oil to be in a -- he likes it to be 44 to 48 can't go anywhere else >> yeah. he doesn't impact the s.e.c. >> no. >> i'm sure he's saying, why am i get nothing credit for the fact that north korea doesn't fire missiles anymore? where is the nobel peace prize when i needed it >> he had abe nominate him for it. >> i think that we're going to see a reversal i don't know i think powell will say the right thing. the semiconductors are leading again. it is just incredible how good that group is. goldman had some negative stuff, you know, talking about losses and trading on the stock, not doing that badly, it was in the preannounce quarter. i don't know i -- i would love to be as

negative as the morning is but i -- i would love to be as negative as home depot is. down 7 just go buy home depot, 3% david, i want you to bid 183 for 50,000. >> okay. i got it. >> and take the top. >> i'm not allowed to own stocks, but we'll take care of that >> i remember those days hey, karen, go bid 183.10 for -- no, i said 50. >> bring jim a new computer screen >> get some ha, ha >> let's go to rick santelli in chicago. good morning, rick >> good morning, carl. of course, what chairman powell says is going to be quite important. but do remember, you know, fed chairman, chairwomen have a propensity to paint themselves into a corner and try to overtransparent a topic that isn't necessarily anything but a bit murky. he wasn't the heavy pouring bartender during the big days of

stimulus he's just following the parade i find it so fascinating at all the difference changes within the economy. he becomes the point person on -- granted, he has a lot of power. treasuries down several basis points we have a drift once again from the top of the range as we always close in on 270 we've seemed to back down. housing starts took a bill toll. hyg is an etf unlike the securities side on the spread side of a barclays high yield. as we watch these etfs, this particular is hovering at the best levels really since october. and once again, people could be nervous about the uncertainty of how markets and the economy acted at the end of last year, but there are many indicators that are showing that things just aren't as bad with respect to the dollar, the dollar/yuan has been under the microscope for obvious reasons and it continues to trade on the soft side. up just a smidge today but the zip code is still in july of 2018 and vix, can we talk enough

about the vix? haven't heard many talk about it remember, wasn't that long ago that it was trading 36 yes, 36. i can tell you the exact date. christmas eve. and where is it now? less than half of that today it's hovering. friday it closed at 13 you can think about the fundamentals, and that is always important but low volatility means they're packing those portfolios tighter with equities once again and finally, as i look up and we get prepared for consumer confidence, those feel-good indices like many data points have lost some ground. it's going to be fascinating to see if they play catch up the way the market did from those high volatility days around christmas. carl, david, jim, back to you. >> we'll get conference board in just about seven minutes rick, thank you. rick mentions high yield u.s. junk bonds on pace for their best two months in almost 20 years >> that's the -- we thought we were going to be in a recession

caused by powell now we know we're not because he's changed his tone. >> yeah, it's remarkable turn around 180 from december where there was nothing. no bids, no activity, no issuance nothing. >> and s&p, remember, it said that had them on the show. 19% decline in issuance. one of the worst -- the worst quarters ever. and i think we're putting that behind us and people are feeling better and we're reacting to news from the days when things are dark and now the dawn is upon us. >> guys, you did ask me earlier about what i was looking at, discovery. i want to come to it because it's one of the bigger losers this morning discovery communications reporting earnings it does appear on the conference call, the guidance may have been a bit disappointing. when they guided to u.s. affiliate growth of around 3% to 4% advertising growth up low single digit range. and for their fiscal year, 19 outlook, growth up midsingle

digit range. international advertising down it would be behind some of the selling in shares of diska >> i remember when that levitated in that fabulous interview you did. >> got added to the important platforms. >> great interview >> nice work >> thank you thank you. >> so humble >> you know, you can be humble i'll sing your praises all day >> okay. >> you and andrew, so impacted by that. amazon >> yes >> andrew, i wanted to give him a hug. >> oh, we're back to hq2 >> did you know that philadelphia is trying again >> why not >> one more time >> life-long new yorker. bad day for the city >> it really was >> what are you going to do? >> you have to move on maybe you have to move out >> oh, david, you're not going anywhere >> not for a little bit. >> you're upper west side. >> change it up. life is short. >> notice faang start --

>> you've got to go to the track soon, right? >> sky sky. >> put up a picture of sinatra next to -- >> why are you doing this to me? i was freezing cold. >> you looked great. >> you do look good. >> i lost a little weight, i -- i'm burning this suit when i'm done you'll never see this suit again. i'm going to shred it. i'm taking it to the chipper shredder, like buscemi >> one last point on tesla we're watching the s.e.c. news porsche announced its first all-electric suv and vw, investing $1.7 billion with ford in that self-driving autonomous venture other stuff going on in the sector >> when i met with the ceo of lamborghini, they don't have plans yet to do the electric,

but they're sold out like this is so important. electric is everything now, of course, lamborghini sold out of everything. there's a lot of money sloshing around among really rich people. $400,000 car but their suv for 160, 180, which is like an arm and a leg, but beautiful. and audi wants them to make more and more this is the pressure maserati -- >> they make it in a beautiful factory in milan >> so if tariffs kick in, you'll be paying -- >> no, you'll really be paying but people, one of a kind. but there is tremendous demand there's demand for the wealthiest china, tremendous demand still most of them go to the u.s. as a plurality. cat's coming back. >> cat's coming back >> what's on "mad" tonight >> i got some -- i got a chart that's going to blow you away, david. >> really? >> yes, one of the greatest charts ever. david has been critical of this

