should try to stop that from happening by raising rates at the cost of putting people at the bottom end of the income spectrum back to work? no of course we wouldn't do that. so i think we're doing the right thing with what we do. we're ultimately giving people a shot to get a good job and get a good wage and accumulate that wealth >> i'm going to quickly interject. in the same op-ed it is pointed out companies are taking out debt not to finance investments and infrastructure and workforce alone but rather to finance larger profits and stock buybacks what's your response to that argument >> you know, i think businesses make rational decisions generally about what they should invest in, when they should give money back to their shareholders, what that has to do with monetary policy is not clear to me. i see an economy that created 3.5% unemployment and wage gains for the lowest paid people over

the last two years or so of the last expansion, and all of that in the context of low interest rates and monetary policy. i guess i'm just not seeing that >> i know the fed has a statutory obligation to promote price stability and maximum employment what are your thoughts on the relationship between monetary policy and inequality? what do you take to be your obligations with respect to wealth inequality? >> we don't take inequality as a mandate. we think we can -- we have these disparate which have gotten worse. we see those as weighing on the potential for the economy. i think everyone does. if you don't have a chance to take part in contributing to and then benefiting from the economy, then the economy is not all that it can be now what can the fed do?

we can support maximum employment that's what we can do. we can push the job market to a place where consistent with our price stability obligations where jobs are widely available, really, though, we're not -- we can't be the lead on it. it's fiscal policy and education and things like that, that will really matter much more over time than monetary policy. i think it's appropriate for us to call it out and to use our tools as we can. >> and my final question before my time expires is about just the multifamily housing market and new york city more than half of our revenues from real estate and when real estate sales have implications, implications for tenants who suffer from maintenance, for property owners and local governments to depend heavily on property taxes of sewer and water and it has

implications for the financial system that might have an interest in those properties what role can the fed play in shoring up multifamily properties and real estate that will be my final question >> we can't directly operate on that what we do we supervise banks who do lending, and we make sure they have good risk management practices and conduct themselves professionally and with care in the loans they make. capital losses -- >> thank you very much the gentleman's time has expired. the gentleman from missouri is now recognized for five minutes. >> thank you, madam chair. welcome, chairman powell i always enjoy our conversations. you've been asked a lot of questions today over a wide range of topics. by the time you get to the end

of the day here, it seems like everything has been asked. i have a lot of questions but you've pretty much answered them all. let me clairerify a fewthings o the standpoint of concerns i'm also the ranking member on small business, so these things affect small businesses as well, a lot of things you've talked about today. one that has been harmful is the unemployment benefit this morning there was a poll that came out that said 1.8 million people turned down jobs due to unemployment benefits another poll said 40% can make more by staying home than they can enjoying this benefit than going to work. you look at all -- interrupting the chairman's testimony for a quick report on the july beige book from the federal reserve. they said the economy strengthened showing moderate to robust growth. that's a definite upgrade from the last report.

transportation, travel, tourism, manufacturing and nonfinancial services all showed above average growth but there were supply disruptions that became more widespread according to the beige book there were shortages of materials and shortages of labor. along with shortages of some consumer goods as well the fed talked about, quote, strained car inventories, keeping auto sales down even while demand was healthy there was also healthy labor demand that was broad based, the best gains were showed in low-skilled workers. labor shortages were cited in several instances. prices increased at an above average pace some pass along the prices and others, however, saw reduced profit margins those are the highlights of the beige book let's get back to the hearing of fed chairman powell. >> -- cutting off benefits is the headline that would seem to me to be an extraneous vulnerability you would be taking into consideration. i guess that's just my point small businesses are directly

affected by this the numbers of folks are staggering when you start looking at those sorts of things with the concerns they have. i have another issue i want to talk to you very quickly with regards to the imf i saw an article today with regards to -- it said the biden administration backed international fund to an unprecedented $650 billion of special drawing rights this year alone will help reshape international financial system would you like to comment on that have you seen the article or are you aware of it? >> so i'm familiar with the issue and it's very much an issue for the treasury department and maybe for you, but it's not an issue for the fed. we don't have any role in that at all >> the article goes on here and talks about affecting the reserve currency status of the united states. i would think that would be a pretty important take on that for you, would it not?

