banking and management consulting, we might be hearing a different tune out of those who are on the right side of globalization right now. >> i won't ask you to comment on it, though i will note, though, that i think immigration plays an important role here in the period of time you were talking about from the 1950s to the late 1990s, less than 10% of the american workforce was foreign born right now, we are reaching a point of our highest in over a century. and i think it's important that we focus on immigration policy, too, as a role that it plays in bad luck working class jobs, something we'll explore next week on the economic subcommittee thank you. >> senator warner? >> thank you mr. chairman, it's good to see you again. make an editorial comment first. i was proud to support you when you became chair you made a commitment to me that you would realize this job and role required an independent fed chair that would not be subject

to political lobbying and haranguing, whether it comes from this end of pennsylvania avenue or the other end. i think you've stuck to your guns so far, but i want you to keep sticking to your guns i would like to turn to some questions about facebook and its proposed cryptocurrency, libra i'm a supporter of innovation in the financial sector, and if done right, this notion of a cryptocurrency could really deliver, i think, real benefits to the -- for increased friction, more access to consumers. but somebody who spent a lot of time the last couple of years dealing with social media and facebook in particular, i think it would be safe to say, and frankly, for people on both sides of the aisle, that facebook has quodeveloped sometn of a trust deficit and that the kind of silicon valley mind-set of move fast and break things maybe works when you're just

thinking about it in a technology framework, but when we're thinking about the kind of implications social media has had around consumer privacy, public discourse, that break things and move fast no regulation doesn't always work yesterday, i think at the house financial services committee, you noted that libra posed many serious concerns, including potential risk to the stability of the financial system. and again, while i'm open to the public benefits, i share your concerns about systemic risks, money laundering, privacy, other items. this past week, former fdic chair, sheila bayer called on the fed to exercise additional oversight over libra particularly if calibra, the ability to have credit disruptions, former currency risks, financial mismanagement

of the libra reserve, the truth is that we could be creating a system that -- without the kind of regulatory oversight that led to the crisis that took place that senator tester pointed out. i think back when the reserve fund broke the buck, we didn't think that was going to be the thing that potentially brought down the system, but you could end up with that same circumstances around libra can you expound a little bit on what you see around these regulatory risks and do you basically share shelia bair's concerns regarding the liquidity risks presented by libra >> i do. i think the risks are -- i think we need to do a very careful, patient, thorough assessment of what the risks really are. and i think that's going to take a little bit of time and the idea this would be going into implementation within 12 months, i think, is not going to be proven right

i think we're going to take more time than that and as i mentioned earlier, one of the key issues, really, is that there isn't a single credible regulatory authority that can be held accountable for its oversight. it falls into many, many pockets, state, federal, international. so we're going to be looking at that -- i did see that op-ed, i thought that was an interesting idea we haven't even gotten to the basics yet >> my hope would be, though, that you would -- we have not been great at getting things across the finish line my hope would be that you would take a serious look here i think back to concerns that i had in the late '90s when social media was set up and the rules of the road that were set up were basically thinking, social media, these are just dumb pipes, we're not going to put any regulatory

structure around it. we're now 20 years later, 65% of americans get their news from facebook and google. we have the ability to disrupt our democratic process we see hate speech from either end of the political spectrum being brought forward. i would be really concerned as we think about the innovation that comes from this space that we don't make the same exact mistakes back in the late '90s if we do move forward with this innovation, that we would assure whether it's facebook or any other dominant players, that we make sure that there is going to be access for third party wallets, not just a facebook product. that we really think about the ability for third party developers to plug into this new financial system getting this right on the front end is so terribly important and i look forward to trying to work with you and the other regulators to make sure we get it right >> thank you and i will just say, this has gotten people's attention in a way that is very -- i hope

that's very clear. not just ours, but the other regulatory agencies and governments and similar bodies around the world >> i will say -- my time's up, but facebook has taken advantage of the gaps within the current system and we've got to make sure we don't have that those jabs >> senator rounds? >> thank you, mr. chairman chairman powell, thank you very much for being here today. before i begin my questions, i wanted to comment on the insurance capital standard being developed by the iais. i think my colleague from wisconsin, congressman stile hit it on the nail or hit the nail on the head yesterday in his conversation with you, in which he made it very clear that any version of the aics nails to recognize the aggregation method in the united states is unacceptable and i appreciated your comments, basically agreeing with that i also appreciated the response from vice president quarles. but i remain concerned that the eu is using the ics as a

