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 men,

particularly less well educated younger men, but people across the gender spectrum and income spectrum and age spectrum, we have low labor force participation. i think we want the economy to grow and want that prosperity to be widely spread labor force participation gets both those things almost better than anything so i think it is something that ought to be high focus for people who have different tools than ours. >> i agree with you, and not necessarily within your tools but based on your perspective, what do you think is holding it back what's your perspective, what else can we do to remove barriers for people to get back in the labor force, to be working to support their families, themselves, meet their full potential >> part of it would be education and skills gaps. part of it would be the opioid

crisis and there just would be a range of things. i would think as we were discussing a minute ago, there are also some disincentives to go to work built into benefit programs i met with a group of women in west virginia last year who were in an apprenticeship program for carpentry, electrician, plumbing, steel work and that kind of thing and the hardest thing they had to do was to go to work in this program, which had 100% placement and which paid 9 or 10 bucks an hour because that was less than the meager benefits they were already getting. they had to take a paycut to go back to work and did it anyway, which is pretty inspiring, but i think we ought to have policies that reward and support labor force participation. again, they're not ours. i shouldn't get into the prescriptive business but i think it is important for the country. >> thank you i want to follow up on the rural urban began. we're seeing the same thing,

there's a disconnect in wage growth and labor force participation. do you take that in account and other perspectives of what we can do to not have that gap widening for those in the rural areas? >> we do in the general sense that we are learning, have learned this year that there's more slack in the labor market because people are coming back in if people weren't coming back in, the unemployment rate would be substantially lower, but they are and are staying. labor force participation is rising in either case. that tems that tells us there's room to grow that has implications for monetary policy. in terms of urban and rural, we look at that we look at those disparities, all kinds of disparities in a general way. they inform thinking about the state of the economy, particularly maximum employment

which is not -- there's no one number you can look at, you have to look at a range of indicators and that would be one of them. >> great thank you. >> senator jones >> thank you, mr. chairman chairman powell, thank you for being here today really appreciate it i want to stay on the urban versus rural divide a bit. obviously we see you've got senators on the committee with a lot of urban areas and it seems like there's one factor may come into play that's not quite so obvious that we have talked about, and that's health care. in 2017, the atlanta fed set out to study urban rural divide in the southeast, and one of the factors they kept noticing was impact on residents' health on the economic output. to simplify that's obviously a complex issue, according to the fed study in atlanta while the portion of workers who say they're too sick or disabled to work is roughly 6% nationally, that rises to over 12% and

higher in the rural south. from your perspective, what role do you think health outcomes play in economic growth, particularly in rural america? >> i think poor health outcomes are very much associated with a lot of social issues, including low labor force participation and lots of other economic issues, low lifetime earnings and many different things. those are obviously more prevalent in rural areas as you point out. >> i would assume you agree if health care is not accessible in those areas, i mean, if for instance in alabama we have seen rural hospitals closing left and right, 7 or 8 in the last seven years, with the absence of health care, it may contribute to people leaving those rural areas and urban areas. would you agree? >> hard to say people have been leaving for some time.

some counties as you obviously know have lost half their population in the last four, five decades >> if states individually, if states were to develop policies that expand health care in these communities, give affordable health care, access to health care, what would you expect economic impact to be? >> i think people who -- health care in principle would allow people to remain in the labor market, get them back in the labor market, keep them from getting sick and being out of the labor market it would be positive for the economy. >> i promise we won't ask you to testify in front of the health committee. senator tester made a comment as he was finishing up that despite, and there is a lot of good economic news, everybody agrees, there's a lot of great economic news out there, but i think a lot of folks do you any

other than the debt, do you see canaries in the coal mine we need to be looking for in this congress >> i would say that the outlook for the u.s. economy is a positive one, favorable one. there are always risks right now, i would say the predominant risks to the economy are slowing global growth, particularly china and europe. we have seen a significant slowing in growth over the course of the past year, and seems to be on-going and that can create head wind for the united states economy. i talk about brexit, that's an event risk which could have implications for us. here domestically, i think the outlook is generally favorable >> thank you senator shelby asked about the health of big banks, which you gave a pretty favorable report