>> yeah, i -- again, sdr issue is to deal with funning the imf. we are not -- it would be hard to say that single action will be the thing that threatens our status as the reserve currency we don't have -- the fed doesn't own the reserve currency issue that's an issue we share with other parts of the government as well >> just quickly, i know the chinese are trying to economically compete with us when you say that they are trying to weaponize their economy against us to try and take us over, would that be a fair statement >> i would say -- i would go so far as to say we certainly are in a havestrategic competition h kind but other countries are really for the government -- for the administration not for the fed. >> well, with respect, sir, this

morning this hearing is about monetary policy and the state of the economy. it would seem to me things that would affect the economy, challenges to the economy, we would be talking about especially monetary policy and would seem the chinese if they -- if our money and investment money is going over there to empower and help their economy against our economy, it seems that would be of interest to you, is it not? >> those are issues that are absolutely in the province of the treasury department and the administration and the congress. you've given us powerful tools and independence and all of that, and if we wander all over the landscape taking on issues not assigned to us, then i would have a hard time explaining to you why we should be independent. >> okay. mr. chairman, i appreciate your conversation this morning. we will have to disagree on this one. i think it is an important issue with regards to our economy. i yield back >> thank you the gentleman's time has expired. the gentlewoman from ohio is

also the chair of the subcommittee on diversity and inclusion. she is now recognized for five minutes. >> thank you, madam chair, for holding this hearing today and to our ranking member. let me just thank you to my friend, director powell. thank you so much for being here and always being willing to reach out and discuss whether it's monetary policy or for looking at forecasting of what the future looks like on the state of the economy first, i know you don't weigh in directly, but i think it's worth me noting that as i've been looking at the vacant seats there is a vacant governor's seat at the federal reserve that has not been appointed yet i know it's appointed by the president but just fyi to you, i'd like to see someone nominated with more diversity.

we've had long and ongoing conversations about diversity. but today i want to ask the question we've heard a lot because of the pandemic and as you stated in your monetary report i've had a chance to go through. we've heard about housing costs, lumber, et cetera. but housing is so important to us i serve on the housing committee. and purchasing homes has continued to have an upward trajectory especially in cities in the midwest like my city. despite the strong housing market, the federal reserve has continued to purchase mortgage-backed securities by $40 billion per month. can you briefly explain the federal reserve's thought process on the need for these purchases? and if these purchases will have any effect on the cost of housing? >> sure. >> we buy treasuries and

mortgage backed securities for the same reason. they're not intended to provide support directly to any industry including the housing industry that said, low interest rates and asset purchases like that do keep longer term interest rates low. they do support low mortgage rates which indirectly or directly supports the housing industry it's not that we're looking at the housing market, it's really that we want to support overall demand we're still a long way from maximum employment and we think it's appropriate even once people go back to work, start going back to work at higher rates, which we expect later this year, we still think it will be -- some time will have to take place to get all the way back to that place where we were in february of 2020 or a place like that. if that makes sense. >> let me quickly go to my

second question. the price of lumber -- and we heard this earlier -- skyrocketed to more than 1730 per board feet in may. in the last few months suppliers come back online, surprises have plunged to 60% and now our negative for the year. is this the transitory inflation rate the fed was anticipating, andhow do you differentiate between the rising prices due to supplier constraints as a result of the pandemic and the potential long-term inflation? >> broadly, yes. that's the kind of thing we would like to see a lot more of. we would like to see a bunch more examples. it's the same story, a situation where there's a shortage there's a lot of demand. supply can't react prices go up in the case of lumber there's a lot of buying, almost panic buying

we may be seeing that with used cars where we have very high rates. that's one of the things we expect our very flexible economy of supply and demand and you'll see inflation move down and maybe even prices themselves move down >> and that is a great answer. that's another reason when we talk about infrastructure, we should be talking about housing and the supply and demand for housing. my last is basically a statement, my last 30 seconds. in your report you have an area called special topics and it talks about the uneven recovery in the labor force participation. you might want to take a look at it it talks a great statement and makes a true statement that factors are still contributing to the disparities with certain populations, whether it's age, poverty or race. black americans are not listed and let me make it very clear

