announced issued his own statement praising that action there have also been reports that the governor and his wife, with respect to their business and perhaps other interests, may have had deposit interests in svb. so when the reserve -- the federal reserve board, the fdic board, and secretary yellen in con certation with the president recommended invoking the systemic risk exception for svb, and then decided to provide blanket insurance, even on uninsured balances, that the fed or any others to your knowledge perform any conflict of interest due diligence? >> no. you know, we were in an emergency situation. on monday morning, there was going to be and there was a run on banks that looked -- >> so looking back, do you think there was -- >> we carried out our duties and i'm actually pretty sure we did the right thing? >> and you don't think there was any conflict of interest, even looking back

>> i have absolutely no knowledge on that. >> okay. thank you. thanks for being here. i yield back the plans of my time >> gentlelady yields back. the gentlemen from texas, mr. gonzalez is recognized >> thank you, chairman and ranking member thank you, chairman, for being here with us this morning. the june federal open market committee indicates inflation in the u.s. in a broad continued ease but remain evaluated. in response to the fmoc that has the proposed interest rate increases up until june 14th, recommendations to pause interest rate hikes for the first time this year, research has shown that the effects of monetary policy decisions, like raising interest rates, can take on average 42 months to be realized in the united states, meaning we may not understand the effects of this first increase in rates in march of 2022 until next fall with that many mind, how have our recent tightened monetary

policies impacted the strength of the u.s. dollar and how it is valued globally. >> let me say, there's a lot of uncertainty how long it takes. there's no agreement on 42 months most people would say shorter than that. you're asking how it would affect the dollar, so the -- first of all, the treasury department has a responsibility for the level of the dollar and the stewardship of the dollar as a currency we don't actually comment on that we don't look at any particular level. it's just another -- to us, it's a financial condition, a stronger dollar means certain zm thing and weaker dollar means certain other things >> it continues to be a concern in this committee. also, as you're aware, the federal reserve's core mission is to keep employment up and inflation down although i understand the calls for climate-related financial risk management from my colleagues, we should be focusing on the economic state of our country the credit of the u.s. dollar is

at jeopardy and as you know, we've had global pressure recently and we need to be sending a clear message that the role can rely on the full faith and credit of the united states dollars. we should be focusing on mitigating the calls to reduce dependency of the u.s. dollar. monetary policy changes implemented in the u.s. are likely to caused a ripple effect throughout the global economy. with that said, would you agree that monetary policies to directly address climate change should be made by congress and not the federal reserve? and implementing monetary policies and supervizry tools to exclude energy leaders from capital and financial institutions would have a grave impact on local, state, federal, and even global economies? >> a strong agreement around the fact that we have quite a minor role in climate change and really the important decisions about climate change need to be made by elected people

not by the fed >> thank you i yield back >> the gentlemen yields back the gentlemen from florida, mr. donalds is recognized. >> thank you, mr. chairman chairman powell, thank you for being here really appreciate you being here look, i've got to say, first of all, it was good to hear from the other side of the aisle that the federal reserve should not even be engaging in using its tools with respect to climate change or climate mitigation or whatever the case may be the fed y, you guys have a big enough job as is adding anything like that to your job will be wholly detrimental to the american economy. so i for one this morning am glad to hear that, coming from the other side of the aisle. you've had a couple of questions already on capital -- bank capital, et cetera look, some of the current views are that raising -- continuous raises of bank capital will increase costs to our economy, anywhere from 5 0 to $200

billion. what's your view of the current desire or mode of vice chair barr to fully implement the basel 3 capital standards? >> well, i think that's the next thing, vice chair quarles was working on that. it didn't get completed for various reasons, but i think that's an international capital standard that we should go ahead and complete as to the level of the -- the right level of capital, that's a discussion that we're about to ha have >> in the fed, are you concerned that it seems like the european regulator is starting to pull back from that they're starting to think about capital, saying there's too much from european banks. and they're starting to recede from what was a handshake agreement in years gone by >> i'm not hearing that, exactly. we'll be watching that carefully, though. >> okay. overall, with respect to capital. let's take a step back obviously, since 2008, 2009, we

have, in my view, aggressively gone through this process of increasing capital standards and capital requirements on a tier 1 capital for banks. in retrospect, do you think that's been a net positive to the overall banking environment, or do you believe it's been a negative to the overall banking environment? >> i think it's been a net positive and as i pointed out earlier, u.s. banks have competed very, very successfully through this period, despite what were very significant capital increases that we put in a few years back. it really has led to a very strong and made it well through the pandemic period, i thought and i think that was a pretty good test. so even though the government did do a lot to support the economy, still, i think that those capital hikes that we made in the last cycle came through looking pretty good. >> do you guys at the fed, do you have a view of -- i say "you guys," i know you're the chairman, but there are other members as well. do you have a view about the concern of community banking in