on in december of this year right as the government was shutting down, the secretary of treasury issued a press release, he had this call with all of the big banks to discuss liquidity and make sure things are okay. next day he had a call with you and some other regulators. that sent some alarm bells through the country, and folks up here. can you walk through those two days, what was the purpose, what did you see was the purpose of the secretary of treasury four days into the shutdown, attempting to reassure folks i guess that the banking system was okay >> i would not comment on the secretary at all but our financial system as i mentioned is very strong record profits no bank failures the last year, capital is higher, liquidity is higher, risk management is much

better we never take this for granted we keep watching carefully, looking for problems, but i can say that what i was thinking in those days was we had significant volatility in the markets and i was just, you know, wondering, asking the question does that have any broader implications for the economy or for the financial system and the answer i felt was no, but it is something that part of the job is to ask that question, which i was. >> thank you, mr. chairman appreciate you being here. >> senator kennedy >> mr. chairman, thank you for coming today my good friend senator brown lamented that the financial institutions are making profits

now. that's a good thing, right >> we need a profitable financial system to have a well capitalized financial system. >> well, is it better if banks are making money or losing money from macro economic standpoint >> i think we want banks to be profitable and strong and more capitalized than they have been. >> i want to talk about the government shutdown. tell me if i get this wrong. cbo estimates $11 billion impact to our economy we'll recover about 8 billion so the net loss to the economy is $3 billion does that sound about right? >> all i know about that, that's what i've read >> that's what i've read too got to trust somebody. i'll take cbo at their word. we have $21 trillion economy, is that right >> sounds about right. >> as a percentage of our economy, that $3 billion loss is

1.5% of 1% is that about right? >> you did that math very quickly, senator i believe you. i'm going to trust you on that >> good. that's an in fan 'tis mal impact, is it not? >> very small. >> let's talk about the economy. some economists said if we passed the tax cuts and jobs act that our economy would overheat. those economists were wrong, were they not? >> the economy did not overheat, has not overheated. >> we're having growth without inflation, is that correct >> we have inflation at target. >> right around 2% >> around 2%, 1.9%. >> and we had more business investment, is that correct? >> we had solid investment first part of last year. reasonably good in the second half the outlook is for business

investment. >> wages are up, correct >> yes, they are all our wage measures are up to 3% or better, a very good thing to see >> i want to get your opinion on, and i'm not trying to ask you to make policy, i'm asking you as fed chair, what could we have done in hindsight to encourage more business investment in plants, machinery, equipment, software which could have created more jobs and hopefully increase productivity, specifically let me ask you this there's legislation to prohibit share buy backs. is that a good thing i know share buy backs have a positive economic impact but if you have legislation that cut business taxes but also said

you can't use that money to buy back shares, you have to invest it in your company, or pay shareholders dividends, what would you think about legislation like that, just from an economic standpoint >> well, i think first of all that kind of decision is not in our hands, that's for you to make. >> i am asking you as an economist. >> i would say the goal, i guess i would just say the goal of having prosperity be widely shared is one that we all share. i think the thing about -- when you talk about companies and what they do with profits, how they allocate capital, in our system we always left those decisions to the private sector, to private hands, and i would want to understand the consequences of changing that and i would want to look at whether there aren't other ways to achieve the goals that i think we all want which is to have prosperity be widely

shared >> are there other ideas to make sure prosperity is more widely shared >> it ties to things we talked about. labor force participation is a win for the economy to grow faster, people that are not taking part tend to be ones with lower education, at the edges of the labor force. we are underperforming as a nation on this compared to our peer group >> why >> that's a good question. it is a problem that stands out here compared to other countries. >> is it because we pay people too much not to work or because people don't have the skills or because they don't have access to the jobs? this is my last one, mr. chairman >> i think there's a range of perspectives on this, and there's some wisdom in a lot of different ideas. best thing to do would be to get

some proposals that would have broad support and work on those. i think quite a bit of it is skills, education, aptitude, and not having disincentives where people lose their benefits with the first dollar of pay. that seems like a disincentive to work. none of this, by the way, is in the fed's hands, but since you asked. >> you're doing a great job. thank you. >> thank you >> senator warren. >> child care. thank you, mr. chairman, thank you chairman powell for being here earlier this month two giant banks, sun trust and bbt announced they intend to merge the new too big to fail institution would have about $450 billion in assets and become the sixth largest bank in the united states. now, as you know bank acquisitions and mergers don't go through on their own, they have to be approved first by the fed. so last spring i wrote a letter asking for data on the number of