when we talk about unemployment rates, when we say it's great for america, it's double in the negative for black folks that we're still struggling you mentioned hispanics but there's no mention of black americans so i would like someone to take a look at that because we still are dealing with very high unemployment rates. >> thank you very much the gentle lady's time has expired. the gentleman from michigan is now recognized for five minutes. >> thank you, madam chairwoman there's been a lot of discussion about lumber how that may or may not indicate transitory inflation as someone who actually buys lumber, one of the things i do is we have a real estate developing firm and we are in

the sand and gravel operation so i'm intimately involved in construction i can tell you the lumber i had to buy at the beginning of this year, which is currently building the home that is hopefully going to be occupied, was going to be the beginning of august and now looks like it will be more like the middle of september because of supply constraints, labor constraints, demand, all the things that are going on, i'm not going to be able to lower that price of that condominium because of current lumber prices. those are baked in and fixed that's why i think a lot of my colleagues aren't really understanding the effects of what those price increases mean in the longer run and at the end of the day i wish i could. i wish i could go back and rewrite that contract. when it's already stick and concrete in the ground and it's going up and it's got a roof on it, i can't do that.

so that's going to be a problem that i think this administration is going to have to wrestle with i know you've had a lot of discussion about inflation today. i'm not going to dive too deep into it, but i needed to make sure i lent my name and as people are having the tally of who was bringing up inflation, i wanted to be one of those people -- i didn't think i would find myself in agreement with larry summers on some of his concerns about what's been going on with inflation. whether it's larry summers or saying that nearly half of all of their members -- by the way, i'm also a member of nfib -- that they have had to do price increases which are affecting their customers. we've got to keep an eye on inflation. and my only -- my parting thought on this is -- and what i'm afraid of is we won't know it's too late until, frankly,

it's too late. and that is the problem with having such a retrospective look back when you're diving into those numbers. you don't have to respond to that you're welcome to if you would like to. i do want to hit on lie bbor. something that has not been brought up today you have been very committed in your support as well as other fund regulators at completing the conversion away from the libor benchmarks it's essential, i do believe, to provide certainty for those contracts and you have expressed that in the past you've also stated in previous testimony that although the secure overnight rate -- funding r rate, you said, quote, market participation should seek away from libor in the manner mostly.

i've heard that sofr doesn't necessarily fit the institutions the last few weeks we've had rhetoric out of members about the need for putting parameters about the choice that financial institutions have to determine which benchmark replacement works best for their institution, their customers or lending activity while i agree there needs to be a standard for a replacement rate, i'm concerned that some of the most recent statements sound like the federal reserve and other u.s. financial regulators may be changing their previous views before this committee suggesting that a rate based on the repo market, a market dominated by the largest money center banks should be imposed on every institution and borrower as a one-size-fits-all solution so, chair powell, is the federal reserve's view that there should be a choice among qualified benchmarks as it relates to those regional and community institutions that believe they are more appropriate options

given their business model, lending activity, size and customer base? >> yes honestly i think we've been pretty clear on that we think people's use of sfr is voluntary. >> so it needs to be put into legislation or does there need to be more of that hard legacy escape and certainty >> we need legislation for the hard tail, as you say. i think appropriate to have it in the legislation it's going to be the rate for at least for capital markets and derivatives and things >> i look forward to continuing this conversation. >> i would be glad to. >> thank you very much

the gentleman from california, mr. sherman, who is also the chair of the subcommittee on investment protection, entrepreneurship and capital markets is now recognized for five minutes >> i want to agree or witness deserves a second term or for bringing up the importance of the state and local tax deduction and focusing our attention on libor and its great impo importance you testified how important it is to have federal legislation in that area i do want to correct any misconceptions about the legislation that i'm proposing is not the purpose of the federal government to impose

sofr on any institution anywhere in the country that specifies whatever rate they want. i'm old enough to remember that most mortgages that were adjustable were cost of funds. if they -- whatever they want to use. the question is, do we want to have a voluntary system where the instrument doesn't specify what rate to use and if voluntary means, well, the creditor volunteers one rate and the debtor volunteers another rate, then my friends in the trial lawyer field will have a heyday so the focus here is not to force anything on anybody if they draft an instrument that specifies what they want if they have an instrument from which no one can determine what is the amount of interest to be