backdoor to implement its solvency to insurance capital framework worldwide. the eu's insurance regulator took a victory lap at the end of its latest annual report, saying that they have achieved their goal of having, and i quote, solvency 2 as the practical implementation of the ia's ics moving forward, it's imperative that we see a very strong, assertive response from the fed and from team usa with the iais activity my first question concerns the capital plans that banks are required to develop under the ccar framework the ceo of jpmorgan, one of the banks required to participate in ccar in his annual shareholder's letter credited mr. diamond and i quote, under the fed's most extreme stress testing scenario where 35 of the largest american banks bear extreme losses, the combined losses are about 6% of

the total loss absorbing resources of those 35 banks. jpmorgan chase alone has nearly three fitimes the loss-absorbing resources to cover the projected losses of all of these 35 banks. mr. chairman, it seems a little absurd to me that we're forcing an institution like jpmorgan to hold not just enough capital to cover its own losses, but also the losses of the other 35 largest institutions three times over this is coming at a tremendous opportunity cost in my opinion the capital tied up under ccar is capital that could be applied to help first-time home buyers purchase a home or budding entrepreneurs start a small business vice chairman quarles said at a conference in boston earlier this week that capital stress tests need to be more predictable and easier for firms

to pass. i guess my question would be, do you agree that ccar framework should be revised. is it an item that's up for debate >> i think that we're going to have to continue -- well, the tests will have to evolve over time or inevitably, like anything else, they'll become out of touch with reality. so we're committed to making appropriate changes. i would say, though, that the bank's obligation is to have a minimum level of capital post-stress. that's the test they have to pass and we don't want them to be able to go -- we've made a pretty good judgment about what the minimum amount would be. i think the level of capital in the system is just about right i don't think it should be less. i think there's lots of work going on on ccar and it's a subject of that conference in boston on monday

or tuesday lots of changes. but we're going to preserve the overall strength and power of them, while making them more transparent. >> and i understand that capital requirements are important it just seemed a little surprising to me what the current guidelines would do in terms of the amount of capital there are. and i think there is a cost when you maintain that, being able to put that back out in terms of loans to places that need it and i recognize that this is something that is ongoing, but i want to point out, that seems to me to be a little bit larger than what i would have expected it to be in terms of the capabilities today >> well, again, i think the level of capital that we have required, of the largest instituti institutions, in particular, is about right. and it is high it hasn't even been ten years since the financial crisis we haven't even been through a downturn so i think it's early to be talking about reducing those standards.

>> you point out that credit provided by commercial banks to fund businesses as well as commercial and residential real estate continue to grow in 2019. that bank profitability remains solid in the first quarter of 2019 i was encouraged to read this because of the pressures that farmerses are facing led to questions about whether or not banks will continue to -- or will continue to be able to make loans in the ag sector given your view of the economy, should banks be in a position to continue to provide credit to farmers and ranchers during this time in which net farm income is down 50% in the last five years? >> the answer is yes to that i think our farm belt banks have had a lot of experience dealing with the issues that farmers are facing in the whole, our ag industry is in a tough time. and i know banks are trying to

work through those difficulties with farmers >> thank you, mr. chairman >> chairman powell, thank you for being here i'm going to ask you a series of questions about severe weather and climate change and the first thing i want to say is i don't expect monetary policy to solve a public policy problem. but i think it's important in your prudential supervision capacity that you measure risk accurately and completely. and so the first question i have is, does increased severe weather pose a risk to the institutions that you supervisor >> yes and you know this, senator we do require financial institutions that you supervise to have a plan and an understanding to deal with severe weather events, particularly those in areas that are exposed to increased risk of severe weather >> is severe weather increasing

due to climate change? >> i believe it is, yes. >> has the fed changed the approach that it uses in assessing severe weather risk over the last 10 or 20 years >> we've had a policy in place i would tell you, there's been quite a lot of research done at the fed around severe weather and its affect on the economy. and we do incorporate that into our supervision of these institutions so it's definitely evolved i think we have a cutting edge understanding of the effect of severe weather events on the economy. and we do incorporate that into our supervision. >> but has the process changed >> has the process changed um, you know, i would have to go back and look. >> the reason i'm asking this specific question is that severe weather, generally speaking over the last 10 or 20 years has been treated sort of force majeure, it can't be helped, and to a certain extent, it can't be accounted for, except that there's this sort of outside

risk but when that risk of say a 500-year storm rises 10x in say, 15 years, the question becomes, are your systems adequate to the conditions on the ground and i can take that for the record, if you don't want to puzzle through it. >> no, i can -- >> -- miked up go ahead >> one way to get at that is superstorm sandy when you have water lapping at the foot of the fed, in downtown manhattan, you know you're going to need robust plans and redundancies and all of those things to deal with severe weather events we know that and apply very high standards to the payment facilities and other financial institutions >> let me read you something from the bank of england the cost of climate change are having a devastating effect, as