the united states or a lack thereafter of community banking? it has been shrinking quite significantly over the past 10 to 12 years. >> very much so. it's a focus for us. we understand the importance of community banks that they provide a different service and really important service to smaller businesses and communities, and community banks have been consolidating for 30 years. it's a secular trend as people move to bigger cities and everything, but we don't want to do anything to move that long. we think the world is not a better place with fewer community banks and try to keep that in mind in all of the regulatory and supervisory things that we do. >> do you think that federal regulatory policy apart from congress has led to a diminished effect of community banking in the united states? >> it's probably been a factor, but i think there have been

important demographic factors as well and also, having interstate banking. interstate banking only became legal quite recently and that also has led to consolidation. you can look back, though, again, look back 30-plus years, and you've seen a very steady decline. i think there are demographic and other factors driving it but, you know, regulation can fall as a fixed cost, which means that institutions need to be bigger. and i think that's probably part of the story >> i don't disagree with your conclusion, i'm concerned about the trajectory i think having larger financial institutions, larger banks overall with a diminishing smaller community bank infrastructure is detrimental to lending to small businesses, mom and pop businesses it also could be parochialized i got the start of my career in community banking, so heartfelt situation. last question, with running out of time. the s.e.c. has proposed a rule that would among other things require banks to segregate client cash held in custody,

upending custody bank balance sheets and by extension, the bank custody model are you guys at the fed concerned about this proposal rule from the s.e.c. >> the gentlemen's time has expired. the gentlemen can respond in writing. >> fair enough >> the gentlemen from new york, mr. torres is now recognized >> thank you, mr. chairman thank you, chairman powell as you know, the u.s. has foreign adversaries, potential the ccp that seem intent on de-d de-dollarization how seriously should the threat of de-dollarization be taken in your view? >> the status of the united states -- of the dollar as the world's reserve currency is a very important thing to us i think the reason we have that status is large ly due to our great democratic institutions, the rule of law, and the fact that generally speaking, we had strong levels of price stability, and the dollar will

remain the reserve currency, as long as those things are in place. >> i want to explore that answer commentators often speak of the dollar as the world's reserve currency as the cause of america's economic dominance do you think of it as the cause of america's economic dominance, or as a consequence of it? >> to me, it's more of a consequence and there tends to be an equilibrium where one currency becomes the accepted global standard. that has been the dollar for some time and i suspect it will be continue to be for some time. >> do you view these mandates as equally as binding upon the fed, or does one supercede the other? >> they are perfectly equal under the law. >> i'm curious to know what it means in practice to have a 2% speculation target the latest clause notwithstanding, does it mean the federal reserve will continue raising interest rates until the 2% target is reached, even if doing so comes at the expense of maximum employment as

well as financial estimate >> it doesn't mean that. the way we think about it is, most of the times the two goals are aligned in the sense that if you're achieving one, you're achieving the other, and if you're a little bit off, the other one -- they move in the same direction today's situation is unusual in that we are overachieving the maximum employment goal, but far from achieving the inflation goal so in our system, we have a constitutional document and what it says is, when that's the case, you look at how far you are from the goal and the speed with which you would move back to the goal. that would tell you today that we should focus heavily on inflation. but as it becomes closer, as the two things become more aligned, then they would go back into perfect quality under the law. >> the fed engages in a delicate balancing act between employment and inflation, so to what extent do you factor in financial

stability, safety, and soundness when raising interest rates? >> you're right, we have a financial stability mandate, but we try to -- >> do you have a financial estimate mandate with respect to your role as a bank regular later? >> also just generally, we're the lender of last resort. central banks were originally created to support the financial system in times of stress and to make sure that you don't get into times of stress so i would say that -- >> so what extent do you factor in safety and soundness when factoring in interest rates? >> we try to use monetary policy tools for monetary purposes that the reality on the go is much messier than that. they're very much entangled and one affects the other. the separation is no noot all perfect. we think of these as separate things with separate tools

do you think that the silicon valley valley bank failure revealed a different tension between the safety and soundness mandate of the fed as a bank regulator and the mandate of the fed as an administrator of monetary policy? >> i would say "no," and i'll tell you why interest rate risk is one of the most basic banking risks we supervisor for it overwhelmingly, u.s. banks did manage their interest rate risk. silicon valley bank didn't and even though we -- you know, the supervisors were pointing that out, the bank didn't take action quickly enough. it was management that failed to hedge against those losses and failed to hold appropriate liquidity. >>ed in pre-covid world, we had the best of both worlds, low