group. and i think you're going to like it >> okay. i'm going to tune in tonight >> yeah. >> one of the great charts >> i'm also going to review 5g intel, fabulous piece today. bob swan, i mean, maybe -- i don't want to say underrated because i really like him but he's got a strong hand we didn't talk about this conference >> congress in barcelona yeah, jon ft. ortfortt is there >> "mad money" 6:00 p.m. eastern time the powell headlines are out and we await the opening statement and the questioning and some color we'll turn to steve liesman with thoughts on what we know so far, steve >> carl, thanks. pretty much as expected, a relatively upbeat characterization of the growth outlook in the u.s. saying he expects it to be slower but still solid growth also the idea that the fed is going to be patient on monetary policy really just reiterating that

talks about cross-currents and headwinds with government policy and foreign growth along with some of the trade issues by implication in there maybe a bit of a disappointment on the balance sheets. its relation to current economic indications here and current economic data. but doesn't go so far as the minutes went where it said almost all are ready to discuss an -- ending the balance sheet run-off this year. i guess the fed has not made a formal committee decision on ending the balance sheet this year probably to come in the march meeting. the chairman not willing to get out in front of the committee as a whole when it comes to ending the balance sheet run-off. >> steve, ylon muay made a statement they are ready to adjust normalization if needed in terms of the things he can

add to today, does that strike you as one of the big ones >> i think so. what we want to hear powell say is that he's sort of with the committee in terms of ending it this year. the minutes said that explicitly i was just looking up the statement. almost all participants thought that it would be desirable to announce before too long a plan to stop producing the federal reserve balance sheet. it would be interesting to hear the chairman get behind that comment in the minutes from the january meeting. he hasn't done that quite yet. also another way we may be looking for is some kind of number from the chairman about where the balance sheet ought to end up he hasn't really given one since he was nomination testimony back when he first was before congress and he put it there between 2.5 and $3 trillion and now we're talking about a balance sheet that may end up north of $3.5 trillion. some guys are putting a number like $3.7 trillion

all we know from powell is that he's gotten up in front of the podium at the press conference and said, there is the market estimate of $3.5 trillion, but not really endorsed that number. >> all right we'll look for some formalization of the rhetoric we've gotten over the past several weeks. steve, thanks. steve liesman, don't go too far away we're looking for conference board numbers. see if we get a rebound. we'll go back to santelli for that >> this is a nice surprise expecting february consumer confidence number around 125 131.4. 131.4. that leapfrogs over our last unrevised 120 and change that was the lightest going all the way back to july of '17. and this 131.4 number takes us back towards november at the end of last year when we were at 36 and richmond fed, february number as well, triple the expectations comes in at 16 no revision on minus 2 in the rearview mirror.

present situation 173.5 versus 169.6. expectations, 103.4. and there was a revision late revision, last month's confidence it popped up from 120.2 to 120.17 a bit of bright news on the feel-good indice >> we await for chairman powell's testimony to begin. let's bring in laurie, shawn matthews and mike santoli is here good to see you all. laurie, man, confidence has not been shaken by lei, new home starts, retail sales that's pretty oright >> it feels like we're weathering the rough patch pretty well. it was priced in, in december, and we seem to be on some of these indicators, climbing out pretty well. >> does it feel like a reset back to october? >> i don't think so. i think it goes back to the

consumer is just feeling better because the markets are up this is a quid pro quo, right? the consumer is going to look at what's going on in the marketplace. but the reality is there are still structural issues out there. >> even though we know what stock ownership is like in the country. >> great >> why would the whole country feel -- >> unemployment is low plus the stock market up. headlines are good people feel good about that. >> before we turn to powell. >> it's really the global growth picture has been the swing factor and perceptions of whether that was bottoming out or not the domestic consumer, we're -- the market has moved past that concern that somehow that was following it up because housing peaked so long ago at this point we've almost not used it as a driver of new term growth. >> the two of you have been net cautious in your case and on tech in your case. have you -- has the narrative changed in house where you are >> on technology or -- >> markets in general. >> if you think about our market view 2900 on the year

i don't feel myself turning bearish. i think there's a bearish sentiment starting to brew up. we were more cautious in the third, early fourth quarter. we feel good about where things are. valuations are fine. sentiment doesn't look stretched to us. we don't think recession is coming on technology, still concerns about parts of the sector looking crowded and overvalued but that's a separate issue. >> all right i think we're going to dip in here and listen to the chairman as he begins his testimony i hope you can stay with us. >> thank you and good morning. chairman crepo, ranking member brown and other members of the committee, i'm happy to present the federal reserve's semiannual monetary policy report to the congress let me start by saying that my colleagues and i strongly support the goals congress has set for monetary policy. maximum employment and price stability. we are committed to providing transparency about the federal reserve's policies and programs. congress has entrusted us with an important degree of

independence so that we can pursue our mandate without concern for short-term political considerations we appreciate that our independence brings with it the need to provide transparency s that americans and their representatives in congres understand our policy actions and can hold us accountable. we are always grateful for opportunities such as today's hearing to demonstrate the fed's deep commitment to transparency and accountability today, i will review the current economic situation and outlook before turning to monetary policy i'll also describe several recent improvements to our communications practices to enhance our transparency the economy grew at a strong pace on balance last year and employment and inflationremain close to the federal reserve's statutory goals of maximum employment and stable prices, our dual mandate based on available data, we estimate gross domestic product or gdp rose a little less than 3% following a 2.5% increase in