financial policymakers and prudential supervisors, we cannot ignore the obvious risks before our eyes. we must integrate the monitoring of climate-related financial risks into the day-to-day work, financial stability, monitoring, and board risk management. do you agree with the bank of england? >> you know, i guess i see climate change as a longer run issue. it's -- i don't know that incorporating it into the day-to-day operations of financial institutions would add much value >> let me add the case for day-to-day supervision, particularly prudential supervision. you mention cybersecurity risk, balance sheet risk, you measure risk this risk is accelerating. and i understand the desire for the fed to sort of stay out of the political fray and even to stay out of the public policy fray, but this risk is accelerating and i'm not -- i am satisfied that you're puzzling

through this and that the staff is trying to get this right, but i am not satisfied that you are drawing the correct distinctions between weather and climate and that you're quality accounting for the increased frequency and severity of severe weather events due to climate change and there's one other part of climate change it's not just individual events. it's changes in weather appearance that could cause individual portfolios to be more at risk. so do i have your commitment to continue to work with our office on this problem, especially that as you know more than a dozen central banks around the planet are working really hard on this. and again, without an ideological lens, but just to try to adequately measure the risk >> yes and there's not going on in the other central banks that we're not quite well aware of, as i think you know >> thank you thank you.

>> senator perdue. >> chairman, thank you for your forbearance, your second day going through this i would like to get back to a topic we covered a little bit earlier. today we have in the world about $60 trillion of sovereign debt united states has about 22 of that corporate debt since 2008 in the united states, between the last decade, between '08 and '18, about doubled. but still only represents about 4% of more than $60 trillion in overall u.s. capital market assets my question is, basically, after reviewing all the data around corporate debt, sovereign debt, and particularly the increase in corporate debt, do you believe that leverage lending has reached the point where it's beginning to be a systemic risk? in so, can you explain what information you're using to look at that? >> so as far as corporate debt is concerned, i would tell you,

i do not see it as rising to the level of a systemic risk or a financial stability risk. and the risk is really held in more than half of the risk in leverage lending is held in a collateralized loan and debt obligations and those are market-based vehicles. they're not on the balance sheet of banks and they're not runable. it was runs during the crisis that caused a lot of damage. the funding for those vehicles has a longer expected life than the assets that they own so that's an important thing the next biggest holder of that paper is mutual funds and those in theory could be subject to accelerated withdrawals and that kind of thing. we monitor that very carefully there is a risk there, but we've seen them weather lots of

downturns. empirically, we've seen them weather spikes in volatility and that kind of thing we are not, in any way, backing away from this and saying it's not a problem. i think we're very focused on monitoring it and confirming that it doesn't evolve into something that could threaten the system and in the meantime, it clearly can be an amplifier to an unexpected macro economic downturn >> you know, i tried to buy a cup of coffee in china last year with a credit card and with cash and i just couldn't do it. it was all we pay, et cetera with cryptocurrency question you had earlier, in all the technology that's coming, it just seems to me that technology is running ahead of us in our ability to look at how currency is managed around the world, how cash flows are managed, and the impact it could on how we for the last hundred years or so have used reserve currency and we benefited of that in the united states. the ability to borrow $22 trillion of debt and potentially

$10 trillion more over next decades depends heavily on our ability to be the reserve currency to have the dollar as the reserve currency what risk to the structure itself and also to the fact that the dollar has enjoyed for over a hundred years or about a hundred years being the reserve currency >> i think being the reserve currency does confer benefits and costs. and one of those is, you know, one of the potential costs is you're a little bit immune from market discipline. because everyone wants to be in the most liquid asset. and it tends to be a pretty stable equilibrium there tends to be one reserve currency or two and it tends to last for a long time but if you're going to keep that role, you've got to run your fiscal house successfully. you've got to be running a sustainable fiscal policy. and we're not. i don't think in the near-term, there's anything to threaten our status as a reserve currency, but in the medium and longer term, we'll have to address our fiscal issues. >> with $30 trillion in a decade, and that would be

approaching probably 40 to 50% of all sovereign debt in the world at that point, because a lot of other countries are deleveraging to some degree, all of a sudden, then, that does -- your medium to long-term -- not trying to get you to qualintify that but if we were to add 50% more, the near to long-term definition could fall in within the next decade or so, could it not >> you have to the another reserve currency that has more attractive features. we have the rule of law. we have institutions we're a trading nation we're hope to trade. and we have a highly developed financial system that's really important. because when you're the reserve currency, you can have inflows and outflows and you've got to have a financial sector can that absorb and manage that or you'll have spikes in inflation and currency volatility. so there's currency could take over that role, but there isn't one right now that could check all of those boxes