unemployment, low inflation for decades. do you think we could return to that best of both worlds or are high interest rates a new normal in the american economy? >> we will return to 2% inflation and maximum employment what will be the level of interest rates that's a good question >> do you think it will settle than what we've seen historically >> it's a great question the people that argue that it will move back down point to the fact that it was global factors that drove rates down in the first place. maybe the truth is somewhere in the middle >> the gentlemen's time has expired. the gentlemen from nebraska, mr. flood, is recognized >> thank you mr. chairman, chairman powell. i would like to discuss the continued efforts to unwind years and years of quantitative easing and what it's done to our federal reserve balance sheet. if you take a look at the size of the federal reserve's balance sheet since the 2008 financial crisis, we've seen an alarming increase from around $800 million to today's $8.3 trillion

in assets. back in 2018, you did start the work of winding down the balance sheet. you managed to off-load roughly $700 billion assets between the beginning of your time as federal reserve chair and august of 2019. the problem is shortly after your efforts began, we had another major economic shock, the covid-19 pandemic. that caused the fed to once again return to quantitative easing as a form of economic relief pretty soon, the federal reserve's balance sheet had increased another $4 trillion in size that's how we made it to the balance sheet level that we were at today i understand that you have started working to shed some of the federal reserve's balance sheet, and i appreciate the work that being said, the scale involved here to me is startling. my concern, chairman powell, is that efforts to shed assets from the fed's balance sheet have never been anywhere as quick as efforts to build a backup. our economic cycle does go through recessions from time to time it's not always boom, but some bust, too. if we continue a pattern of

rapidly building up the federal reserve's balance sheet in bad times and slowly shedding assets in good times, we're going to see the balance sheet grow significantly over time. chairman powell, is this a concern of yours and to pair with that question, long-term, how can we avoid an environment where any effort to unwind the federal reserve's balance sheet is undone anytime there's an economic shock? >> it is a concern and that's why we are, this time the balance sheet rolloff is much, much faster than it was back in the first episode. we also know more. we hadn't grown our balance sheet like that, and we hadn't shrunk it before now we have experience with that so we are moving back down to a level that will be appropriate for a new framework. we won't go back to a framework where we were dealing with scarce reserves. we like the administrative frame work that we're in now it is important that the balance sheet not just grow with every

cycle. and i think i'm very conscious of that. >> chairman powell, do you have an optimal fed target for the size of what the balance sheet should look like you know, a number >> you know, i'll give you the idea and that is, it's -- you find the number but the idea is that it's smaller than now, it's a place where reserves are abundant and a little bit of a buffer on that so we don't run into reserve scarcity demands for reserves can be volatile and you don't want to find yourself suddenly finding that reserves were scarce, and we didn't see it coming, and we then had to, you know, put more reserves into the system at a time when we didn't want to be doing that i think you want to have levels -- a level where we have ample reserves, plus a buffer. and you know, that will be a percent of gdp that we get down to we're moving in that direction pretty smartly >> chairman powell,

realistically, how quickly can the federal reserve unwind its balance sheet? what's the threshold beyond which an assets sell off by the federal reserve would disrupt our markets? >> so we don't sell assets what we do is we allow them to mature and passively roll off. that's what we're doing to the tune of about $1 trillion a year we're in the middle of that process now. we will, it's an empirical question you're going to find a level that is still ample, plus a bit of a buffer. and that's how we're thinking about it >> thank you, mr. chairman i would just reiterate my concern on this issue. i fear that having the federal reserve backstop so much of our economy through the holding of treasuries and mortgage-backed securities is not sustainable longer thank you, chairman. i yield back >> the gentlemen yields. the gentlemen from nevada, mr. horsefer is recognized >> i thank the chair and the ranking member for holding this important hearing and thank you, chair powell for appearing before the committee today before i begin, i would like to

ask permission to enter into the record editorial by the "las vegas sun" kbentitled, "economy infrastructure thrive when dems have the reins," dated june 16th, 2023 during this time of economic uncertainty, it is more important than ever that the federal reserve fulfilling its dual mission of maximizing employment and supporting price stability. there is no doubt that it is difficult and the needle that has to be thread is very specific however, the human cost is simply too great for us to get this wrong sometimes we need to be reminded that there are real people behind the economic data and that the actions taken by both congress and the fed have really consequences for everyday americans. everyday americans who want to know that myself and my colleagues are dedicated to creating an economy that actually works for them.