merger and acquisition applications received by the fed, and the number that had been approved over the last ten years. chairman powell, when you answered my letter in may of 2018, how many mergers and acquisition applications from the banks had been received since 2006, do you remember? >> no, i don't have the number. >> 3819 sound right? >> yes >> good. and do you remember how many of those 3819 applications you denied >> no, i don't >> would zero sound right? >> if you say so >> well, you said so it is your letter. chairman powell, has the board denied any applications since you responded to my letter in may? >> i would just, if i can offer a little context >> let's get this part out that's what i'm trying to do >> i don't believe we have i think what happens is that

people don't apply or withdraw applications. >> that's what i'm going to talk about. 0% of applications for mergers and acquisitions since 2006 have been denied. that doesn't mean all potential mergers and acquisitions make it through the process. 13% of applications are withdrawn before they get a decision according to your letter, chairman powell, quote, prospective applicants may discuss a proposed transaction with federal reserve system staff prior to filing and applicants discouraged from filing applications where it is apparent that the applications would not meet all of the statutory factors required for approval, end quote. so you think that -- if you think a proposed merger won't be approved, you discourage the bank from following through. is that right? >> in some cases i think that would be in cases where it is clear there's a statutory problem.

for example -- >> but you approve 100% of those that go ahead and apply. >> unless they're withdrawn. >> that's what i said. so you encourage them to withdraw if they're not going to get an approval? >> but they can file and then withdraw. >> the point is they withdraw if they're not going to get, because of a conversation you have that's a nonpublic conversation so this is a formal process required by regulation in order to do an approval, people who object to the merger have an opportunity to file a protest. that's how the process is supposed to work that would include, for example, communities that are worried that local banks may close following a merger or acquisition, employees that are concerned about losing their jobs, state officials that may be concerned about decreasing competition and so on. you explained that consultation with a bank can start before the

merger is announced publicly when is it that the public can actually file protests before or after the merger is announced? >> so i think the process is that we receive an application for merger which we have not received yet we expect to receive it i am told sometime next month >> and when will the public have a chance. >> then. >> and that's true in all of these, right the public doesn't get a chance to comment until after the application is already filed but the application is only filed after the banks have had a chance to have this quiet conversation with the feds i just want to get this straight you and the banks get together in the back room and grease the wheels before the merger is announced and if you're not going to approve the merger, you tell the bank in advance and they go figure out something else if the public wants a chance to weigh in, they have to wait

until you've already made a decision no wonder you approved 100% of the merger applications. not a single no. your approval process itself appears to be a rubber stamp, that everything is happening behind closed doors. so the question i have is about the sun trust and bbt merger is this one just going to be another rubber stamp you already made the decision behind closed doors before the public gets a chance to weigh in >> no, not at all, no. we're going to conduct a very fair and open transparent process. i think our obligations under the statute are clear and quite broad. we'll be hearing from groups of all kinds and going through our process carefully and thoroughly. >> it is just that in the last 3819 merger applications which were all approved without a single one for which you said

no, this time you're going to listen to comments from the public that might cause you to say no i just have to say, i'll bet that suntrust and bbt looked at the 100% merger success rate and saw what everyone else sees and that is that the fed works for big rich banks that want to get bigger and want to get richer and everyone else pays the price for diminished competition, worse service, for higher prices, for employee layoffs, for the risk we have yet another too big to fail bank on our hands. i just think it is time that we put down the rubber stamp and that we let the public and everyone else weigh in before we create yet another too big to fail bank. thank you. >> senator cotton. >> thank you, chairman powell, for being here i want to talk about stress tests for mid size banks

reform increased the threshold for stress tests. >> you heard senator warren questioning fed chair powell about merger and acquisition approvals among major financials, he was asked about cannabis banking, effects of trade on agriculture, urban rural divide keeping our eye on that. meantime, the dow has managed to go positive. and the s&p to 2800. steve liesman has a recap of what we heard so far >> in terms of turnaround there, carl, and the chart is interesting, the market was weakening and then fighting back up part of it has to do with the chairman's dovish attitude about the labor market he said we're learning there are more people in the labor market that they can come back into the labor market and that has implications for monetary policy there's only one implication that could mean, which is that federal reserve remain lower for