paid we need to provide that answer we have to do it in a way we are not indicating that sofr is the standard to be used in instruments going forward. it is not the federal rate, the not the prefrt rate. i want to thank the chairman for his testimony in the past on the importance of wire fraud i'm disappointing you're not moving to a named system for wire fraud but i'm blesed you're looking at other ways to make sure we don't have people who wire their money to account one, t 12345 and it instead goes to a nigerian prince. i want to applaud the fed for consistently year after year remitting $50 billion or $100 billion to the federal he

treasury and in effect profit and i know this is unintentional. i think you should focus on it because it is very important as to fed currency, a federal digital currency, chairman powell, is it the intention any such currency would fully implement the know your customer and anti-money laundering standards? >> so we're at the very early design stages but the answer to your question is going to wind up being yes >> good. and you've said that while crypto wouldn't become a currency, crypto means hidden and that's the great advantage cryptocurrencies will have over a federal digital currency because they are designed to be

crypto and hidden from the irs that pleases the anarchist pseudo patriots who half the time are telling us the federal government needs to enforce laws and have a strong foreign policy and our national security goals without deploying our troops and the other half of the time spend their time being delighted whenever anyone strikes a blow for liberty by evading our tax laws looking at fiscal policy, you can't determine or project monetary policy without some guess as to what our deficit will be. what do you use when you tell us what you're intending to do with the monetary policy, what is your expectation on the level of the federal doft >> what we're looking at is

deficit spending and that kind of thing by the way, the assumptions we make are in the middle of the road and what cbo said. >> my time has expired thank you. >> thank you very much the gentleman's time has expired. the gentleman from kentucky, mr. barr, is now recognized for five minutes. >> good afternoon, chairman powell good to see you. thanks again for your leadership inflation is the topic of the day. i want to talk about timing and communitycation of normalization. with the backdrop of accelerating inflation and i understand your position is some of this is transitory and supply chain bottleneck that is could work itself out. i also recognize the slide

change in the framework you're working under. i worry if inflation expectations continue to rise, regardless of these supply chain issues that resolve themselves, that you could have a self-fulfilling prophecy and inflation could get away from the fed. my question is given the fact that there is communicating well in advance to make sure market stability and clarnt for participants, i worry these movements in cpi and other inflation metrics in recent months have proven to be rapid and significant. are pressures outpacing the fed's preferred time line for communicating adjustments in its balance sheet policy and when you start the tapering process

>> no, there's nothing in our g guidance that would prevent us from doing the right thing at the right time >> you do not believe inflation could move so quickly the fed could be forced to make asset purchase adjustments or even increased fed funds rate without the requisite runway >> that's a separate question. i'm saying we can deal with whatever happens in our guidance i don't expect the outcome you're talking about which would be surprising for something like that to happen it doesn't tend to work that way. but i think we're in a good position to move as is appropriate no matter which way things go. >> you probably saw, chairman, "the wall street journal" article today higher inflation is here to stay for years, economists forecast. what do these economists have wrong that the fed has right

in other words, why is the cons consensus, maybe with the exception with the dallas fed, that this is transitory as opposed to a sticky inflation? why are these, in your judgment or the fomc's judgment, why are these economists wrong and speak to this issue about self-fulfilling inflation expectations and why that's not a concern. >> okay. i'll come back to that i don't have that survey in front of me, but i think, you can correct me here, i think the median estimate for inflation for 2022 was in less than 2.5%, which would be -- and that's cpi or maybe it was pc, i don't know that would be much more consistent with our framework than with what our critics are saying that would be very much in the range of fomc participants are

expecting or at the high end of it or within that range. you may have it in front of you. i don't have that. >> here is what we as members of congress are hearing and you get this data. i spoke to the chamber of commerce at lunch time today this inflation concern is real it's not just that lumber prices are up and the home builders are upset. it's not just that the fixed income seniors are upset because the price of food is up and the restauranteurs are having to pay more for the price of food and the trucks companies and the commuters are having to pay more for fuel costs, you know, we're hearing that according to the nfib, 47% of small businesses raised average selling prices in june that's the highest since 1981. i hope this is transitory, but i hope the fed is hearing the same thing that we're hearing >> so we are