which is why i was pleased that last week, the federal reserve decided to pause your interest rate hikes and take stock of the overall economic picture now, don't get me wrong. there's certainly more work ahead of us, but with 13 million jobs added since president biden took office, we should be rooting for america to succeed and not to fail. the strength of the labor market continues despite the multiple concurrent shocks that continue to reverberate throughout the global economy and i believe our economy remains resilient thanks to the historic investments that were included in the legislation passed last congress and signed into law by president biden. these beneficiaries of these investments were the people, the middle class, not special interests. the bipartisan infrastructure law is creating construction jobs and projects that will help ease supply chain challenges and ensure safer transportation for

everyone president biden and congressional democrats are investing in technology that will define the 21st century, components to generate solar and wind energy, semiconductors and electric vehicles that will all be made here in america. just last week, treasury secretary yellen was before this committee and described how the transformational investments from the reduction act are ushering in a renaissance of domestic manufacturing these are good-paying jobs, union jobs, that are expanding our production capacity here at home while reducing our reliance of goods imported from abroad. remarks that annual in-depths in manufacturing construction has more than doubled its pre-pandemic levels. when we narrow the region, the

u.s. census bureau estimates that in just two years, private manufacturing construction increased almost tenfold if we want to rebuild the american middle class, we must do so from the middle out and by investing in modern infrastructure and modern manufacturing facilities but this does not mean that everything is improving equally. i've heard time and again from my constituents about the cost of housing being one of their biggest pain points. the monetary policy report points out that housing services prices have risen a shocking 8.5% over the 12-month period ending in april. and in my district, it's even worse. so chair powell, at a time where it has become increasingly difficult for working nevadanesses to purchase a home, i worry that rising mortgage rates will put working families even further behind on accessing the wealth and equity that a house provides while higher rates have cooled, some housing markets across the

country, what do you see as the biggest remaining upward pressure on housing services, and what can we do in congress to incentivize new home starts to hopefully moderate the imbalance between supply and demand in the housing market >> i think you're talking about longer run -- largely, longer run factors here and i think there has been for some time a shortage of housing. it's harder to get lots, it's harder to get workers, and in the pandemic, it had been harder to get materials and things like that so there is certainly a need for more housing i think during the pandemic, you had people wanting to live in houses rather than downtown in apartments, because of covid you had low rates. and so you had two or three years of very, very high pricing increases for housing. now that has flattened out a lot as we've raised rates. >> the gentlemen's time has expired. the gentlemen from new york, mr. lawler

>> thank you, mr. chairman chairman powell. you, the fed's vice chairman for supervision and many others have indicated that the banking system is well capitalized bank capitalization remained robust during the covid shock and related shutdowns of economic activity and severe fed stress testing nonetheless, the vice chair for supervision wants to increase capital and other requirements on financial institutions. this will have substantial economic effects that will begin immediately, while you are still focusing on bringing inflation back to the fed's 2% target. excessively high capital requirements will constrain credit provision to the economy, costing jobs, incomes, opportunities, and living standards. as my colleague pointed out, a 1% increase in capital requirements could potentially reduce gdp by up to 16 basis points based on the basel committee literature on january 21st, 2021, 30-year

fixed-rate mortgages had an interest rate of 2.77% now, for the same loans, individuals are looking at a 6.69% interest rate for a 30-year fixed rate mortgage. for the median home valued at $436,800, the difference from less than two and a half years ago from now equates to over $300,000 more over the course of the loan with the median household making around $71,000 a year, that extra $10,000 a year out of pocket in mortgage costs is crushing some areas like my district are even harder hit due to the high cost of living and the lack of housing. combine that with inflation at or above 4%, and these factors are taking a real toll on the average american family, including in the hudson valley now, further decreasing the ability of credit to households and businesses across the country would only likely worsen

this crisis. so chairman, do you agree that excessively high capital levels, constrained bank's listeneding capacity with spillover effects on jobs and living standards for americans, skpand effects would begin immediately, independent of any proposed fadphase in tim. >> i do think, as i mentioned earlier, there's a trade-off between safety and soundness and availability of capital. and you want to get that balance right. >> but respectfully, you said, you have testified that there was more than enough capital in these banks. so where are we unsafe and unsound, that we would require more capital requirements? >> well, as i mentioned, that's the question we're going to be asking, as we review the proposals when they do come forward. we don't have a proposal in front of us at this point. and i think any -- as i mentioned, any increase in the capital for the large banks would needto be justified. i don't know that there will be much in the way of capital

increases proposed for banks other than the very large banks. but we'll have to see. >> so you don't believe regional and community banks will face the same requirements? >> very different requirements than they do now >> but you're not looking to increase the requirements on them >> we'll have to see what the proposals turn out to be once they're out, we can have lots of conversations about the specifics, but until they are, it's tough to do that. >> and you'll commit to providing this committee with all such analysis before any proposals come out >> i think there will be a proposal that comes to the board some time this summer and the board will vote on that and we'll share whatever analysis we have >> are you concerned that any significant increase in capital could jeopardize the fed eefrtss to reign in inflation?