longer if that's the case because there's not a danger of the economy overheating. he said specifically the economy is not overheating one more thing i want to point out, i don't know if you remember, i have been trying to get the fed chairman to over time publicly support or endorse a number for the size of the balance sheet. he went further today than he has gone before. he calls the average market estimate contained in new york fed surveys of $1 trillion for bank reserves, quote, reasonable as far as i can tell, that's the first time he endorsed that number let me do some math for you. $1 trillion of reserves is st t consistent with 3.6 or 7 trillion balance sheet, the fed has 250 or 350 billion to go bottom line on that, the fed can get done early this year, toward the end of the year with balance sheet runoff, if indeed that's where the committee decides to go >> steve, a lot of commentary

now. so far this has been something of a low drama affair. we will continue to monitor this for more news and comments steve liesman. thank you. we'll go back to the hearing >> we need to work hard to make sure the message gets out clearly and that we find our people do listen, so we're alert to that. >> thank you i want to turn to a different question there has been talk about the unemployment rate, and participation rate which is increasing, talking wages and wage growth. there was recent data highlighted in a "the wall street journal" article that said despite these factors that income to employees in the form of pay and benefits continues to decrease, down to 52.7% of gross domestic income.

by the same token, business income, profits too businesses, whether the biggest corporations or small businesses have gone from 12% to up to 20%. can you give me thoughts on why we're seeing more income going into the hands of owners in this country and less in the hands of workers? >> yes that's the labor share of income is what you're talking about really if you look back through history, it zigs and zags, but generally zigged and zagged at a higher level around 2000, it went down sharply for ten years, broadly speaking has been flat since then it goes up and down, but it is basically flat the question is why. it is a really good question there are a lot of different answers. honestly, there's no clear easy answer as a separate matter, wages are growing at a level that makes sense.

the problem is the level, not the growth rate. wages are growing, wages and benefits growing around 3%, a little better. a healthy growth rate in an economy with 1% productivity increase, 2% inflation problem is there were ten years that didn't happen from 2000 until 2010 it can have to do with globalization. that was around the time of china joining wto. some connect it to that. in any case, we welcome wage increases for this reason. >> i do as well. i hope we'll continue to see them, see more of that growing economic pie going into the hands of workers thanks >> chairman powell, thank you for being here i have concerns about discrimination in lending. i want to ask you a follow-up question to the record that i submitted last time you were here and it vofz the federal

reserve enforcing fair lending laws i asked you how the fed would improve oversite of fair lending rules. in your response, you mention that fed examiners evaluate each financial institution for fair lending compliance so i guess my specific question is how would examiners evaluate whether a lender might steer consumers to higher priced loans. in written response, you mention credit scores, can you expand on what the examiners would consider to ensure against consumers steered to high priced loans? >> i think examiners who examine for that i believe are trained to look for patterns of that nature >> specific criteria anything specific they look to that you're aware of >> i have a general understanding of this. i should come back to you with more details. >> thank you i appreciate that.

i would also like to know as you come back and answer this question, would examiners consider incentive pay tied to higher priced loans, with the existence of bonuses for bank staff that provide a loan with higher fees and interest rates be a red flag to examiners if you could expand on that in writing, that would be fantastic. appreciate that. >> happy to do that. >> the other issue that's important because it is an issue in nevada and around the country, affordable housing. in response to submitting questions for the record, i asked if rapid rise of housing costs was encouraging consumer price models to assume higher threat of inflation. do you think the fed raising interest rates was a factor in rising housing costs >> i think higher interest rates certainly played into higher mortgage rates and that will have had an effect. >> what about cost of building

that apartment or house? >> yeah. i think materials costs and what you hear from builders is labor shortages, and higher materials costs, some of which are effected by tariffs of course, but you hear them under tremendous cost pressure i think that was flowing through into higher prices and that was making the affordability calculus, and at the same time rates were going up, and i think that all together that picture slowed down housing construction in the last year or so ralts are now down a little bit, 50 basis points, so we're seeing a little bit of a pickup >> how do you compare pickup of higher interest rates on construction compared to higher prices for goods that may be caused by tariffs? >> you know, i think that higher costs, depends, from standpoint