as you know, we have a great network through the reserve banks. we hear that through a loudspeaker every day. we are absolutely hearing that your earlier question, if you want, i can go back to expectations that is the thing we monitor carefully and we don't see problems on that front if expectations do move up it a way that is troubling we would be concerned and we would react to that. >> i appreciate your vigilance, mr. chairman, and i yield back >> thank you very much the gentleman from missouri, mr. cleaver, also the chair of the subcommittee of housing community development and insurance is now recognized for five minutes. >> thank you, madam chair. thank you, purchase, for being here with us today and let me preface my one question by saying that we have been working with your staff on the issue of

cra. our chairwoman has made affordable housing appropriately and necessarily the majorish be you of our time and hopefully the whole nation is going to be focused on it even as we are struggling with the short-term inflation. so thank you for your participation and support. i hope the occ can participate as seriously as your staff has but my one question is although i remember missouri, i was born and raised and my family members are still in texas a local tv station in dallas did an investigation, and it was very alarming because they found that the lack of banking

services in low income and minority communities in dallas county south of i-30 -- i don't expect you to be familiar with that but the community reinvestment act requires banks draw assessment areas that credit the needs of entire communities and the tv station wfaa found that 20% of banks in dallas -- dallas county, drew maps that exclude southern dallas county. and a bank was found to service all of ellis county where i was born summersville, parker, hood and tarrant, which is ft. worth. only half of dallas county above i-30 and so the federal reserve identified no evidence of discrimination the cra requires that assessment

areas contain entire counties, cities or towns and not arbitrarily exploit low to moderate geographies i'm just rambling on, but let me ask you the question and that is what more needs to be done to ensure that bank assessment areas attract areas where banks have significant activity but also low to moderate income or minority communities within the same geographical areas where lower bank activities may have a legacy of redlining discrimination in housing and finance sectors? i apologize for going on and on and on i needed to go through all of that to get that question to you.

>> well, thank you you or your staff brought this or thecal to the attention of our staff or to my attention and i've had a chance to look at it and, yes, it's very troubling on its face, the article and shows we need real vigilance in making sure banks honor their obligations to serve minority communities within their operating areas. that one got our attention we can't talk about individual institutions, of course, but we take this very seriously and appreciate you bringing it to our attention. >> thank you i yield back, madam chair. >> thank you very much, mr. cleaver. the gentleman from texas, mr. williams, is now recognized for five minutes and we're certainly going to hear about what's happening in the automobile industry. >> well, thank you for that lead-in, madam chairman.

chairman powell, i'm sitting here in one of my car dealerships in texas and listening to how used car prices are driving inflation, which they do, but i can't -- with that in mind i cannot say this is a very best time to trade your car in. you're going to get more than you ever thought you would get but it is an issue the idea that used cars are appreciating is something you would have never thought you would say but we're seeing it as we speak and that is a truth. i want to thank you for coming today, and yesterday i had the pleasure of speaking with main street american business leaders, of which i am one, as you know, and how they've been recovering from the pandemic in the small business community where we talked to them. some of the issues were these businesses were having trouble finding workers, as we talked today.

inflation increasing and the cost of goods and they are purchasing from their large suppliers and then the threat of tax increases. now one business owner from texas reminded us this isn't very complicated small businesses operate on tight margins and any increase in the tax rate is detrimental to the ability to operate. he mentioned they were planning out their capital expenditures and have begun investing less because the threat of higher corporate and capital-gains taxes come in 2022 i want to make sure the factors the federal reserve is tracking which could be a drain on the economy are alliance with what main street america that we're hearing from business people in our state and districts. as you look at the economic outlook of our small businessance the country moving

forward, can you talk about some of the factors that can be limiting growth that the federal reserve is paying attention to >> i would be glad to. i have to say the first thing that comes to mind is difficulties, challenges in hiring we're hearing that very, very widely small businesses are having a hard time hiring and it's, again, widespread an we think that will abate, though, as the factors that i talked about today i think there's a lot of optimism and demand. people have money to spend so we're hearing positive things about that i know people are very worried about inflation, too we hear that loud and clear. it's really going through the economy and through every