>> the thing about capital requirements, there would be a 30-day comment period, something like that. and then there would be a period, a long period of considering the comments that were made, and then there would be movement toward coming to an agreement about what to finalize that would take many months. and there would be a situation where there would be long phase-ins. so i don't think capital requirements play into the near-term economic situation the way interest rate hikes do >> according to the bureau of labor statistics, a cpi calculator takes $1.16 today to buy the same consumer goods and services as $1 purchased when president biden took office in january of 2021. do you agree that outsized inflations continues to harm workers, retirees and families continuing to try to make ends meet and pay their bills

>> i strongly agree with that and that's why we're taking the measures we're taking. >> thank you >> the gentlemen from north carolina, mr. nichols is recognized >> thanks, chair powell, for being with us here today >> back in is the 95, i worked here in congress as an intern for dick gephardt. i was in his press office and we had newspapers where my job would be to clip out the articles and paste them on a sheet, but when i was here in '95, the grateful dead were playing, it was one of jerry garcia's last concerts and i was just so disappointed that i missed that concert but was excited to see from public reporting that you were at the most recent dead and company show i've been to this version and enjoyed it, but we weren't here. how was the show did you like it? >> it was terrific what can i say it was great i've been a grateful dead fan

for 50 years >> i've found one universal truth. i like people who like the grateful dead. so having said that, i have limited time, but do you want any time to go back to some of the questions that you had do you want to elaborate on anything that you've said here so far today >> you're very kind tuo offer, but i'm fine with the answers i've given so far today, i believe. >> well, back to that show a lot of people there in virginia, and like my constituents, they're very concerned about this economy they're worried about, the cost of groceries, rising inflation, interest rates going up and, when we do these hearings, it's always big news. the things you say move markets and are very important but fed speak is just so hard for my constituents and the

american people towns. what can you tell the american people who are concerned about the when i where this economy is heading? >> i would say, this economy is very strong. and what's driving it now is a very strong labor market there's still significant demand for workers, more job openings than there are unemployed people, wages are moving up, and that's really what's driving the economy forward. people's disposal incomes are coming up, inflation is moving down gradually the thing that troubles people and can thing that accounts for the surveys that you see, despite a historically strong labor market, people are still concerned about the economy, it's really inflation. so this this is our job to bring inflation down the way we do it is by raising interest rates and while that can be painful, it gradually slows down demand, so supply and demand can get back into alignment and so we can have inflation running at 2% and people can get on with their

jobs and not have toibt inflation. the definition is so people can live their daily lives without thinking about inflation all the time we want to get back to that place. and we're on a journey to get there. we have quite a ways to go, but we're making progress. and i've always wondered, if congress was in charge of setting interest rates, do you think that is something that we could handle as a legislative body >> i wouldn't want to comment on t that >> and i want to join on the chorus with a lot of my colleagues about capital requirements for banks i brought this up with vice chair barr, with mickey bowman, and in your written questions for the last time you were here, i didn't get a chance to ask questions, because any seniority here on the committee, but you

said we've got to be careful because it could cost banks to reduce the ability of credit or pass higher costs of credit on to consumers, end quote. skpubs tand you said capital and liquidity levels are at multi-dead highs my constituents sent me here to lower costs for working families so increasing borrowing costs really hits them hard. as the fed considers new capital requirements, how do you intend to strike that balance between the trade-off that you talked about in your written response >> that is the balance, you said it very well so strong capital requirements mean it's more resilient to downturns and crises and things like that, so banks can continue to lend during even stressful times.

so that's very important we know the cost of capital goes up and the cost of credit will go up. it's a balancing thing and there isn't any one simple model or answer, so you have to make a judgment call based on that and that's what we'll be doing as these proposals are made and assessed >> i yield back. >> thank you, mr. nichols. i look forward to joining you at the next concert with the chairman and we'll see how that works out. chairman powell, thank you very much taking time for being with us today recognize, first of all, that you get feedback from every successor on how you're doing your job you are charged with two mandates primarily among those are price stability and combatting ting unemployment the labor market is clearly very tight and you should be credited with succeeding in maximum employment and being a partner in this. unfortunately, we haven't collectively been as lucky in

