rare, rare exception to sign a pledge that they're not going to deal with the 98% because they've got to protect the 2%. we're here dealing with outsourcing because that's what outsourcing because that's what

>> homeland security secretary, janet napolitano testifies to our neighborhood the judiciary committee oversight hearing. >> there has been a hostility to poverty. since the war and poverty. brent johnson was the best president and the don monday. he talked about his social service. when a job at an. i hate to say this, that richard nixon as the father of minority business development. instead his priority business

established the small business administration and use the term economic justice. richard nixon, economic justice. >> 30 years of the administration's ronald reagan's and bush and obama have done more to confirm of the rich getting richer and everyone else falling behind, than 75 years of the soviet union perhaps.

>> it was about those men and women who are almost mortally injured in war, because of huge advances that have been made in medical trauma treatment over the last 10 years, now they're been saved. an incredible number are being saved. almost everybody who follows in the battlefield been saved.

i wanted to write about what was life was like for these people. i started out for the question, having seen some people who are pretty gruesomely named, wouldn't it be better off if they were dead? don't they wish they were dead? >> federal reserve chairman ben bernanke told congress a recession is possible if congress does not deal with tax increases and spending cuts to take effect in january. his testimony before the house financial services committee lasted two hours 40 minutes.

[inaudible conversations] [inaudible conversations] >> this hearing will come to order. we meet today to receive the semi annual report to congress by the chairman of the board of governors of the federal reserve system on the conduct of my

policy. and the state of the economy. it is gone, but i don't guess -- >> i'm not sure this night is working. is that better? this hearing will come to order. we meet to receive the semi and paper to congress by the chairman of the board of governors of the federal reserve system on the conduct of monetary policy and state of the economy pursuant to committee rule 3f1, richer and ranking member of the subcommittee and domestic monetary policy for a period of eight minutes on each side. without objection, all members written statements will be made a part of the record.

for purposes of opening statements, i recognize myself for five minutes. we're honored to federal reserve chairman ben bernanke before us today. thank you, chairman bernanke for appearing before a committee once again employ a dedicated service to the country. as we meet this morning, we continue to find a nation on the path physically an economically unsustainable. and some in the senate, chairman bernanke believe only you can do something about it. since the economy is bad and i'm planning a site, one of those pointedly told you yesterday that she's got to get to work. that leads to an important question. who is ultimately responsible for the state of our economy? we once had a president who had a sign on his desk in the oval office that said the buck stops here.

i'll amend that to say the buck stops with the president of the united states and with congress who are the elected leaders of this country. the president and congress are the ones who have created america's spending driven debt crisis by hitting the gas when what was needed was someone stomping on the brakes and more importantly the need for reform of our entitlement. some in the senate may want to duck responsibility, but the truth is the federal reserve cannot rescue americans from the consequences of failed economic and regulatory policies passed by congress and signed by the president. the chairman of the site cannot see the economy when those elected leaders decided they are prepared to send our country over a physical classifieds one declared earlier this week chairman bernanke is one congress and the administration time and time again by without action growing deficits will

about prosperity and made the next-generation of americans with less opportunity. to avoid the fee we must start taking action now to detain washington that the site and import as chairman bernanke is that, tackle the difficult but necessary long-term restructuring of our entitlement. the house to its credit has had the courage to miss hyper partisan attack to begin a long-term process. i would like to take this opportunity to tell the senate that it's time for them to go to work. our economy is not only by deficit instead but also the cumulative weight washington overregulation. this committee is constant from private-sector witnesses to tell us the regulatory burden being placed on our one small-town banker witness says slowly but surely strangling their ability to do business and create jobs.

this is not to argue we don't need regulations. they provide clear rules of the road for businesses and protect consumers. businesses need certainty and to know what to expect. they don't have it under the present regulatory regime. unfortunately, john kreider certainly socially reasonable and clear rules aren't what they get from washington right now. instead they chose regulators don't court made actions and the result is businesses are subjected to conflicting rules on many attack wall street and big corporations when they call for more regulation, the reality is the important solstice portion in small businesses and small community-based financial institutions that lend to them. as the small business

administration reports, cost small businesses 36% more per employee to comply with federal rules than large companies. this is driven consolidation which is evident in her financial services industry and because small businesses the engine of growth in our economy, we can hardly blame the fed when policy is passed by this congress and signed by the president resulting regulatory overkill that makes it harder for small businesses to thrive and higher. instead of more regulations, congress and the president need to do more to eliminate government roadblocks to stand in the way small business success in job creation. the president recently said entrepreneurs and small businesses are successful on their own they can succeed only with the help of the government. that is akin to saying apple computer is a success because of the person who built steve jobs'