business and as we've discussed a lot here today it does have the feeling of something that is associated with the reopening of the economy and that things should settle down as the economy is fully opened and supply and demand recalibrate and prices move around and people get to their new job and we're in a new normal i hope soon as of right now it's on every small business person's mind >> thank you i wanted to get your quick take on the speed the private sector was able to get covid relief money to those in need we've not seen the same success of the shuttered venue program back and hasn't got the money out to struggling businesses moving forward do you think we should get the private sector more involved as we deal with distributing government aid? >> that's a question for you i will say, if i may, the real

way that our lending programs, emergency lending programs, worked was they agitated or supported as a backstop private markets to work and having the private markets step in and make the loans was so much better than having us make the loans and having those done in that sense it really worked, the back stops did. they didn't have to make the loans because the market started working and that's always the better answer. >> well, thank you real quick, can you elaborate on what the financial stability board means when it says climate related risk might be amplified? and can you give me a quick potential example? >> so i think without having it in front of me, i think what they would mean is the financial sector could amplify a risk

along the lines of changes in the climate that had very bad effects on a particular agricultural area. for example, over time and that bank failures have a way of amplifying shocks rather than absorbing them. >> just in closing, this is a great time to buy a car. >> thank you very much the gentleman from georgia, mr. scott, also the chair of the house agricultural committee, is now recognized for five minutes. >> and i just want to say that my great colleague, congressman williams, is not only just a great entrepreneur in the car business, he is also one of the great all-star third basemen for my atlanta braves in major league baseball. >> that's right.

well, thank you for reminding us >> all right he's a good man. chair powell, it's good to have you back now last month you stated before the house select committee on the coronavirus, you said this, and i quote, you said a recent decline in commodity prices was evidence that price pressures will cool as supply from reopening the economy are worked out and stimulus files maintaining that our concurrent inflation is temporary and would eventually move back to a 2% target

so i want to ask you while there is no doubt that soaring prices for commodities have fueled a sense of optimism for our farmers and our agriculture producers this growing season. given the volatility around the price of commodities are your views on price pressures still the same today >> so i would say we continue to see prices come in and this week exceed our expectation and that's not what we're hoping to see. this latest rating was above where forecasters thought it would be it's still the same story, the same parts of the economy producing this inflation a narrow group of things

we're anxious like everyone else to see that inflation pass through. >> thank you for that answer and i agree that a return to a more stable inflation rate would be indeed advantageous to our economy. but as we know the increase in commodity prices drives up consumer prices over the long term even after inflation returns to normal and, unfortunately, wage increases will not keep pace creating real hardship for people on fixed incomes, retirees, and many of our low-income households. considering how they failed to keep pace with the rising cost of living, can you elaborate for us what trends the fed expects

to see between commodity inflations and earnings at least until we return to a 2% inflation rate >> hmm we don't have any ability to forecast commodity prices any more than anyone else does they're going to do what they're going to do. our expectation is that over time the reopening of the economy will be a process that we go through and that these imbalances that we're seeing will abate, and we hope that happens sooner -- it's difficult to say exactly when that will happen it seems likely that it will happen, but the amounts by which inflation will move up and the timing of it passing through are very hard to predict >> well, how much time do we have i mean, how much longer will we

be in this thrust? you feel confident it will happen what is your best estimate about when we will be back to normal >> i think we'll know -- before we get fully back to normal i think we'll know generally whether this framework for understanding is the right one and so we would want to see more things like what happened with lumber and see more of these prices flatten out and then perhaps come down hopefully as lumber did that's what we would like to see. ultimately price stability is half of our mandate. if we see it risk a period of troublingly high inflation we'll use our tools to bring inflation back down to 2%. >> thank you very much, chairman you're doing a great job

keep it up >> thank you very much the gentleman's time has expired. the gentleman from arkansas, mr. hill, is now recognized. >> thank you, madam chair. and it's great, chair powell, to have you back before the committee. our members appreciate the chance to visit and seek your wisdom on alm thel these topics i hope the fed is right this record high inflation we're experiencing for many, many years is, in fact, transitory. super important to family here in arkansas that only has $48,000 in median income when they're all telling our offices they're seeing such persistent and large price increases from the grocery cart to gas to home improvement projects it's a big difference for them than it is for some economists at the federal reserve who makes $175,000 a year and gets to work