terms of price stability core cpi is still over 4% and services and housing costs remain very sticky given the economic uncertainty on how fed will bring inflation to its 2% mandate, can you touch on how the bank capital requirements vice chair barr is proposing, and main street businesses, farmers, family farms and iowans back in my district provide a backbone on this and they depend heavily on this area. do you think they'll be facing a more difficult and expensive credit environment as a result of this? >> i don't think so. particularly in the near-term. so first of all, many of those people will be dealing with regional and community banks, rather than the gsibs, but the phase-in for higher capital, the process of publishing and then getting comments and evaluating those comments and then coming

to a broad agreement and consensus on what to implement and over what time period, that takes time it will not be important during this period of the next year or two, when we're getting inflation back down to target, and the economy is kind of normalizing, i don't think the capital will -- the capital changes will have much of an effect in the near-term. >> mr. chairman, let me ensure that i'm hearing you correctly chase chair barr is engaging with small businesses throughout the west, with potential knock-on effects some have found that these will increase borrowing between 50 and $200 billion as we look to cut this in half, is this the right thing to be doing? >> sorry, cut in half? >> the inflation rate. >> honestly, i don't think the two are really in conflict we have an obligation to bring inflation back down to 2% over time, and we will do that. and we'll use our tools to do that but i think the question of bank

capital is real. i don't see it as a key factor in how we think about inflation, because, again, it will take -- it will take quite a while to decide what to do, and then to implement some of the changes we're talking about will have multiple year phase-in periods >> let me ask you on that implementation timeline, particularly for new capital standards, you said it would be some years before it would go into effect. according to a report published last year by the federal reserve bank of cleveland, in the case of implementation, basel 3, banks began to increase their capital ratios, and i quote, prior the publication of specific language applicable to u.s. banks, end quote. and the bank responses we estimate to take place well before basel 3 rules start to come into force before 2013. do you agree with the cleveland fed, and do you believe our banks will begin to adjust as soon as the proposal is released >> yes, i do it's not an absolutely thing

where they will wait until the effective day. they will certainly -- and they may be starting, but i think the earlier you start, the more gradual the path will be >> very quickly, i want to turn to a different subject it's been brought up by a number of my banks back home, relating to a central bank digital currency, or any federal-issued coin we have seen how this administration in the last congress wanted to require anyone who made more than $600 on a third party settlement organization like an ebay purchase has report that to the irs. the existing threshold before the law was modified was $20,000. that is how far this administration wants to peek behind the curtain of what my constituents are going spending their money on i want to know specifically, for my constituents back home, the thoughts of creating a central bank digital currency that tracks individuals, if the fed were to offer a direct individual accounts to citizens, wouldn't this be a direct threat to the financial privacy of many

americans? >> potentially, and that's why that's not something we support. we would not support accounts at the federal reserve by individuals. if we were to and we're a long way from this, if we were to support one, it would be one that was intermediated between the banking system and no not by the fed. >> i'm happy to hear that. with that, i yield my time and rends the gentlewoman from colorado, miss peterson for five minutes. >> thank you, mr. chairman and thank you, chair powell, for being with us again today. >> i come from colorado. i was in the legislature for ten years, and when the pandemic happened, i was part of being one of the, unfortunately elected people during that time, during that difficult time when i think about what our

country was going through a few years ago, our economy almost in free fall, completely shut down, our local governments were slashing their budgets they were laying people off. and what that moment meant, that we had to do in stepping up at national level to infuse dollars to save our country's economy. so my frustration here is that we continue to talk about inflation as if it was spending just to spend money and what we were able to do to make sure we could recover, keep our local businesses afloat, our local governments, and recover much more quickly than others so since we talk about this often, i would like to know, if you look to other countries around the world who didn't infuse dollars, like we did, is

there countries we can look at to compare what the outcomes would be and what is their recovery like now? >> our recovery is by far the strongest of any country and i would say inflation that we have is actually, everybody has very high inflation. the eu, the united kingdom, many countries within europe as well. >> that was my next question, how we compare to other highly developed economies on our recovery so it sounds like in the emergency that we were in, the hopefully once in a century global pandemic that the united states ultimately met the moment, and when the american people look at what we have done, we should feel good about where we are, but that we have a long way to go and something that comes up often is rising debt leads to

increase in higher rates of inflation. doesn't that also include tax cuts, trillions of dollars of tax cuts that we could afford that went on our rising debt >> in terms of today's inflation? i think if you look -- to your appoint, you look around the world, there has to -- there's a common factor that has driven inflation very high in lots of advanced economies and it's the pandemic. and it's everything about the pandemic the closing of the economy, the reopening of the economy, the fiscal spupport, the monetary support, all the things that happened went into high inflation. and inflation is coming down we'll look back on this and be able to look at our period of very high inflation, but i think it's not just monetary and fiscal policy, it's also just things to do with the pandemic various shocks >> absolutely. it's hard to believe where we were a few years ago and where we are now, although we do have challenges ahead another frustration that i have