of the consumer, what matters, what does the house cost i think you'll find that the interest rate has an important, is a very important thing from the consumer standpoint. setting the price of the ouse, it is not the interest rates, it is costs of materials of and labor. >> you talk about higher cost of labor. could that also be due to curbing immigration? >> quickly, breaking news. we'll take you back to the fed chair in a moment. we have news breaking on tesla phil lebeau has that >> carl, what we have is regarding fiat chrysler. shares of fcau, a stock that will be in focus today, the company announcing a major expansion in the detroit area, adding 6500 jobs, that's how many plans to add in the detroit area, investing $4.5 billion in new production here's how it breaks down. there will be a new plant built in the city of detroit, converting an old engine plant into a new plant, adding

production at five other facilities, all of this to expand for the jeep brand. two new jeep models. this is a stock, guys, that's been under pressure. again, announcing a major expansion in the detroit area. 6500 jobs. $4.5 billion back to you. >> my apologies. i thought you were referring to the judge ordering musk to explain by march 11th why he shouldn't be held in contempt. that also broke in the last half hour back to the hill and fed chair >> student loans and research that shows that for students that can't discharge or service loans or discharge them that those loans can weigh on them over a long period of time, have real effects on economic and personal lives over time. >> and ability at home ownership, is that correct >> yes. >> thank you, chairman, for being here >> thank you senator moran. >> thank you very much let me start with what i think is a straightforward question

followed by a more complicated one. 18 of my senate colleagues join me in a letter calling on regulators to provide a more significant reduction in reporting burden of our smallest banks in the first and third calendar quarters as required by section 205, 2155. we're looking for a greater difference in those reporting requirements than what has been proposed according to the current proposal, banks with less, the smallest assets would save 71 minutes a quarter. not a significant change based upon the proposed rules. can you speak to whether you think our concerns about smallest banks and call reports have been addressed? >> senator, as you mention that rule, we put that rule out for comment. we got a lot of comments, got your letter, and we're carefully reviewing the comments

i think what we are trying to balance is, we're trying to find the right balance. we'll certainly take into account comments that we get >> well, i appreciate that i would want you to do that. if the end result of 2155 is as modest as this appears to be, we have not achieved our goal that can't be the congressional intent, at least in this instance, on this topic. let me reiterate that. then let me talk about what i think is a difficult topic for me to have a conversation with you about just because of its complexity key goal of this legislation was to provide qualifying community banks relief from complexities and burdens of current risk based capital rules, but we of course want to ensure they maintain a high quality of capital consistent with the current rules. the recent interagency proposal for community bank leverage ratio allows certain banks with less than $10 billion in total

assets to elect to use the cblr instead of the current risk based capital requirements if the cblr ratio is above 9%, current ratio required being 5%. under the new proposed framework, a bank would be considered less than well capitalized if it fell below 9% and hasn't opted out of the clbr, that would trigger certain restrictions and requirements. as currently written, it seems to dangle incentive of reduced regulatory burden, but with capital requirements 4% higher for small banks to qualify would it not make sense to leave the existing pca framework unchanged, allowing small banks to maintain well capitalized status and begin reporting capital ratios under the current based risk capital rules when cblr falls below 9%?

>> that's another rule we have out for comment obviously and senator, can i ask, is that a comment that you have -- >> if we haven't, we can. >> i would encourage you to do so these are really important tailoring proposals, mandated by 2155 and we want to get them right. i understand the question and we'll look carefully at that >> all of the regulators working well in implementation of 2155 >> i believe so. i think we share the goal, first of all, putting high priority on implementing 2155 but on tailoring it for smaller banks i think all of us feel there's a lot we can do without undermining safety and soundness. we want to find those and do them i had many conversations with regulators as long as i have been on the committee and in the

senate it is something that's always, and not suggesting this about you, but always something that's highlighted, certainly talking to me about its importance, but hard to find change that occurred voluntarily by regulators to make burdens lesson the community banks and that's why 2155 was so appealing, that we failed to get regulators to change their behavior, and 2155 seems to me to be the option, the only option i have seen that actually might force change when it has been reluctant to arrive so i care a lot about that in the 15 seconds i have left, i remind you that agriculture as you and i visited about last time we talked is in significant -- faces significant challenges i want to make certain our community banks, our relationship bankers don't lose ability to consider character and history.