>> and the master basket concept has no more appeal today than it did a decade ago >> it hasn't really taken off, if you're talking about special drawing rights but nonetheless, we shouldn't assume it will last forever. >> thank you for being here. >> thank you, chair. i want to just note that i believe in the first 30 seconds of your testimony this morning, i believe i heard colleagues on both sides of the aisle pay tribute to how important it is to have an independent fed i want to thank you for your steadfast defense of that. i want to follow-up on comments by senator tester. senator tester said, what is going to tip the scales to bad when it comes to our long-term economic prospects and i would like to just for the

record say that i do really believe that our increasingly volatile climate, climate change is on the same scale as the long-term threats to a grow national debt in terms of the stability of our economy and trust me, the farmers in minnesota who are looking at lost yields and a complete shake up of the world in which they operate, for them this is a therm and an immediate issue i wanted to just add my thoughts to that point. speaking of issues that are long-term challenges to the economy, you mention ed housing and sort of the lagging housing construction what we're seeing all over the country and certainly in minnesota is that housing costs are growing faster than wage growth and the market is producing -- so we had shortages of housing at price points that people can afford and we're seeing, of course, more high-end homes being built, but not homes that people can

actually afford. so i would like to have you talk a bit more about the impacts of this this has impacts on employment and rural areas. and what you see the fed's role could be and what our role should be. >> what we hear from the home builders is that it's a series of factors that are holding them back and driving and challenging affordability. and it is, in many cases, that there was a big home building sector in 2005 and a lot of those people retired in 2007, '8, '9, '10, and '11 and now you have a shortage of skilled labor. so it's hard to get people on the job, electricians, carpeters, plumbers, and other people that's one issue, just finding people who can do that work. >> would you say our immigration policy might have something to do with that >> that's what we hear from home builders, for sure it's also hard to get lots

in many metropolitan areas, you have a lot of homes and traffic and that kind of thing and the rules for creating new lots are challenging material costs, too, have gone up and some of that is tariffs, for sure so the home builders feel almost like they've been hit by a perfect storm here i think with rates -- rates on mortgages having dropped quite significantly over the course of the year, we do expect a turnup there. but these longer-run challenges are going to be there. and affordability is going to be a challenge. >> what i hear from businesses and communities, especially in rural minnesota, but really all over the state that the lack of workforce housing, affordable housing for people who have good jobs is actually a real limit on economic growth. i'm doing a series of roundtables around the state to try to get at this so i appreciate your comments on that thank you. let me just ask you, on another topic, senator shelby was talking about the relationship, maybe the shifting relationship between interest rates and

growth you are under political pressure, which i don't approve of, to lower interest rates. i'm not asking you what you're going to do, but i want to look at the lesson of what we're seeing in the eu so, in europe, the central bank essentially has negative interest rates, economic growth is only about 1.2% a year and inflation is also below target so my question is, how do you -- what can we learn from the experience in europe it looks to me or some could conclude that you end up losing many tools in your toolbox when you -- that seems to be sort of the challenge that they have some of this is monetary policy and some is fiscal policy, but can you comment on that? >> it's really the same lesson that we've learned, i think, from japan, that you see that in a less-extreme form in europe. and that is that you don't want to let -- you don't want to get behind the curve and let inflation drop well below 2%,

because what happens is, you get into this unhealthy dynamic, potentially, where lower expected inflation gets baked into interest rates, which means lower interest rates, which means less room for the central bank to react. and that becomes a self-reinforcing thing we've seen it in japan and are now seeing it in europe. and that's why we think it's so important that we defend our 2% inflation goal here in the united states. and we're committed to doing that >> thank chairman crapo, i have several other questions that i would like to submit for the record. i'm especially interested in submitting a question around deutsche bank. last night "the new york times" reported that deutsche bank's private banking managers urged the bank to retain jeffrey epstein as a client, even after the compliance officers recommended that the bank drop him as a client, because of reputational risks so i'm going to submit a question about what type of customer does represent a reputational risk. and if not epstein, who?

>> thank you senator kennedy? >> thank you, mr. chairman and thank, mr. chairman. mr. chairman, what is the economic impact in your judgment of illegal immigration on america's economy? >> i would have to answer it in generalities i haven't tried to quantify that, but people who come in legally or illegally, they add to our workforce and they contribute to gdp, certainly so, that's part of it. i think part of growth, you can really boil growth down into labor force growth and productivity increases and immigration, total immigration has contributed more than half of the growth to our workforce in the last few years, so it's important. >> what about illegal immigration? does it have an impact on wages? >> there's been a lot of research on that and it has really not reached a clear

conclusion there's research that finds no visible impact and there's research that finds that it has a modest impact. >> would you think illegal immigration is a good thing? >> you know, it's really not at all in our say so. it's like trade or guns or other things that we don't really take part in. >> well, in part it is, and let me explain myperspective we welcome about a million of our world's neighbors to become american citizens every year i think that makes our country stronger i think we can probably agree on that unfortunately, we have a lot of folks that come into our community illegally. i think part of the reason that so many people want to come to america is because we have rights

and we cherish them and we protect them i mean, when's the last time you heard of somebody trying to sneak into china they want to come to america but with rights go responsibilities one of our responsibilities is to abide by the rule of law. federal law is not an a la carte menu you can't pick and choose which laws you want to abide by. and to come into our country illegally is a violation of federal law. and it would seem to me that we would want to do everything we can, if you believe, as i do, that people respond to incentives, not to give people an incentive to violate the law. now, that's kind of my perspective on it.