2017 last year's growth was led by strong gains in consumer spending and increases in business investment. growth was supported by increases in employment and wages, optimism among households and businesses and fiscal policy actions. in the last couple of months, some data have softened but still point to spending gains this quarter while the partial government shutdown created significant hardship for government employees, the negative effects on the economy are expected to be fairly modest and to largely unwind over the next several months the job market remains strong. monthly job gains averaged 220,000 in 2018 and payrolls increased an additional 304,000 in january the unemployment rate stood at 4% in january. a very low level by historical standards and job openings remain abundant. moreover, the ample availability of job opportunities appears to have encouraged some people to join the workforce and some who

otherwise might have left to remain in it as a result, the labor force participation rate for people in their prime working years, which is to say a share of people ages 5 to 54, who are either working or actively looking for work has continued to increase over the past year. in another welcome developed, we're seeing signs of stronger wage growth. the job market gains in recent years have benefited a wide range of families and individuals. indeed recent wage gains have been strongest for lower skills workers. that said, disparities persist across varies groups of workers and different parts of the country. for example, unemployment rates for african-americans and hispanics are still well above the jobless rates for whites and asians likewise, the percentage of the population where the job is noticeably lower in rural communities than in urban areas and that gap has widened over the past decade. the february monetary policy report provides additional

information on employment disparities between rural and urban areas. overall consumer price inflation, as measured by the 12-month change in the price index for personal consumption is estimated to have been 1.7% in december, held down by recent declines in energy prices. core pce inflation which excludes food and energy prices and tends to be a better indicator of future inflation is estimated at 1.9%. and our january meeting, my colleagues and i generally expected economic activity to expand at a solid pace, albeit somewhat slower than in 2018, and the job market to remain strong recent declines in energy prices will likely push headline inflation further below the fomc's longer run goal of 2% for a time but aside from those transitory effects we expect that inflation will run close to 2% while we view current economic conditions as healthy and

economic outlook as favorable, over the past few months we have seen some crosscurrents and conflicting signals. financial markets have become more volatile toward year end and financial conditions are now less supportive of growth than they were earlier last year. growth has slowed in some major foreign economies, particularly china and europe and uncertainty is elevated around some unresolved government policy issues including brexit and ongoing trade negotiations we'll carefully monitor these issues as they evolve. in addition, our nation faces important longer term challenges for example, productivity growth which is what drives rising real wages and living standards over the long term has been low likewise, in contrast to 25 years ago, labor force participation among prime age men and women is lower in the united states than in most other advanced economies other longer run trends such as

relatively stagnant incomes for many families and a lack of upward economic mobility among people with lower incomes also remain important challenges. and it is widely agreed that the federal government debt is on an unsustainable path as a nation addressing these pressing issues could contribute greatly to the longer run health and vitality of the u.s. economy. over the second half of 2018 as the labor market kept strengthening and economic activity continued to expand strongly, the fomc gradually moved interest rates toward levels more healthy for a healthy economy. at our december and january -- september and december meetings, we decided to raise the target range for the federal funds rate by 0.25 percentage point at each, putting the current range at 2.25% to 2.5% at our december meeting we stressed that the extent and timing of any further rate increases would depend on incoming data and the evolving

outlook. we also noted we would be paying close attention to global economic and financial developments and assessing their implications for the outlook in january, with inflation pressures muted, the fomc determined the cumulative effects of these developments, along with ongoing government policy uncertainty warranted taking a patient approach with regard to future policy changes. going forward, our policy decisions will continue to be data dependent and take into account new information as economic conditions and the outlook evolve for guide posts on appropriate policy, the fomc routinely looks at monetary policy rules that recommend a level for the federal funds rate based on measures of inflation and the cyclical position of the u.s. economy. the february monetary policy report gives an update on monetary policy rules, and i continue to find these rules to be helpful benchmarks, but, of course, no simple rule can adquietly capture the full range

of factors the committee must assess in conducting policy. we do, however, conduct monetary policy in a systematic manner to promote our longer run goals of maximum employment and stable prices as part of this approach we strive to communicate clearly about our monetary policy decisions. we've also continued to gradually shrink the size of our balance sheet by reducing our holdings of treasury and agency securities the federal reserve's total assets declined about $310 billion since the middle of last year and currently stand at close to $4 trillion relative to their peak in 2014, banks reserve balances within the federal reserve, have declined by around $1.2 trillion, a drop of more than 40%. in light of the substantial progress we've made in reducing reserves and after extensive deliberations, the committee decided at our january meeting to continue over the longer run to implement policy with our current operating procedure. that is, we will continue to use

our administered rates to control the policy rate with an ample supply of reserves so that active management of reserves is not required having made this decision, the committee can now evaluate the appropriate timing and approach for the end of balance sheet run-off. i would note we're prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments in the longer run, the size of the balance sheet will be determined by the demand for federal reserve liability such as currency and bank reserves. the february monetary policy report describes these liabilities and reviews the factors that influence their size over the long run i will conclude by mentioning some further progress we have made in improving transparency late last year, we launched two new publications the first, a financial stability report shares our assessment of the resilience of the u.s. financial system and the second, the supervision and regulation

report provides information about our activities as a bank supervisor and regulator last month, we began conducting press conferences after every fomc meeting instead of every other one. this change will allow me to more fully and frequently explain the committee's thinking last november we announced a plan to conduct a comprehensive review of the strategies, tools and communications and practices we use to pursue our congressionally assigned goals this review will include a broad outreach to a range of stakeholders across the country. and the february monetary policy report provides further discussion of these initiatives. thank you, and i'll be happy to respond to your questions. >> thank you very much, chairman powell as i mentioned in my opening statement, you said the balance sheet normalization may end sooner with a larger balance than previously anticipated in the -- if i understand it, the ultimate size of the balance sheet will be principally driven by demand for reserves, plus a

buffer, correct? >> that is correct >> reserves have increased from $43 billion in early 2008 to about $2.8 trillion in 2014, if i understand correctly before falling now down to about $1.6 trillion currently. do you have an estimate of the amount of reserves that are estimated to be necessary to achieve the fed's monetary policy objective, and how does the fed's post crisis regulatory policy affect this amount? >> the quantity of reserves before the financial crisis, mr. chairman, was $20 billion, in that range, plus or minus. relatively small amount. one of the important things we did was require banking institutions to hold quite large buffers of highly liquid assets. one of those assets that the banks like to hold to satisfy those requirements is bank reserves