here is our failed policies around immigration perform and providing legal pathways for workers here in this country when i talk to business leaders across the country, they say the number one thing we could do to address immigration is that we could work with the people who want to live here. my question to you, would an increased labor supply help supply chain issues and inflation in this country? >> we're seeing that very much we've seen a bounceback in labor force participation and a significant return to the prior trend in immigration and we believe that's part of why most employers are finding the labor market to be a little bit less

tight. more labor supply the helping the labor market get back into balance, including through immigration. >> great, thank you. >> another concern that i have is not just now, our inability to address legal pathways towards the united states and the consequences of not doing that to our economy, i really worry about in the long-term, if we don't address our labor shortage so i would like to know if we are unable to provide those pathways, do you see this contributing to the rising costs and inflation here in the united states in the long-term? >> i'm not sure about the long-term, but i would say that employers are looking for a demand of excess over the supply workers. there's a lot of demand out there for people to work >> thank you, mr. chairman the lady's time has expired. i now recognize the gentlewoman from texas, miss de la cruz for

five minutes >> i thank the chairman for holding this importanthearing today. it is important that this committee continue to explore how the biden administration's ill-conceived policy and regulatory approaches are harming our nation's economy and thank you, chair powell, for appearing before us today. i would like to lead off with a question that i posed for vice chair barr, when he recently appeared before this committee as representative for a largely rule district, where my constituents, of which 86% are hispanic, heavily rely on banking institutions for their financial needs. i am concerned about mr. barr's focus on factors that aren't necessarily material to the recent bank failures his report on silicon valley

bank seemed to go out of its way to advocate for higher capital levels as a cure for the recent bank failures, instead of the failures of regulators and bank mismanagement. in fact, one of your other colleagues, federal reserve colleagues, governor bohman, echoed these concerns in recent remarks, when she said, the unique nature and business models of the banks that recently failed in my view do not justify imposing new overly complex regulatory and supervisory expectations on a broad ranck of banks if we allow this to occur, we will end up with a system of significantly fewer banks serving significantlily fewer customers. those who will likely bear the burden of this new banking system are those at the lower end of the economic spectrum,

both individuals and businesses. just a couple of moments ago, rep donald asked you a couple of questions. and your response was that you mentioned how important community banks are and that you were keeping them in mind with all that you do. as i speak with my local community and regional banks, they say that the increase in regulation and capital requirements will really hurt t them with that being said, what i find as being an outsider in politics, new to the political arena, i find that people hear in washington, people who hold leadership positions are often out of touch and so i want to ask you, chair powell, do you personally bank with a community bank >> i have over time.

not currently, but yeah, the last mortgage that my family and i had was -- you would like this story, i can tell you some day, but we had a very large bank, which sort of failed at the last minute to come through with our mortgage and we went to the local community bank and they knew my family and they knew the house and they were able to give us a mortgage without difficulty, within a few days. so i have very positive experience with community banks. >> so with your relationship with community banks in the past, how do you feel that increasing regulatory burdens would -- would have consequences to these community banks >> you know, i really think that the things that we're looking at are not about community banks. they're about the very largest banks. and to some extent, banks in the silicon valley bank range is $150 billion that's far larger than a

community bank to be under $50 and probably around $10 billion in assets. so those are not the focus of the regulatory reforms i believe, that are going to be proposed for the board for consideration this summer. >> and i will -- i will also hope that this be true, because as i said, in my district, we have a lot of community and regional banks that would suffer with increased regulation and capital requirements and so, with that, i have very little time, so i will yield back to the chair. thank you. >> the gentlelady yields back. i now recognize the gentlemen from california for five minutes. >> i want to comment on one success story. several years ago, there were $16 trillion of libor instruments, where the amount the debtor was supposed to pay the creditor was to be determined by the london

interbank rate and as of june of this year, that rate will no longer be published. something happened unusual here in washington. a year and a half before the libor hit the fan, congress acted. you published your and the problem is solved. i want to pick up on the ranking member's comment that it's critical we deal with housing. there's a lot we can do in washington but we also need to get cities to allow the construction of apartments and condos the dedollarization, we need to compete against the euro and yuan one place congress can act is with respect to crypto they want to displace the dollar, are working for

dedollarization, and when billionaires tell you they are trying to hurt your country you should believe them. there has been discussion whether it's the pandemic or washington, d.c., policy that's caused the inflation we have a perfect test case. our annual inflation rate is 4%. the european union, where mr. biden is not president and mr. powell is not head of their federal reserve, the european union in may had 7.1% inflation. the unemployment rate in the united states is 3.7%. the european union is at 6%. and since the pandemic began, gdp has grown in the united states 5.3%. in the european union only 3.1%. i think it's pretty apparent that our policy has turned out to be actually better than