properly vetting people who come into your country, in my judgment, is not racist. it's prudent in the interest of public safety are you familiar with the program called directo a mexico? >> i am not, at least by that name >> i understand it's a program under the fed. it facilitates remittances from people in america to other countries with low transaction and exchange fees. >> which must be part of our ach operation and we do some remittances through ach internationally. >> well, you make it easier for people in our country to send money to another country >> very, very limited. most happens in the commercial banking system, almost all of

it we have something called -- this is complicated, but automated clearinghouses really set up to do something like payrolls it's not a great tool at all for sending back remittances >> but you do have a program, you're just not familiar with it called directo a mexico? >> i'm not familiar with it, sorry. i'll look into it. >> do you know if u.s. citizenship is a prerequisite being able to use the program? >> i don't i would have to check on that. >> do iyou know the impact of your program on the american economy, what does it do for us? >> i would have to look into all of these things and i would be glad to do it. >> you're aware that remittances form a huge portion of the gdp in other countries, like mexico, for example? >> yes, i think a number of countries rely on remittances from relatives usually who work

in the united states and send money back home. >> and if someone is here illegally, this program could be an incentive, could it not >> in principle, yes again, i am completely unfamiliar with it, so i should really -- >> okay, that's fair i don't want to catch you off guard. i'll be calling you. i would like to visit more about this and whether this is a good idea or whether it improperly incents people to break the law. okay >> thank you, senator. >> thank you for your good work. >> senator van hollen? >> thank you, mr. chairman and welcome, mr. chairman. and thank you for your leadership as you know from previous questions i've asked you at these hearings, i've been very frustrated, very frustrated at the lack of the development of a realtime payment system at the federal reserve. there were some questions in the house yesterday about this as you acknowledged, the fed has been looking at this for five or

six years. in the meantime, every day that goes by, the lack of a realtime payment system is costing millions of americans lots of money. and over the course of a year, we're talking about millions of americans losing billions of dollars, especially those who are going paycheck to paycheck at the same time, lots of other countries have gotten there before us. and in the meantime, because of lack of progress, there's been more momentum for a de facto private sector version, through the consortium of big banks, the clearing house and there's lots of concerns about that system. mr. honig, who was formerly the vice chair of the fdic and bruce summers, formerly at the fed recently wrote an editorial about their concerns with the largest banks in the country controlling the payment system and i want to quote from their article. and they say, the needs of

consumers and businesses and the depository institutions nationwide will be sbervpreservy the federal reserve continuing to play its role the alternative is to award the clearinghouse a de facto monopoly, resulting in a less competitive, and less-efficient market for immediate payments. question do you share the concerns they expressed in that editorial? >> senator, as you i'm sure know, we actually have a proposal out to provide a real-time settlement system, 24/7 365 and asked the public to comment on that. we've got 900 comments. and this came out of our faster payments initiative. >> when do you expect to get this done? i mean other countries have done this

it's not that complicated. it's really just a question of making a decision. so do you share the concerns that were expressed by those two individuals in their editorials? and let me, as you think about your answer, i want to point out that 2 1/2 years ago, when the big bank consortium was preparing to launch a realtime payment system, they told the department of justice that they would charge the same price to all depository institutions regardless of their size about a year later, the justice department cited that assurance when it told the clearinghouse that they had no intention to take any anti-trust action against them but last month, the clearinghouse added a big caveat to its pledge. they said, they would only maintain that commitment if there was no other competition, meaning the federal reserve. and community bankers are very worried about this here's a quote from bob stein, he's the ceo of a $93 million asset bridge community bank in mt. vernon, ohio, quote, talking

about the fed. if they don't take that as a dare, then i don't know what it takes as the fed to serve as a central bank role. so this is -- we just got to make a decision here because the lack of the fed making a decision is essentially putting in place the de facto clearinghouse. now, if that's the result of a deliberate decision, that's one thing. but if it's the result of inaction, then there are real risks at stake here. >> so we are working our way through the comments and approaching a decision and we have to weigh this very carefully under the law, under the monetary control act and under our regulations. you're absolutely right that the smaller institutions are strongly in favor of our doing this but there's a range of commentary we have a process we need to go through. we've been going through it and expect to reach a decision >> all right i would just be concerned with providing the biggest banks a monopoly over this big an area of transactions.