so the demand for reserves is going to be substantially higher than it was before the crisis and will not go back to those lower levels in any case we only have estimates based on market intelligence and discussions with financial institutions and those estimates have actually gone up substantially, just over the course of the last year or so. we don't have a precise notion but we believe that the public estimates that are out there of around a trillion dollars, plus a buffer as you mentioned in your remarks will be -- is a reasonable starting point and estimate of where we might wind up >> all right thank you. i've been a strong critic of the quantitative easing the fed has been engaged in and appreciate your explanation of how you intend to reach the appropriate balance of what the fed's balance sheet should be. i'll continue to work with you on understanding how we get to the right spot as soon as we

can. you mentioned in your statement, and in your report, that the labor force participation rate has started to grow. that has been one of the reasons we've seen such low economic performance, in my opinion, in the past years do you expect that the labor force participation rate growth that we have seen will stabilize and even possibly increase as we continue to move forward >> so labor force participation, if i can provide just a little background, was an area where the u.s. was at least comparable to other well-off countries and in some cases at the high end as far as women labor force participation by women was concerned. we are now at the bottom end of the lead table for men and women. and it's a very troubling concern. a big part of it, though, is driven by something we can't really change, and that is just

demographics as the country ages, labor force participation should decline at a fairly steady level. nonetheless, even allowing for that, we're lower than we need to be. so the gains we've seen over the past year have been very positive and very welcome from our standpoint we don't know how long they can be sustained, but we hope for a long time. i would just say that i think we need a broad policy focus on how to sustain labor force participation, not just through fed policy but legislative policy as well >> i agree i think that's a critical part of our ability to maintain the growth and strength of our economy. i have lots of questions, but just one that i'll have time for in the remaining amount of time i have and this will get to regulatory relief and implementation of senate bill 2055 senate bill 2155 provides sma smaller institutions with relief from the volcker rule.

there are still significant issues with the rule for institutions of all sizes, and i and six of my banking committee colleagues wrote to our financial regulators in october of last year urging further revisions to the rule to address outstanding issues such as the rules covered funds definition and its broad application to venture capital. other long-term investments and loan creation. in addition, i am concerned that the proposed accounting test may make the volcker rule more complex than is necessary. can you commit to using your significant regulatory discretion provided by statute to promptly address these outstanding issues >> yes, we received comments on those issues and more, and we thought some of those comments were very well taken and we're working hard to address them we'll do our best to do that >> i appreciate that senator brown. >> thank you thank you again for being here, chairman powell. yesterday your predecessor janet

yellen said she doesn't think president trump has a grasp of macro economic policy. is she right >> i won't have any comment on that for you, senator. >> all right guess i'm not surprised. it's troubling that the former fed chair, the woman that sat in your job and was very good at that job tells the press point blank that she doesn't think the president of the united states understands the economy. i think the american people continually and more and more understand that this president -- that many americans, gm workers in youngstown and hamtrammic believe he has betrayed workers in this country. that's becoming clearer and clearer. last week, former fed chair wall volcker raised concerns the culture of banking only focuses on the profits of the firm and the pay of the ceo i share this concern that we should focus on workers. since 1979, you know these numbers, mr. chairman, worker productivity has grown 70%

compensation for those workers has grown by just 11%. meanwhile, the top -- top 0.1% saw their earnings grow by 343%. this disparity as you know is even worse for women and people of color so do you think, mr. chairman, the fed's employment mandate is just to ensure that people are employed or do you think full employment implies a dignity of work, that is meaning workers earn a salary and benefits that let them fully participate in the 2019 economy in our country. >> our mandate as you well know is maximum employment. and we try to take that to heart. and our tool for trying to achieve that is monetary policy. i think -- and i think we were at a 50-year low in unemployment there are many other issues in the country. you've managed some of them. but honestly, to achieve some of the things you're talking about,

we need other tools. the fed can't effect every social problem as you well know. >> is that a social problem that fewer and fewer people, even though they are employed, wages are stagnant is that just a social problem >> well, wages -- i would say wages do go into our assessment of maximum employment. we look at wages i'm happy to say that wages, while they were very sluggish in the aftermath of the crisis have now started to move up in a way that's more consistent with past history and with inflation and productivity >> but not even close to productivity not even close to gains in productivity for most workers. >> so today, i know the chart you're talking about you're talking about over the longer run wages are now going up a little better than 3% inflation is right at 2% productivity was -- has been running -- sorry, inflation has been at 2% productivity around 1% so 3% is about right from that narrow standpoint.

wages have moved up. we welcome that. we don't find it troubling from an inflation standpoint. at this point. so we do look very carefully at wages as we assess maximum employment and assess whether we're meeting our maximum employment goal. >> let me put it a bit of historical perspective will rogers during the great depression provided a lesson we can learn from unlike water, money trickles up, not down he said the money was all appropriated to the top and the hopes it would trickle down to the needy, give it to the people at the bottom. the top will have it before night anyhow, but at least it will have passed through the poor fellow's hand they saved the big banks but the little ones went up the flue this observation is 89 years old. it seems the fed still thinks from your answer and from the behavior of the fed, the best way to help workers is to shore up big bank profits and hope the prosperity trickles down

over the last decade, it's been creative in how it accomplishes this i believe the fed has the authority and duty to be creative to help workers share in the prosperity they create. my staff will follow up with your staff on ways of doing that one more question. it seems like too big to fail is alive and well we are seeing potential merger -- we're seeing growth in most of the largest money center banks to regional banks as you know suntrust and bb & t, each with over $200 billion in assets decided to merge saying it was too difficult for them to compete with the money center banks, investment and technology what message does the fed send to regional and community banks about their future if the fed eventually approves this merger? >> well, we have a process that we go through in evaluating any merger it's set forth in great detail in the law and in our guidance