from home and doesn't bare all those normal challenges a family in arkansas does i hope the fed committee is right that it's transitory the balance sheet of the fed's increased $750 billion we're over $8 trillion at the federal reserve. as we've talk today you continue to purchase about $120 billion in assets per month, $80 billion. of the total balance sheet that makes up about 29% of agency mbs and about 63% in the u.s. treasury securities. is that approximately right? >> sounds about right. >> and chair powell, isn't it true in the recent july monetary policy report outlined that the, quote, housing sector remains remarkably strong, closed quote. i know you've testified about housing but that's -- you agree that's what the monetary policy

report says? >> yes >> so given that acceleration in home prices you and i talked about back in february when you were before the committee and that vigorous expansion of mortgage lending, is it necessary to be buying the $120 billion of assets a month particularly to the mbs portion? what's the committee's logic in maintaining that portion >> so really we look at the whole things we're buying. treasuries and mbs and they have the same effects on the economy, erpt of them mbs very modestly affects on housing. as you know we're in a process of looking at tapering those purchases. we had a meeting back in june. we have another one in a couple of weeks and if we continue to make progress toward our goal we

articulated last year we could reduce those purchases >> i noted governor wahler made some comments in the recent -- after the recent meetings say ing they are on fire and don't need any unnecessary support will that be taken into consideration as you look at the taper and the potential design of how one would taper >> yeah, i would say the timing and the composition of the taper are the two main things along with whether we're meeting our goal of substantial -- those will be in the conversation for sure >> and help me with something that's a flow of funds contradiction for me, we have this massive -- i know you don't refer to it as qe so i will be differential to you but this massive stimulus in buying $120 billion of securities monthly and yet we've seen huge spikes in the federal reserve's reverse repos which, in turn, drains

that liquidity back out of the system soaking it up how does that make sense to an ordinary review, and i do think your description in the monetary policy report was good, but how does that make sense to the market >> well, you know that the repo facility, the first repo facility is there to keep the federal funds rate in a target and for a couple of big reasons there's been downward pressure m rates. >> wouldn't that indicate there's just not that much demand to take those liabilities and the assets in the banking system, maybe we have essentially way, way too much liquidity on the books of the banks? >> you could say there's a shortage of safe short assets, treasury and so yes, that's why that's happening a shortage of t bills, not a lot of t bills in the general account is shrinking down, too

>> last topix, we can answer this offline but congressman hines introduced the 21 century dollar act to help our strategy for the u.s. dollar. i'm interested in if you're going to maintain the cutoff date for our international swaps december 31st? >> the swaps really work they did a great job, as you know, they were fundamental part of our program to stabilize the global financial markets and dollar funding markets in particular which are really important for our economy. we've extended them to december 31 i made the decision not to expand them beyond that. i don't know that we would unless conditions change >> yield back. >> the gentleman from illinois mr. foster is recognized for five minutes >> thank you, madam chair. first extend my apologies for

having missed most of the hearing. we found something more interesting than fed monetary policy which is a hearing on the science committee on the origins of the coronavirus, which was, i have to say a rather interesting subject. i also like to thank my colleague from arkansas for stealing the question that i was intending to ask about the differential effects of buying mortgage-backed securities versus other government guaranteed sassets an i appreciate your answer so one of the questions i have, one of the good things the fed is doing the last several years instead of publishing household net worth as if there was only one consumer in the country but actually publishing it by wealth slices and so you can see in your numbers for example that the top 1% wealthiest have about a third of the wealth in our country, the next 9% have

another third and between 50% and 90% have pretty much the last third, the bottom half according to the numbers by fed reserve have only 2% of the wealth this is very much related to how you model the economy because there are many of the policies that we're thinking of implementing and many of the effects of your policies that have very different effects on the top versus the bottom. for example, things that affect stock market valuations essentially only affect the top 10% of the u.s do you incorporate that into your hodling looking into the future are you using economic models that look at the different behavior of the different wealth strata in the united states? >> yes, where it's appropriate for higher propensities to

consume at the lowerer end of the income spectrum and lower at the top. we incorporate those where it's appropriate we do that in modeling monetary policy it matters as well. >> if you have some sort of write-up on that, could you get i'd very much appreciate it. i think that's, getting the coefficients there correct are really important to understanding how your policy decisions affect not just the american economy as a whole. do you have any general feelings on the apparent disconnect of the stock market with the feelings of ordinary families? there were instances during the covid crisis where just there was a scream of pain from the general public and the stock market was hitting record highs. what is your thinking on that?