remind you that we have generational bankers along with generational farmers whose grandfather bankers have taken care of grandfather farmers, down through the generations that has continued, and community bankers know who has character, who has ability to pay, who has history to demonstrate that, and we can't tie their strings or the agricultural challenges the economy faces today, ag country's problems will be exacerbated if you take way the ability to account those factors that are not crossing a t and dotting an i thank you. >> senator van hollen. >> thank you, mr. chairman chairman powell, thank you for your service i want to focus for a moment on the impact of the tax bill, the tax bill that passed about a year ago, especially taking a look at the banking industry because i think in no other sector is it clearer as to what a huge give away this tax cut

was to big financial interests i don't know if you saw the bloomberg analysis that was conducted earlier this month they looked at the 23 u.s. banks that the federal reserve says are most important to our economy and concluded that those 23 banks got a $21 billion tax break windfall did you see that analysis? >> i don't know that i did >> would you be surprised to learn that they use much of that windfall for a major stock buy back >> i honestly don't know i know the tax cut reduced taxes for big companies that were very profitable >> they did. and it was $21 billion windfall. a lot of it used for stock buy backs that helped a lot of the executives what's interesting is during

that same period of time we saw a loss of 4300 jobs among the 23 banks. does that surprise you, big tax break, yet loss of jobs among the banks? >> must be several million we're talking about. >> of course, it was sold on the promise that we would see all these new jobs generated i want to ask you about the increase in wages. obviously it's always good to see increase in wages. of course nominal wages are only half the equation, right you also have to look at rising costs when you look at real wages. isn't it the case when you look at real wages and rise in real wages in the last term of the obama administration, real wages grew faster than they have since the beginning of the trump administration, even with the tax cut. isn't that the case? >> you know, i just don't look at it in terms of those time frames

i would say that the way i would say with wages, if you look back to 2012, just to -- look at the four major wage and benefit increases, things we track, it was around 2%. all of them around 2%. now 3% or better part of that is just that the labor market continued to improve. >> sure, of course you testified you've also seen up tick inflation and costs, right? so the result for real america is how much increased wages that are coming in, what the purchasing power of that will be if you could take a look at that, get back and confirm whether or not that's true, the figures i've got suggest that you saw more rapid increase in real wages in the last term of the obama administration, which just gets to the point about there's a lot of hype about the tax cuts let me ask you about student loans. my colleague just asked you about that you just testified we have $1.5 trillion of student loans i think the fed just reported

that delinquent student loans reached 176 billion in the fourth quarter of 2018 you indicated this is putting a lot of stress on students who are trying to get out there and buy their apartments, rent their apartments would you be in favor of allowing students to discharge debts in bankruptcy just like banks can? >> so i think it is important that students be in position to borrow, to invest in their education. it is important they get proper disclosure about risks are it is not a fed, someone asked me in this committee a year or so ago that question and i did answer it directly, but i would say it is not really for -- >> let me ask, is the impact of student debt in your view impacting the economy in a negative way, the fact that

these students are stuck as soon as they graduate trying to payback loans that they apparently capit apparently can't repay. >> for students that can't repay loans, growing amount of research shows those people can have longer term negative economic effects some people invest in their education, borrow money to do it and it works out well for them but for those that don't, it can be quite a negative. >> that's a lot of people that can't now. you reported a record delinquency rate last quarter. last thing i would say, mr. chairman, while i have the chairman of federal reserve here, i will keep after you on faster payments issue. makes no sense that mexico south africa, soon the european will have the ability to clear payments while we don't. cash checked friday will appear middle of next week, and millions of americans are paying

a lot more in terms of late fees and pay day loan interest rates. loan sharks because of that. i hope you give the same attention to that issue as you're giving to some of the other issues discussed this morning. >> thank you >> thank you, mr. chairman thank you for being here and for perseverance these are big committees i have two questions for you one is i am always amazed at the economic experts in this committee and revisionist views of history let me throw some facts out, leading to a question for you. this recovery is real. we're going about 100 basis points more than the last administration just after two years. cbo says if you grow .4-tenths of 1%, you more than pay for this tax bill. second, median income is the highest it has been in the united states. 5 million new jobs created,

lowest unemployment in 50 years, lowest hispanic unemployment measured my kerch concern is with labor export issues and interest rate issues we had nine fed fund increases in the last two years, two-and-a-half years with our debt, this is the question i'm trying to get to, you know where i'm going i appreciate the time you gave me recently in a private conversation the federal debt bothers me. it is overhang on the economy and ability to drive the economic wherewithal of every american the national debt is the greatest threat to national security, according to military experts. today we turned $22 trillion of national debt if you include all of the debt that we have as a government as i understand, there are $200 trillion of debt in the world. 60 trillion of that solid. we have a third of that. five% of the world's population