grudge. small businesses succeed in this country in spite of the government, not because of it. chairman bernanke, i know all of us look forward to your testimony and discussion will have today. again, thank you for being here and yield to the ranking member. >> i appreciate that. i'm always struck by the ability of my republican colleagues to engage in a duality of the mind with regard to federal spending. i listen to the chairman talk about the need to bring in spending and note that we're going to be given a bill to vote on that will increase military spending beyond what the president has asked for. there is a curious notion that somehow military spending is different from other government spending. people tell us how it never creates a job become the most militant keynesians when it comes to military spending in committee with alleged portion is spent overseas. will be asked to continue a

tornado so western europe can continue to spend so they cannot lower retirement ages and will tell americans they can cut back on social security and medicare. the main social security and medicare and i'm proud of those. i am not prepared to maintain more and more military spending at the expense of them. next i want to comment about mr. bernanke has told us. i want to begin by noting the people vote for bipartisanship, it is striking the degree of bipartisan criticism who is single-handedly the most bipartisan institution. he was three times for us to the federal reserves in 2002 in the chairman to economic advisors in 2005 and then share the federal

reserve because mr. bush had an important economic appointment to make. he said give me the usual suspect bush is mr. bernanke. he's generally bipartisan and therefore advocate his analysis of the economy and there's little to do with the right partisan caricature over here. i read the economic report. there's a basic statement or economy has been recovering from the terrible crisis by the complete absence of regulation and unchecked responsibility by some financial institutions, obviously not all. and we are told that it is slowed down by a number of fat tears. the most important according to the way it's presented as what's going on in europe. nothing we have done is responsible. in fact the federal reserve is helpful for partisan criticism for cooperation with the ecb to

ease the situation to her benefit. we are told there is a problem because there's the attacks and policy. >> i think we can cut military spending. a better way to do it is to tell western europe are unknown as to stop fakery and we've got to win with the non-existent soviet union. the fact is the uncertainty that mr. bernanke talks about our bipartisan republican and democratic appointment top economic official is an insurgency that is bipartisan and has nothing to do with regulation. i listened to the complaint about regulatory uncertainty. maybe there's a part of the monetary policy report i haven't read. cannot see a word in here that says financial reformed or the forms are part of the problem. it does talk about other things.

for example, the cutback in hiring in construction by state and local governments is a direct preference of the republicans. we began in 2009 when we had a president and democratic congress to continue to be economically active in the face of the crisis that hit them. we were told by republican colleagues that didn't create jobs. if you can't shoot anybody with something or sent to an overseas base that has a job impact. they only go for the military. in fact, if they had not been forced to cut that, unemployment would now be below 8%. we have lost about 15% of the jobs created in the private sector by cutbacks in the public sector. so again as i read this, there's discussions of what is causing a

recovery slower than we wanted to be. none of them have to do with what my republican colleagues have said. again, this comes from mr. bernanke who is three times appointed to the position by george bush, a man with whom i sometimes disagree, but whose integrity and intellectual honesty ought to be unquestioned unfortunates hyper partisan atmosphere to quote the chairman it sometimes isn't. >> i quote the ranking member. before recognizing dr. paul for his statement, i want to note that this may be his last committee meeting with the chairman of the fed -- federal reserves. throughout his time in office, dr. paul has been a consistent and strong advocate for sound monetary policy and his leadership commended during the series when the federal reserve chairman appears before us have

certainly made the hearings are interested and provided several memorable youtube moments. >> mr. chairman, unanimous consent to say that having served a long time with ron paul come with whom i agree on a number of issues, i'm very pleased i was able to share one term with him as the chairman because there were times during a joint service but despite his seniority and thought he'd never get to it, so i'm quite he finally achieved the chairmanship he should've had long ago. >> thank you. and let me know if my statement didn't talk about chairman and republicans. >> okay, thank you for the record, we don't know that. >> dr. paul for three minutes. >> your comments, chairman and the ranking member. i am delighted to be here today,