>> i never express an opinion on the level of the stock market. remember the stock market is pricing in future cash flows as you well know and thinking ahead. i think in this particular is what happened last year was pretty early on. at the beginning there was this crash and pretty early on after the c.a.r.e.s. act passed and the things that we did, markets rp recovered quickly beginning pretty early, looking ahead to what became a pretty strong recovery, and markets were righter than a lot of forecasters were recovery did exceed expectations but i can't comment on the actual level >> and are you fairly satisfied with your response to the stress in the treasuries market do you need any new tools? would you like to have any more? what's the current or the thinking in retrospect on that >> i think the work is not done there. i think we are in the middle of

conclude -- of bringing that work to a conclusion about what went wrong, what are the right tools, you know, how deep out into the tail do we need to ensure and all those questions i think will come around i don't think we're done with that project at all. i think this will be over the next 12 months probably a lot of ideas and discussion the idea of central clearing, there were a lot of things >> yes, just the imbalance of supply and demand may have been one of the critical factor there is and what you did there may actually have been very important preserving the dollar's position as a country you want your economy connected to that was well done. thank you again. doing a heck of a job and the end of the tunnel is in sight and i hope we'll come out of this and continue in good shape.

>> thank you >> thank you, very much. ladies and gentlemen, members, we have a hard stop that we negotiated with mr. powell, and he's going to have to leave now, and so we will not be able to call on any more members at this time, but those who were not able to raise their questions or to make their statement will be first in line when he returns. so i'd like to thank mr. powell for his testimony today. without objection, all members will have five legislative days within which to submit additional written questions or the witnesses to the chair which will be forwarded to the witness for their response sky mr. powell to please respond as properly as you are able. without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the

record with that, this hearing is adjourned. [ gapounds gavel ] >> chairwoman maxine waters chairing the meeting part of the central policy, day two in the senate tomorrow, of course welcome back to "power lunch." not much time left in the program, me and eamon javers listening. >> this is the shortest edition of "power lunch" ever. fascinating to hear the questions about inflation and that's what people want to know and the cost of cars seems to be the big proxy members of congress asking what things cost in their district, cars are the things they turn to. >> used car up 45% was the eye grabber. steve liesman is standing by with more. steve? >> yes, inflation was topic number one he was barraged with questions bin flation and cars were a big deal, as you said. i don't think powell gave very much ground on policy, sticking

with policy suggesting there's about a six-month window for the fed to get these inflation rates down and then the fed would act, guys >> we also see sort of observing with notices comments about some of the happenings in the crypto space that seems like an area where he's probably going to be under pressure for more regulation especially as it relates to commercial paper market. >> yes,'s he has all of his egg in the basket of the federal reserve in september, punting on what the fed will do, putting together a detailed report how the fed should act and what it should do with digital currencily for september he's getting a lot of question and interests what the fed will do with digital currency >> he said a couple of times as i was watching "i don't know the answer to that it's difficult to predict the answer to that." he was unusually forthcoming in his limited ability to see what's happening with the pandemic, we're in a totally new

universe here? >> i think that's right. i don't think we've got on it a point where we know what the right playbook is for coming back from a pandemic the fed anticipated some inflation, not as much inflation as this. the fed is maintaining a wide open policy so we'll have to follow this as it goes with really a lot of uncertainty at the federal reserve and really among a lot of economists. >> steve, thank you for that recap. steve liesman, eamon, a pleasure see you tomorrow that does it for "power lunch," everybody. "closing bell" starts right now. thank you, and welcome to "closing bell. i'm sara eisen market another red hot inflation number the major averages slightly higher as we head into the close. small caps are sharply lower >> wilfred frost earnings are front and center once again, more big banks reported results today the financials among the weakest sector with bank of america seeing a