we will go through that process carefully, fairly and thoroughly and with a lot of transparency when we do get an application, we don't have an application yet on that matter we expect to get it some time in the next few weeks so we will do all of that. i would just say, we haven't prejudged anything and we're going to do our work on that professionally, carefully, fairly and transparently. >> okay. >> senator shelby. >> thank you >> chairman powell, somebody is doing something right. i don't know if it's the president or you or combination of everything. i think this is the best economy i've seen in my lifetime at this point. now the question is, how do we keep it going? how do we keep it going? that's part of your job, not totally, but you're into the money. how do you gauge inflation, for

example? there are a lot of ways to do it that's one you talk about price stability, maximum employment price stability you are talking about the stability of the monetary policy, the value of our currency and everything that goes with it how do we keep this economy going in your judgment >> so i think you said it very well we want to use our tools to sustain this expansion and keep the labor market strong and keep inflation near 2%. that's exactly what we're trying to do. and so we look around and what do we see? we see a labor market that is strong and continuing to strengthen job creation is strong wages are moving up. so that's a very healthy thing with inflation, we see it, in muted inflation pressures, even now with really historically low unemployment and a great recovery and ongoing recovery in the labor markets. we still see muted inflation pressures.

and that gives us the ability to be patient with monetary policy. that's what we're going to do. the committee has decided that with our policy rate in the range of neutral, with muted inflation pressures and with some of the down side risks we've talked about, this is a good time to be patient and watch and wait and see how the situation evolves. >> how does the abundance of hydrocarbons that we have found in this country in recent years, which is -- price is everything. how does that feed into the economy in a positive way? >> well, in a couple of ways, one, it's a big industry we have a very large energy industry now, thanks really to shale. in addition, if you think about the -- so that employs a lot of people, and that's a big thing in certain areas of the country. five or six major areas of the country have a lot of employment and economic activity. interesting on inflation, if you look back to the '70s. a lot of what set off the bad

inflation was an oil shock what we have in our very large domestic oil industry now is in effect a shock absorber. when oil prices go up, american oil shale producers and other oil producers produce more oil and so that offsets that shock and will prevent that shock from driving inflation up here. so it's been a real positive for our economy from a number of perspectives >> mr. chairman, how important is the certainty of good trade agreements to our economy and to the world economy? >> well, uncertainty is the enemy of business. >> absolutely. >> >> and businesses want a transparent set of rules, play by those rules, make longer term investments in hiring and that kind of thing. at the same time, we need the trade -- we're not responsible for trade. we don't comment on trade policy at all, but we have been hearing a lot from our contacts around the country really all year, this year and all last year about uncertainty. and we do sense it's been

holding back some decisions. probably had some minor effect on confidence and maybe activity but overall, certainty around trade and other government policies is very important >> as we look at our current account, the imbalance of trade with most of the world, does that concern you, and if it does, why? >> you know, the overall current account is set economically by the difference between savings and investment, you know, in our country. so it's really -- an identity that works that way. it tends to go up in good times, when americans are at work and earning well and buying things and the economy is strong. we tend to buy things. some of those things tend to be imported the deficit -- the trade deficit and current account balance can go down quickly in bad states of affairs. of course, over time, we'd like

to see balance both in savings and investment and in the trade balance. >> i don't have much time left, but we've discussed this before. cost/benefit analysis. last year when you came before the committee, we discussed here the information -- the formation and the policy affecting this assessment unit to conduct cost/benefit analysis on regulations. can you provide here an update on the work of the entity here and what have you learned, and what's going on? >> so the -- that unit is up and running now. and it's relatively new under taking cost/benefit analysis is something we've done really always and particularly in the last decade or so we've upped our game we have a particular unit focused on it. we're pleased with the progress it's making, and they're involved in the rule makings and assessment of everything we do so it's a positive development and we look forward to making it

ever stronger. >> my last question to you, a few seconds i have left, is, what's the health of your banking system that you regulate of the federal reserve, our biggest banks? >> i think our banking system overall is quite strong. record profits no bank failures in 2018 much higher capital. much higher liquidity. better risk management stress tests have really focussed banks on understanding and managing their risks better resolution planning overall, i think i think our banking system is strong and resilient we never take it for granted we're always looking for problems and cracks, but i would say, overall, our banking system is strong. >> thank you >> senator menendez. >> welcome, chairman as the number of legitimate cannabis-related businesses grow

across the united states, the vast majority of banks and credit unions are not offering services to these enterprises for legitimate fear of legal and regulatory risk. my home state of new jersey is moving towards legalization of recreational marijuana and i have concerns that these new businesses, as well as the existing medical marijuana businesses in the state, will continue to find themselves shut out of the banking system. when these businesses are forced to operate exclusively in cash, they create serious public safety risks in our communities. do you agree that financial institutions need clarity on this issue >> i think it would be great to have clarity of course, financial institutions and their regulators and supervisors are in a very difficult position here with marijuana being illegal under federal law and legal under a growing number of state laws it puts financial institutions in a very difficult place and puts the supervisors in a difficult place, too it would be nice to have clarity on that supervisory

relationship >> in a corollary question, related to the provision of banking services, is the ability for such businesses to secure insurance products a necessity for those looking to secure financing wouldn't it be helpful for congress to also consider the role of an insurance company as they move toward legalization? >> i believe so, yes >> february 7th, bb & t announced it planned to purchase suntrust in a deal that would result in the combined bank becoming the sixth largest commercial bank in the country with $434 billion in total assets as you may know, in 2008, bb & t's community reinvestment rating was downgraded due to substantive violations of the equal credit opportunity act of the fair housing act bb & t's most recent cra exam released last year also included a substantive violation of fair lending laws a violation which likely should have resulted in another downgrade to the bank's cra