very quickly, you have indicated how important it is for the fed to be independent, but the president does give you a call from time to time, right >> he has. >> has he ever raised the issue of deutsche bank in those conversations? >> by long-standing practice, of course, i respect the privacy of my conversations with any elected official, including the president. >> right there's no executive privilege, though, between the president and the federal reserve, is there? >> this is -- >> it's an independent body, correct? >> it's not a legal matter, it's just out of respect for -- i would give you the same respect. >> well, we, sas you know, a group of senators on this committee have written to you about deutsch bank situation where senior executives at deutsche bank overruled one of their experts who wanted to issue a suspicious activity report with respect top certain trump entities, financial entities that was overruled deutsche bank is under your regulatory purview how can you provide us

assurances that that will be looked into when you have a whistleblower case like that >> as you know, we have an enforcement action in place against deutsche bank for its system and money laundering issues and, you know, we're providing absolutely standard oversight to that at this time >> okay. can you provide us assurances that that kind of situation would come under that purview and investigation? >> that kind of situation, yeah. >> thank you >> thank you, mr. chairman >> senator jones >> thank you, mr. chairman and chairman powell, thank you for being here and thank you for your testimony. one of the short-term risks to the economy, that i fear, and i think you have highlighted are the ongoing negotiations in congress over both government spending and the debt ceiling. in june, the june fmoc minutes for example that was written, that participants generally agreed that a downside risk was

a sharp reduction in government spending and all told, if congress doesn't reach an agreement, there's a potential for $120 billion immediate reduction in federal spending for national security and a host of domestic programs would you just elaborate a little bit on what you believe, what kind of risk does this represent to the economy and how is the fed processing this risk? >> so i think that it's essential that congress raise the debt ceiling in a timely way, by which i mean, in a way that allows the united states government to pay all of its bills when and as they're do that is essential. any other outcome is unthinkable. we've always paid our bills. and it simply must happen that congress raises the debt ceiling in time to allow that to happen. the consequences of failing to do so would be highly unpredictable and no one should assume that the fed or any other agency can be relieied upon to shield our economy from the short, medium, long-term and negative consequences of such an act. is there risk in protracted

negotiations i mean, if we're in the 11th hour of discussions and, you know, so many times, we have seen, like last year with a government shutdown, with disaster relief, there's all of this political posturing and dueling press conferences and we end up getting down the road and getting close and then they fall apart. is there risk just in that protracted negotiations and waiting until the 11th hour to do something >> i think markets have seen this movie and i think they think they know how it ends. so they tend to look through that you do see some of the treasury securities that are maturing, they might trade and they are now trading a bit off, on the theory that there might be some delay in payments. but clearly, everyone assuming that this will get worked out. and if that weren't to happen, i think that would be a big surprise and not a good one. >> i appreciate your answer. maybe congress and the president can take a lesson from that and just kgo ahead and get it done

now, instead of going through the protracted, you know, who shot john kind of thing and where we are i want to go back to a question my colleague, senator shelby, talked about just a little bit with regard to trade and the apparent progress in trade and i want to kind of couple that a little bit with what you've talked about with regard to so many sectors of the economy who are not feeling the bu y bu yoyantsy of their jobs, their wages. manufacturingers in my state and farmers in my state, i'm not sure they've seen the apparent progress that was initially seen that you talked about, but regardless, they are certainly feeling the pain of the uncertainty. and those challenges are broad in scope we've got uncertainty with china. there's uncertainty with canada and mexico, there are steel tariffs, there are potential auto tariffs, there's

retaliatory tariffs on farmers and yesterday we heard, there may be french tariffs and even our xm bank needs reauthorization. that, in my state, that seems to be affecting folks in those rural areas, the african-american folks probably more than most it has not hit directly the consumer, i don't think, just yet, with the tariffs. but it's going to happen i mean, we are seeing now in the short-term, we're going to see tariffs that are going to cause increase in the supply of things like bibles and artificial fishing lures, which are fairly standard staples in apple. most alabama households. can you elaborate for me on which of all of this in particular is the thing that concerns you most about the current situation with tariffs what are the concerns that you have most? because we've got -- they're all over the board, and we seem to be going this alone.