europe's policy. banks and bank regulators have said how could we possibly have anticipated the inflation and interest rates of 2023 today we have 4% inflation, almost exactly average inflation rate of the last 50 years. much lower than in the reagan administration with 16% interest rates and that's why i blame the management and regulators at silicon valley bank for telling us that, oh, this was an unanticipated circumstance it's certainly one of the things they could have anticipated. both the congressional budget office and the wharton school of business models both show that the estimated affect on inflation will be statistically

indistinguishable from zero. it will accomplish a lot for the environment and not increase inflation. the recent acts to take away irs enforcement will lead to higher deficits and higher inflation. the chair of the committee tells us we don't need regulation of our well capitalized banks why are they well capitalized? because of our regulation. i do want to focus on whether our banks really are well capitalized. mr. powell, our banks are well capitalized, if you value today's assets at today's fair market value where we have experienced higher interest rates and the value of the debt declines and are they well capitalized even if you assume the depositors are not just going to leave their money lying

in the banks but the obligation the bank has to its depositors is valued at full face value but the marketable securities and loan portfolio is priced at today's interest rates, do we have a well capitalized banking system >> i think you have to take the capital requirements as they are. >> that's the problem. our capital requirements are not -- are hide the facts that are unpleasant if you don't hide the facts, are we well capitalized? >> traditionally a rising rate environment has increased the deposit franchise which more than or at least offsets any portfolio loss. >> we're well capitalized if depositors continue to be lazy and stupid >> the gentleman's time has expired. chairman powell can submit any additional response for the record the gentleman from tennessee is

recognized >> thank you, mr. chairman mr. powell, as you know when the covid-19 pandemic started, there was a round of quantitative easing like many policies this program dragged on not ending until march of 2022. the federal reserve expanded its balance sheet with liabilities on one side and long bearing interest rates on the other at a time of historically low interest rates expansionary fiscal policy, the fed was forced to raise interest rates rapidly. now going back to one of my colleague's questions about the bank losses and the result of that being poor management and failing to hedge against the interest rate, is that a fair

summation failure to hedge caused some of the bank losses >> certainly many banks managed the interest rate risk that came along through that >> but some did not, is that correct? >> some did not. >> in october the fed suspended to the treasury due to losses and estimates that the lost revenue will result in $760 billion over the next ten years and so it does concern me that treasury is blaming banks for mismanagement when yourself had to stop remittances and will suffer losses. now when the fed prepared its semiannual policy reports through the time of qe4 none mentioned interest rate risk would impact government

finances should that have been disclosed or did the fed not interest its own risk in correlation to the interest rates >> we remitt all of our properties and in the era of qe those properties were enormous we're finding long term assets of overnight lower rate instruments. as we now enter an era of raising rates, that will turn around a little bit. ultimately, though, we use our tools to achieve that. we don't think of ourselves as trying to attain some kind of fiscal goal one way or the other. >> but what about as far as -- i

guess i'll ask this question when you look at the $700 billion, how will that impact the economic plans and policies going forward? is it going to unpack negatively >> it doesn't affect spending, right? congress appropriates money. that could raise rates marginally at the margin >> well, i didn't ask about the budget moreover our economic goals. when you look at main street america, when you look at mortgage rates and how it's impacting families' abilities to get a mortgage, and so someone eligible for $300,000 to buy a home now is no longer eligible

for that home, yet people who are upside-down through this expansionary interest rate environment, and i have concerns about future raises and, again, your future homeowner. when you look at silicon valley bank, which is supervised by the fed, what -- again, i get back to when you look at the interest rate increases, why there was not more warning or hedging from you as the impact it may have on the fiscal system, the financial system and the banking system because as we well acknowledge, both sides of the aisle. chairman, i am out of time thank you for being here

>> the chair recognizes the gentleman from massachusetts, mr. lynch. >> thank you, mr. chairman welcome, chairman powell good to see you again. chairman powell, i heard some of your comments the last couple of days about the fed seeking a softening in the labor market. as a former union president -- fed chair powell telling congress it is appropriate to raise rates further. remarks very much in line with what the chairman said in his post meeting presser welcome to "the halftime report." i'm scott wapner we're, of course, going to monitor the rest of the hearing and bring you any necessary highlights as they develop there down in d.c. stocks are trying to avoid a third straight day of losses the investment committee is with me to assess what all of this means to your money. joining me for the hour today joe terranova,