rating i want to be sure the federal reserve is not following the occ and de-emphasizing its treatment of fair lending violations when it comes time to evaluate a proposed merger. what assurance can you give us that the federal reserve will treat these violations with the seriousness they deserve >> we haven't changed our policy on that. and we do consider that it comes in under -- in the law under convenience and needs of the communities served that includes consumer compliance and fair lending records and per formance under cra. those are all things we do consider in -- when we get a merger application >> when you are considering it, can you give us a sense of what the federal reserve's review of this bank or any other bank's community reinvestment act track record and compliance with fair lending laws will look like? >> we'll look thoroughly at it we'll look at the rating, of course, which i believe is satisfactory now

banks that have an unsatisfactory or less than satisfactory rating, i think, have a hard time but we'll look at that and consider public comments and a full range of information. any information that's presented to us, we'll consider. >> well, i ask this question because it seems to me that particularly at the occ, we have -- who has released a proposal without input from the fed or fdic contemflating sweeping changes to the implementation of the community reinvestment act in a speech last year, governor brainerd said the investment act was more important than ever she stressed that branches and deposit taking atms in ways that banks engage with the community. you also highlighted the importance of highlighting the cra and making sure they have access to financial services wherever they live can we get your commitment to build consensus among the fed governors before moving forward

with plans to change implementation of the community reinvestment act >> oh, yes >> i think it's important that you do everything in your power to try, t to achieve a unanimou vote on this before you move forward. many of us find this an incredibly important part of our law and increasingly diminishing reality of financial institutions that somehow think that they do not really have to fully engage and implement the law and ultimately still get away with it and so i think there has to be a strong message that that's not the case i hope you'll be able to deliver that message >> we are unified in our commitment to, you know -- to the mission of cra and to any revisions we, do we'll want to see they preserve that mission and enable banks to serve it more effectively >> thank you, mr. chairman >> senator toomey. >> thank you, mr. chairman chairman powell, welcome back. good to see you again. let me just start by once again

complimenting you and your colleagues on taking us a long way towards normalizing monetary policy in my view, this was long overdue, but you have been pursuing what strikes me as a prudent, thoughtful and data informed process of getting back to normal. so i want to thank you for that. quick regulatory question, if i could. i was pleased with the interagency proposal released by the fed and the other agencies deal with 2155 and specifically the tailoring of capital and liquidity requirements and enhanced standards i think the comment period closed in january on this proposal can you assure us it's a high priority to finalize these rules? >> it's a very high priority 2155 implementation is probably our highest priority and we're pushing ahead. >> any idea of a time frame by

which we could expect to see finalized rules there? >> i wouldn't want to put a date -- there's so many rules. a dozen rules we have comments on i can come back to you >> okay. but i'm glad to hear it's a priority >> it is >> we're obviously eager and i think you're heading in the right direction. as -- unrelated, as you know, the private sector has set up a realtime payment system, and i think a realtime payment system is a terrific innovation that's very, very good for our economy. my understanding is all depository institutions have access to it on an equal footing as they should to the extent that's the case, do you believe it's necessary for the fed to develop an alternative or competing realtime payment system? >> that's a judgment that we haven't made that we sought comment on that question and we had a range of views, and it's something we're thinking about. we are mindful that, you know, we don't, under the monetary control act, for example, we have to find that the services

we provide are capable of being paid for and also not something that the private sector can adequately provide >> right >> so woor loe're looking at thr question >> i'd be interested in hearing your thoughts on that as we go forward. the private sector is providin a perfectly viable and affordable and reasonable mechanism here on another topic as you know, there's been recent discussions both i think inside and certainly outside the fed about whether the fed ought to reconsider the way it thinks about inflation and specifically, the way i understand this discussion is, whether the fed ought to target a price level rather than a change in the price level. and specifically, if there were an extended period of time when inflation ran below a target, would it make sense for the fed to attempt to exceed the target

modestly or by enough so that over a long period of time you'd hit the average? my firstreaction is to be pretty concerned about that. intentionally running at an inflation rate above the target rate worries me given that historically inflation has been much harder to control and high inflation has been a bigger problem than low inflation but i wonder what your thoughts are about this topic >> these are questions, as you know, that are going to be the subject of careful consideration over the course of this year and beyond in our thinking the issue that we face is that rates have come down long and short rates have come down offer the last four years and are much lower. real rates and, of course, inflation -- add inflation back in, nominal rates as well. the implication of that being that in a typical down turn, the odds are much more -- much higher that we'll wind up back at the zero lower bound again.

in that situation, that fact there has the potential to drag inflation expectations down over time in our thinking, inflation expectations are now the most important driver of actual inflation. so we are trying to think -- and really the economics profession has been thinking about it for 20 years, since the experience of japan in the late '90s. thinking of ways to make that inflation 2% target credible, highly credible. so that inflation kind of averages around 2% rather than only averaging 2% in good times and averaging way less than that in bad times, which would drag expectations down. no decisions have been made. you raise a -- there are plenty of questions to be addressed but there's also a problem that we -- i think we owe it to the public to try to think our way through the best possible way to address that problem so that we can carry out our mandate. >> yeah, i understand the logic.