>> i would just say, i think it's general uncertainty on the part of businesses and that -- you don't really see that, as you noted, you don't really see that in household confidence surveys and things like that, i think you do see it in business confidence surveys now. and the concern would be, over time, it would just be -- it will weigh on the economic outlook and it's a concern i think we've been hearing that all year long from our business contact contacts >> in particular, let me ask about -- the president right now has on his desk a report from the commerce debate about whether or not foreign automobiles and suppliers are a no one was hurt threat that has been sitting on his desk since february. it hasn't been released despite many of us on this panel have been asking. is the fact that that is sitting there and the president is not even releasing publicly, did that add to the uncertainty? >> i would be reluctant to

comment on any particular aspect of trade policy, which is clearly not our job. at the same time, we try to call out what we're seeing, we owe that to the public and i would leave it at the level of high uncertainty? >> i appreciate the answer really more of a comment from me than anything else thank you, mr. chairman, for being here and thank you, senator crapo >> thank you, senator jones. and we don't have any other senators here, but we have senators coming. so we're in the second vote at this point senator brown will be back in a few moments. he and i are switching out and while we wait for some of the other senators who want to have a chance to ask you some questions, i get to ask a few more of my own i would like to go back for just a moment to the cryptocurrency issue. and you indicated before as you start to look at the new libra proposal that you have been in communication with some of the other central banks and other regulators as well as the united states regulators. are you aware of any other

cryptocurrency proposals that are out there, other than libra, something else globally that is being developed? >> i mean, not really. there are companies that are looking at internal stable coin type ideas to use with their customers, but nothing that -- i'm not aware of anything that could potentially be quite so scaleable, so quickly, as this given the existing network that the company has. >> all right and to return to the question that senator perdue had asked you about, the impact of a cryptocurrency system on our reserve currency in the world, particularly in the united states reserve currency, which you both indicated in your conversation, has, i think the

united states has benefited from our currency being the world's reserve currency if a cryptocurrency system were to become prevalent throughout the globe, would that diminish or remove the need for a reserve currency in the traditional sense? >> i think things like that are possible, but we really haven't seen them. we haven't seen widespread adoption i mean, bitcoin is a good example. really almost no one uses bitcoin for payments they use it more as an alternative to gold, really. it's a store of value. it's a speculative store of value, like gold so we don't have -- and people have, of course, been talking about this since cryptocurrencies emerged, but we haven't seen it. but that's not to say we won't see it and if we do see it, yes, you could see a return to an era in the united states where we had many different currencies. and, you know, in the so-called i guess national banking era

>> all right thank you. i do have more questions, but some of our senators are returning now and i will turn to senator tillis >> thank you, mr. chairman chair powell, thank you for being here quick question on payments maybe a couple of questions. do you think that the current private sector payment systems are broken >> i wouldn't say they're broken >> then, what part of the problem exists out there that's prompting the fed to move forward with a payments platform >> well, we haven't decided to do that, although we do play an active role in the payment system in a number of ways already. where the u.s. lags is realtime payments broadly available on an

equitable basis. other countries are way ahead of us on that and so for the last five years, the fed has been trying to push us we don't have authority in this area, trying to push us generally into a place where that will be available to people, as it is in many other countries around the world >> how do we go about funding the implementation, the ongoing operation, if you decide to move forward with a fed payment system >> so anything that we do in the way of a payment service is subject to the monetary control act. pardon me. and the monetary control act requires that we -- that -- a couple of things one is, i won't get the language exactly right, but the sense of it is that it must pay for itself on a basis that is comparable to a private provider, meaning the cost of capital and taxes. >> i've got a series of questions that i will submit for the record on the decision

process and go forward but i, for one, hope that we can get to a point where perhaps we can facilitate a private sector solution that addresses some of the things that i think you rightly point out, but not necessarily take on that. on th. first up, i thank you for the great work you are doing you are doing great work as a chair. i appreciate everything thaw do and some of the most confusing time for somebody in your position i appreciate it. i think somebodymentioned earlier when i was out, i apologize. we have multiple committees and votes going on right now i think that we have some of the folks on the other side of the aisle that are concerned as deutsche bank takes itself apart, that the bigger banks will pick up those assets and maybe even get bigger. i don't necessarily think that's going to happen. what i think is probably going to happen is we will see that move into a private equity where

they are probably champing at the bit to buy things for pennies on the dollar. what's your view >> as you know, that's exactly the kind of thing i used to spend my time doing. i have not looked at the company with that question in mind i will come back to you on that. >> thank you another area that i'm kind of curious. if you were in the private sector and you had a 10-year yield that was close to 2%, excuse me, would you extend your maturity profile and lockdown financing? based on today's market conditions >> as a general matter, i think this would be a nice time to lock in at a lower rate. >> as we take a look at our own debt, is it time to potentially consider there are short-term transition costs to consider what other countries are doing on longer term bonds up to and including 100 year

bonds. >> this is squarely in the house of the treasury department i know they look carefully as you obviously know at doing very long bonds >> do you have views on the pros and cons >> i don't i think they look quite carefully. 25 years ago we looked at it and concluded that the market, there may or may not be a market we didn't get it done anyway >> the last thing i will leave you with i want to make sure that the other members get in their questions. we will be committing additional questions for the record for the age-old priorities in terms of regulatory work you are doing around the margin bulk or recalculating the rating and the surcharge. we believe these are things that are positive that we need to be committing questions for the record for timelines for results. thank you for being here