has a third of sovereign debt. the projection is with that increase, 2.25%, with our size debt technically about $450 billion of new interest that we have loaded in there, and yet of that $60 trillion of sovereign debt in the world, about 11 trillion of that is laid out at negative interest rates. much of that in the eurozone my question is are there carry on contagion issues out there that could negatively impact this recovery and continuation of this recovery, independent of what we do fiscally or monetarily in the u.s., due to negative interest rates around the world? >> i think negative interest rates you're seeing are reflection of kind of a risk off mood and slower growth in china and europe in particular europe has had a good strong year in 2017, then slowed down over the course of '18 and seeing more of that now. i think that's what you're

seeing i think it really is through slower global growth for the united states can be a head wind, just as very strong, 2017 was a year of synchronized strong growth around the world a very good year we were feeling a tail wind from that that turned into a head wind our economy, the outlook for our economy is still a favorable one, positive one. nonetheless, this will be a head wind. >> there's growing debate in congress now among some of my colleagues about advocating change in how monetary and fiscal policy work these people advocate a modern theory they want to spend now, spend later policy that uses massive annual deficits to fund tremendously expensive like medicare for all, free college for all, make every structure in

the u.s. efficient in ten years, and universal basic income whether you work or not. under this landscape, proposed the fed would keep interest rates artificially low and physical d fiscal policy driven by congress what obstacles do you anticipate and how successful has fiscal policy been in terms of managing either inflation or interest rates? >> i haven't seen a carefully worked out description of what is meant by mmt, what you're mentioning it may exist but i vice president seen it. i have heard some extreme claims attributed to that framework, i don't know whether that's fair or not, but i will say this. the idea that deficits don't matter for countries that can borrow in their own currency i think is just wrong. u.s. debt is fairly high at a level of gdp and much more importantly than that it is growing faster than gdp. fairly significantly faster.

we're not even close to primary balance which means that the deficit before interest payments we're going to have to spend less or raise more revenue in addition, to the extent people talk about using the fed, our role is not to provide support for particular policies, it is to, and that's central banks everywhere, it is to try to achieve maximum employment and stable prices. so that's really what it is. i think decisions on spending and controlling spending, paying for it are really for you. >> thank you >> senator shots >> thank you, mr. chairman chairman powell, thank you for your service thank you for your stewardship pg&e, california's largest utility filed bankruptcy last month, partly as a result of liability costs from climate related disasters. the damage from 2017 and 2018

wildfires exceeded $30 billion, more than pg&e assets and insurance coverage combined. climate risks threaten many sectors of our economy, real estate, agriculture, fisheries, industries with supply chains are at risk. the government estimates storms, floods, erosion, rising sea level threaten approximately 1 trillion dollars of national wealth held in coastal real estate according to freddie mack, some impacts of climate change may not be insurable. a time frame falls well within the time frame of the 30 year mortgage these properties are worth about $117 billion and contribute 1.5 billion towards property tax

base banks, insurance companies, other financial institutions are all exposed to the risks, that's why bank of england announced it is planning to include impact of climate change in its bank stress it's going to put climb change into next year's stress question do you agree that climate change creates financial risks for the individual financial institutions and for our finance sim as a whole >> let me say, we don't formally or directly including climate change in our supervision, but we do require financial institutions, particularly those more exposed to natural disaster, we do require them to understand and manage that particular operating risk. so, finish if you're a bank on the southern coast of florida and subject to hurricanes, we definitely require you to have

plans and risk management things in place to deal with that you would pick up natural disasters in that kind of thing, which are associated with climate changes. >> do you think your staff and approach this this, which haas has been built properly over many years and pursuant to the statute, do you think you're moving fast enough to acknowledge the accelerating risks of climate change over the last two or three years? do you think there's room for you to do a scrub of whether or not you're fulfilling your statutory mandate? i get you're supposed to pick up any risks related to natural disasters. the question is whether you really loaded in the latest information from the scientific community to go back to these banks, to go back on reits, or lenders who have stranded assets or whose supply chain a particularly dependent on a certain weather pattern which is