i understand the problem that you're wrest ling with i would just urge great, great caution on this for many, many reasons, not the least of which for whatever period of time the fed decided it would exceed the goalo it average ises the goal you don't have price stability during that time certainly not zero intentionally running above even the goal so i've got other questions, but i see i'm out of time. i just want to urge caution on that one, mr. chairman >> senator tester. >> thank you, mr. chairman, ranking member brown thank you for being here, chairman powell. i appreciatie your service and the work you're doing. i want to talk about's government shutdown that we just came through cost the economy $11 billion. i think that's a conservative figure there's at least one in this government that wants to use government services and public employees at a pawn when they don't get their way. but what i want to ask you about

is that we are faced with a debt ceiling coming up march 1. could you walk us through quickly if you could the economic impacts of failing to increase that debt ceiling >> well, the failure to increase the debt ceiling creates a lot of uncertainty in the first instance and then when you actually get up to the point where the government runs out of cash and doesn't -- we never passed that point yet. that's a bright line i hope we never do pass it but there's a lot of uncertainty that's generated and a lot of distraction from what is otherwise a good economy >> what would thohappen to our interest rates on $22 trillion worth of debt if we were not to do what we needed to do with the debt ceiling >> it's beyond even considering. the idea the united states would not honor all of its obligations and pay them when due is just something that can't even be -- >> would it double >> it would go up. i think -- we have a -- we have

the best credit rating we borrow at very low rates, and the world believes in our full faith and credit and i think that's not something i would -- >> it would have draconian effects on our economy overall >> potentially >> there are some that, in this body quite frankly, that say it would be no big deal do you agree with that >> no, i don't i think it would be a very big deal not to pay all of our bills when and as due. i think that's something the u.s. government should always do >> i agree senator shelby talked about the certainty of trade agreements. i won't ask you to grade this administration's trade policies, but from your perspective, how is this administration's trade policy affecting our economy positively or negatively >> you know, again, we don't play a role in trade negotiations i think it would be inappropriate for me to comment on their trade policy either directly or indirectly as i mentioned, we have been

hearing and everyone has been hearing from business about -- and particularly, i would think in your state, hearing about trade. >> exactly and in my real job i farm. and as we prepare for planting this spring, i can't tell you any commodity or any livestock that's going to make as much money, if any. and so i believe the minneapolis fed came out and said that bad egg loans were seeing an up tick -- a serious up tick, i might add, in farm foreclosures. are you concerned about that do you think it is a direct result of trade or is it something else >> i actually did see that piece. as you know, far better than i, the agricultural economy has been under a lot of pressure for really five years now. it's low crop prices, sustained

low crop prices, and that hasn't changed, and that's driven up, you know, bankruptcies under chapter 12, foreclosures and all kinds of bad things. so i think the bigger picture is just crop prices have been low obviously, the trade -- the trade issues haven't helped this year >> okay. and the federal reserve also suggests that farm bankruptcies haven't peaked yet >> wanted to interject here as we listen to the continued questioning of chair powell. a bit of news involving at&t not unexpected, although timingwise we didn't know when we'd hear from a d.c. circuit court that was reviewing an appeal from a lower court's ruling to allow that deal to acquire time warner to occur of course, the deal itself did close after judge leon ruled in favor of it and said the noncompetitive aspects that the government was trying to prove it did not prove in court.

and apparently, or not apparently, a federal appeals court on tuesday agreed with judge leon's ruling and beat back the attempts of the department of justice to potentially have them revisit the deal and even force at&t, should they have been successful in tearing out time warner from it the two companies, of course, are now one, although this final, or this what appears to be final ruling on the deal would appear to allow time warner or at&t to continue the integration of certain areas it might have held back from doing in the overall integration that's taking place between the two companies. so no big surprise here, though another setback for the department of justice as it did choose to appeal the lower court ruling and has failed to get the outcome that it had so desired from that ruling of course, it was all a surprise when the department of justice

chose to try to block at&t's purchase of time warner in the first place. let's get back now into the senate banking hearing where you hear fed chairman jay powell continuing in the q&a. >> thank you, mr. chairman good morning, chairman powell. >> morning >> it's good to see you once again. thank you very much for coming in today before i begin my questions, i want to underscore the importance of the insurance policy advisory committee that the fed is required to establ h establish. south dakotans have a very strong interest in preserving our state-based insurance regulatory system. i look forward to working with you and the new committee to find ways to promote the interest of our state-based system appreciate that. i have got a series of questions that i think -- i think i'm just going to put them in as questions for the record and ask you to respond later on. very seldom do we get an opportunity to have the chairman of the fed come in, in front of

literally the country and to share his thoughts about the direction of our country, in many cases, the financial systems that we have here and so forth. and i got to thinking this is probably an opportunity that we shouldn't let go by to talk about the impact of the federal government and its spending with regard to monetary policy as well and in particular, it seems that congress has a tendency to only make changes in the way it does business when there is a crisis at hand and i'd like to give you an opportunity to perhaps visit with us and offer, if not direction, at least an observation as to what happens when congress fails to take care of some of the safety net programs that we have in this country. i'm going to begin by simply recognizing that we have $22 trillion in debt clearly that debt is being financed that means there's competition for those dollars. the federal reserve on the other hand, it actually manages

through regular meetings and discussions and the kwaunquantie easing is an example where you as an organization have carefully selected how you'll work that through, how you will refinance and so forth but you manage it on a regular basis. congress has a tendency with its budget and the money it spends to not even look at a number of expenditures today with our budget we have about 31% of the budget that we actually vote on we vote on defense and nondefense discretionary spending we don't vote on, nor do we appear to manage social security, medicare, medicaid or interest on the debt about 70 -- well, close to 70% of all of that which we spend every single year. every single year in the -- for as far as we can see, we're going to run significant deficits would you care to comment on the way that congress manages or

does not manage the safety nets? social security, medicare and medicaid and what the impact has -- that has on our economy as a nation. >> i should start i should star try to stay in our lane which is monetary policy, bank regulation, financial stability. we have no supervisory role or role as a commentator, don't score bills. there's jct, cbo, omb, we don't do those jobs. i will say that and as i said in my statement, u.s. federal government is on a sustainable fiscal path by which is meant that debt as a percentage of gdp is growing and now growing sharply, growing quickly faster. that's unsustainable by definition we need to stabilize debt to gdp. the timing of doing that, the ways of doing it through revenue, spending, all those