>> thank you >> senator reed, are you ready >> senator cortez masto? >> thank you for the good work you are doing. at yesterday's hearing you said yesterday's workers missed 10 years of wage growth and the federal reserve needs to call out the declining jobs to workers and realize an economy where the richest 1% control 40% of the nation's wealth is problemat problematic. one answer was for workers to increase their education you said this before i think last time you were here we had this conversation correct me if i'm wrong and i'm looking at the fed's data on page eight of the monetary policy report that just came

out. if i read this correctly, it shows that wages have barely increased for both high school and lower educated workers and college educated workers if you look at that graph, how i'm reading and correct me if i'm wrong, wages were basically flat for both in the past year and a half, wages have gone up over 1.5% for both college educated and high school educated workers it's flat for both >> these are real wages after inflation. that's what the trick is here. if you add inflation back in and nominal wages have increased >> but for both it has pretty much been flat a nominal increase for both categories, is that correct? >> so if you look at the picture on the right, you had declines in real wages and then you see them increasing around 2015 it

became positive for college plus but generally speaking, yeah >> so would you agree that at least what i see here that the 1.5 wage increase over a decade is completely inadequate >> i was referring to the first decade of this century what happened beginning at about 2000, but the share of profits going to labor decline, it had sort of oscillated around a particular level for a long time and around the year 2000, it went gradually down over a period of 10 years my point was, when we talk about wage growth, we are talking about 3% that's a pretty healthy level. the problem is not the change, but the level in the sense that we missed that period where workers were losing ground in wages against what they would

have gotten traditionally. it's a complicated point, but that's what i was referring to >> i will go back to the idea that increasing one's education will lead to higher wages for them do you agree you said that a couple of times. i heard the conversation huh with senator cotton as well. is that what you saying is to ensure they get a better education and what do you mean >> people with higher education tend to have substantially higher compensation in their jobs the value of a college degree compared to not having a college degree in terms of lifetime earnings is enormous by the way, i'm not saying -- >> i appreciate that, but here's the problem i have with these categories come to my state of nevada high

school and organized labor and individuals graduate high school, but they don't get a degree they go through an apprenticeship or learn a trade. they are making good money, sometimes better than the folk who is go to college what i see here is not a reflection of the demographic of who we are as a country. that's my concern. we are categorizing people as whether they are low income or high income. i think it's a false narrative people with a high school education can make a good job. they may not be destined to go to a college or university, but they can go through an apprenticeship and that skilled labor that we need in this country. it goes back to this issue you identified the housing manufacturing and trade and i will tell you housing is the number one issue in the state of nevada we lost all the skilled trade because of the downturn in the economy. we should be investing in the

individuals and getting them back to the level to go through apprenticeship programs. the final thing with the unemployment market is that because we have low unemployment that has increased the wages a little bit and it's forced the companies to say wow, it's a competitive market and i will have to pay more to get people in that should not be the only condition for increasing wages for individuals across this country. the other thing you need to know is come to my state. whether you are a single mother or a two-parent family these parents are working more than one job i think one should be enough i don't think you should have to work two jobs at minimum wage. that's poverty level my concern is i want to see you get into the true demographics of who we are as a country and what's going on with the false narratives even from this

president who argues that somehow unemployment for african-americans and latinos is wonderful. i appreciate that you show that it's not we have to do a better job let's look at the true numbers we have. that's the challenge that i see and not the false narratives that keep getting thrown out i appreciate the hard work that you are doing. i thank you for that i look forward to doing it in the future i invite to you come in and have a conversation on the data itself >> great >> senator scott >> thank you, ranking member brown. chairman, thank you for being here this morning and now this afternoon basically. i want to continue perhaps that current narrative because it does draw my attention i listen to your testimony earlier this morning and i had meetings and a chance to listen to your exchange with senator cotton on the labor force

participation that the rates are tick up slightly and one of the reasons that we saw the 3.6% go to 3.7%. a lot of people are going back to the workforce which is a positive development i was raised by a single mother with a high school education and i thank god that she had the skills necessary to support her two sons, but one of the things we can take away from the numbers specifically as it relates to education is there is power in education these numbers are three or four years old and the person who doesn't finish high school has the average wage around 19,000 high school graduate is around $29,000. if you go to college, you are $59,000. if you multifply that, th