not materializing anymore? do you think you're doing enough in this space in or let me phrase it another way. are you confident you are doing enough in this space >> it's a little like cyber-risk should you ever be confidence you're dough enough in that space? i think we're klee-eyed about the coastal risks and natural risks, but it's a fair question. you know, we'll go back and look at it again. >> could you please respond in writing as it relates to this specific question. the bank of england and 29 basics and supervisor around the world are moving to incorporate on client change in their risks. you know another part of the mandate is to engage with counterparts abroad. do you think the federal reserve should be engaging with its international counterparts in those -- >> we are involved in those

bodies as i mentioned, we don't formally take climate change into account in our risks, but i think the consequences are things that we do supervise for. >> i just think that you've been extraordinary in terms of your ability to withstand political pressure and look at the data and do what's right for the health of the economy. i don't want this to be an exception. i understand that talking about climate change is fraught with partisan peril and will attract the ire of a certain category of people and institutions, but your job is to measure risk. i would submit you're not measuring that risk sufficiently one final question if you'll indulge me, chairman crapo, has anyone direct already oy indirectly communicated to you about rates from the white house? >> that's kind of a broad question. >> it is a broad question.

>> i don't really talk about -- it's probably not appropriate to discuss my private conversations with any other government officials. i would say that i'm completely committed to conducting monetary policy in a way that's nonpolitical and in a way that serves all of the american public you know, i am -- i am very comfortable and confident that that's exactly what the fed will do. >> thank you senator reid. >> mr. chairman, thank you for your service it was brought up your february 6th town hall that we have to make prosperity more dispersed throughout society you also indicated that many of the policieses are beyond the purview, but most of them are clearly within the purview of

congress if you could give us your top three issues that we have to deal with, or can deal with to make a quality much more realized in this country the people not taking part in the labor force environment, are people who are less skilled, or maybe where opioids are prevalent, so i think a bipartisan focus on labor force participation would bring in a lot of policies that would help deal with, you know, what i see as the problems, which are relatively stagnant growth in incomes, in median incomes, also relatively low mobility. education, of course, would be at the top of every list, i

think in addressing these issues as well. >> this would require resources that we would have to commit, and i think you're aware we're on the cusp of debate about sequestration, and share of resources to defense and non-defense. we're looking and very draconian numbers in terms of the situation at the bca, but you would argue we do have an obligation to make a significant investment in domestic programs? >> i think it would be great for our economy and country if we could address these issues of course, easy for me to say. i don't have to find the resources. >> thank you let me turn to another issue, a 36% cap is put on interest rates that can be charged to men and women of the united states forces

and unfortunately what we have seen from the cfpb particularly is a retreat they are no longer supervising this, no longer using this in their supervisory activities they'll enforce a complaint, but complaints are seldom made most don't realize we have this abled to complain. we're looking at exempting an insurance product for auto dealers which may result far in excess of 36%. can you commit your continued strong and persistent enforcement to the her of tletth military lending act >> yes, it's a priority for us. >> thank you another issue you touched upon,

cyber-security it seems to be the ubiquitous problem, and people who typically look for the back door, looking for the small institution, not the big wall street bank who is spending $200 million a year on security how are you dealing with that to make sure that community banks, other smaller institutions that might be more vulnerable are taking the appropriate steps is that part of your expected procedures >> yes, we are, and it's hard, because of course the big banks are attacked, too, but they have the resources to deal with it. well dethrough the -- a body of the regulators to promulgate guidance, and with the smaller banks it's very important. that is a way -- we see that as a real vulnerability, but we

have to be mindful of the burdens on smaller banks. >> are you focused on the extent of conducting red on blue exercises, i.e., you know, seeing what's working out will there? seeing where the connectivity exists or doesn't exist? are you getting any access to organizations that are doing that >> we do tabletop exercises, let's say, let by the treasury department this has been a major focus for treasury, appropriately so, and we take part in them there is always the feeling that you're just not doing never. >> in fact, that feeling is justified. >> probably is. >> unfortunately thank you again for your service. mr. chairman, i appreciate it very much. >> thank you, senator. thank you. i'm not quite done yet, mr. chairman i have a couple more questions i'd like to go babb to the issues of wages discussed by a

number of senators with you. in your testimony and some of your answers, you indicated that wage growth is at about 3% there was some comment by one of the senators, at least, that the nominal wage growth, or that the current rate of wage growth may or may not be keeping up with inflation, if i understand the question you were asked correctly. >> real wages are going up -- you have to look at the average over a year or so. no question that wages are going up by real terms >> and in your use the of term wage