things are not for the fed to decide >> but as perhaps for lack of a better term, one of the chief economists in the nation to be able to give advice to folks that are out there, to the country as a whole about things we have in our future and about the threats to our future, social security will go bankrupt unless we start managing it. is that a fair statement on the current trajectory? >> i think if i could say it this way, i think what happens over time is that we wind up spending more and more precious revenues to service the debt, to pay interest to people that own the debt as opposed to investing in things we really need, education, all the things we need to be investing in to compete in the global economy. i think on the spending side, the thing in my personal thinking, again, this is not the

fed's role, and i think in many people's thinking, the thing that drives fiscal unsustainability, single biggest thing is health care delivery. we deliver health care outcomes that are average for a well off country, but we spend 17% of gdp doing it everyone else spends on average 10% gdp. that's a trillion plus, way more than a trillion dollars a year we spend in delivering health care if i were in your seats, and i'm not, i think that's a good place to look. it is not that benefits themselves are too generous, it is that we deliver them in highly inefficient ways. >> if i could, i'm out of time, in other words, what you're saying is if we managed, if we actually managed the resources that we have, we could probably do a better job than what we do today where we simply don't even include it in the regular budget we vote on on a year-to-year basis. >> again, i can't -- i'm not

here to criticize congress, but i think it is a profitable thing to do. >> thank you thank you, mr. chairman. >> i agree with you, senator senator smith. >> thank you it is wonderful to see you again. i appreciate very much our conversation in my office the other day. i want to follow-up a little on what senator tester was asking about regarding the economic issues in rural areas. and i appreciate your interest in this discussion this was featured in the monetary policy report that you put out. it strikes me if you look at the overall positive numbers in the economy, it is a good thing. when you unbundle those strong numbers, you see inequities and gaps as you pointed out around race, gender and around rural areas. in minnesota, it is interesting. we have some rural counties where the unemployment rate is close to 2%. then other rural counties where

the unemployment rate is more like 6 or 7% so your monetary policy report highlights the impact, what's happening with rural workers without a college degree in particular, and the impact on labor force participation and how unemployment to population ratios recovered dramatically for college educated people, but less so for noncollege people. i'm worried about this disparity that it is causing can you tell us in your judgment why is this gap widening in rural areas. >> i thought that was very interesting. you'll note that like so many economic problems, there's no clear answer, but the way i would say it is the gap between rural and urban areas in

unemployment is not so big it really shows up in labor force participation. that's where it shows up you think of low labor force participation, first thing comes to mind is educational levels. people in the population, broader population, lower educational levels tend to be associated with lower labor force participation. even accounting for that, that doesn't account for much of the disparity. you know, it can be that rural areas are more associated with manufacturing activities which had less recovery than the service sector which is larger than the manufacturing sector. in addition, it all may be effected by people leaving rural areas. in other words, people that leave rural areas to go to an urban area where there are better job opportunities it is something that we're working on understanding it is a fairly stark disparity i think we all see it.

i was in mississippi a couple of weeks ago and certainly saw it there in rural areas. >> when people are leaving, does that suggest that the population that's left is older and -- >> or perhaps less able to find a job, less able to take part in the labor force. some of the people who have job skills may have left that area, leaving the remaining population with a lower labor force participation. that may be part of it >> would that not suggest it would be smart on our part this is not a fed policy, but it is a policy to increase our emphasis and investment in career and technical education, the kind of training you need in order to fill the manufacturing jobs in rural areas? >> so i do think we could use a national focus on labor force participation. that would be one piece of it. we don't have the tools. i can identify it as a problem, and it is a serious problem, but

i think that's a profitable place to look. >> the other thing i wonder is maybe people are not coming back into the work force because they can't afford to. in rural minnesota, you can't afford child care and it is not readily available. i wonder if part of the problem is jobs that are there aren't paying so how come pages don't go up? if there's a demand for labor, people are potentially there, why don't wages go up? >> as i mentioned earlier, wages have moved up from their very low levels of increase earlier i wouldn't say they're going up quickly but at a more healthy rate there are some things in the federal tax code where people lose benefits with the first dollar of earnings which again, it is not our job, but that doesn't sound like -- you want people to go to work, you want

them rewarded for going to work, seems like that's something we could look at, you could look at >> thank you very much, chairman powell i know i'm out of time i want to note that i appreciated the question that senator tester was asking about farm bankruptcies which is a real concern in minnesota and across the northern swathe of states i'm going to follow-up with a written question about how you see the farm bankruptcies potentially effecting overall economic strength of the country, especially in rural areas. thank you, mr. chair >> senator mccallisally. >> thank you i want to continue on the line of discussion you have been on in our conversation when we met, we talked about the labor force participation issue, and everywhere i go in arizona in the more metropolitan areas

anyway companies, the economy is doing great, the optimism is there, but they're lacking for workers. they're screaming for workers. it is up and down the skill set, not just in the trade craft, although that often tends to be those areas. so what we're seeing is this labor force participation rate is going up, ticking up, but there's clearly still this gap that's maybe holding back even more economic growth because of the mismatch of not having workers for the jobs that are there. can you give additional perspective on that and what within your power and within our power do you think we can do to incentivize increasing that number, get more people off the sidelines, get them skills they need to continue to provide more opportunities for people we represent. >> sure. this strong labor market and strong economy we have at the aggregate level is as you mentioned pulling people back into the labor force or encouraging them to stay in the labor force and not leave.

this is very, very positive for us labor force participation has gone back up above 63% and to be in the labor force by the way, you have to have a job or have looked for a job in the last four weeks. if you haven't looked for a job in the last four weeks and are not employed, you're not considered unemployed. this is very positive. we hope it is sustained. but that's sort of a strong labor market, pulling people back in. even with that though our labor force participation rates are lower than other countries that have anything like our level of wealth and income and economic activity it is not easy to say why. i think the fed's ability to address this is really just a function of trying to keep us at maximum employment there are plenty of people, and it is younger people, particularly younger m