but i want to refresh a few people's memory. i was first elected in 1976 in april in a special election in the biggest bill undock it was the revamping of the imf. a major crisis for the break down of the bretton woods agreement they had to rewrite the laws with what they've been doing for five years and noticed a major piece of legislation. it was the consequence of what was predicted in 1945 because the 1945 as predicted by the free market economists. it wouldn't hurt. the whole idea that they could make a date exchange rates and deal with the balance of payment totally failed. so they have to come up with something new in 1971, 76 in the transition. those same economists at that time said this was an unworkable system, to admit the two major crisis of too much debt, too much investment and worldwide would be worse than anything because it would be based on the

fiat dollar globally and manage the problems they have domestically would be worldwide. that certainly has been confirmed with the crisis we are paying. it has not been resolved yet. we are still floundering around and have a long way to go. i have over the years obviously been critical of what goes on on monetary policy. it hasn't been so much the chairman of the committee of the federal reserve, weather was paul volcker or alan greenspan at the current chairman. it's always been the system. i think they have a job that they can't do because it's an unmanageable job and is a fallacy. it's a flawed system and therefore we shouldn't expect good results and generally we are not getting results. policies never change. we say the same thing. i matter what crisis we do more

of the same. if spending and was the problem, spending more and greater debt and have the fed by more data, doesn't seem to help at all. here we are doing the same thing. we don't talk about the work at stake in troop reductions in savings and by the excessive debt is so bad for us. we talk about solving a worldwide problem of insolvency of nations including our own, creating credit. the fat in the last four years as a trillion dollars more money sitting there in the bank sitting with with trillions of dollars in just the creation of money doesn't restore the confidence necessary. until we get to the bottom of this and restore the confidence, i don't think we'll see economic growth. this whole idea that you have the job of managing money and we

can't even define the dollar. no one has the definition of the dollar. it's an impossible task. i had hoped in the past to contribute to the discussion of the monetary policy of the business cycle and web in a fit the richer the poor. and so far my views have not prevailed. i appreciate this opportunity to have served on the banking committee. >> thank you, dr. paul. the gentleman from missouri, mr. clay is recognized for three minutes. >> thank you, mr. chairman. and let me thank mr. bernanke for appearing today. funny also publicly thank dr. paul for his honorable service to his country. as you know the charge of the federal reserve with a dual mandate maintains stable prices, which i understand. we have positive news about full

employment, which is what i would like to talk about today. full employment means everyone. currently the national average unemployment rate is 8.2%. chairman bert mackie, this is decreased compared with when you were here a year ago when it was 9.1%. unfortunately, the unemployment rate for african-americans is much higher. african american males too high. 14.2%. 12.7 million people in the u.s. want to work, but cannot find a job. that is down from last year's 14 million, or 12.7 million are african-americans. nonfarm payroll and claimant is continuing to rise to 80 passing, but too few of those who are getting jobs are african-americans. average hourly earnings for all

private nonfarm employees rose to $23.50 over the past 12 months, but not for enough. consumer food prices have led insightfully, that energy prices have decreased, too. if you're out of work, you cannot pay your electric bill, even if it is slightly lower that i was last year. disparity in unemployment between the national average in african-americans is unacceptable and we have to do more to solve it. mr. chairman, important to put everyone back to work in this country. as a look at policies and strategies, it will continue the improvement in job numbers. the way that we as a nation are only as strong as the weakest link. so let make sure we don't leave

behind a large and important part of our communities. i look forward to your statement in continuing this important an ongoing discussion. mr. chairman, i yield to. >> thank you, mr. clay. before i recognize chairman bert mackie, let me say because of the financial stability oversight council in which the chairman serves his meeting today at 1:00 and chairman bernanke excuse at 12:45 so he can restore the council. the chair announces in order to accommodate questioning by as many members as possible will strictly enforce members in the final minutes to begin asking questions to the chairman should

be advised that they allow us to suspend for the red light comes on so we can allow all members to be recognized. i've often said that our freshman and sophomore class are some of our more capable members and i want them to have an opportunity to ask questions. chairman bernanke, your written statement will be made a part of the record and are now recognized for a written summary. >> numbers of the committee come i'm pleased to present the federal reserve semiannual monetary report to the congress could let me begin with current economic conditions of the ellicott panel talk about monetary policy. the u.s. economy has continued to recover with economic activity to decelerated somewhat during the first test of the year. after rising at an innovative 2.5% in the second half of 20 that in real gdp increased at 2% raise in the first quarter of

this year and available indicators point to a smaller game in the second quarter. conditions in the labor market improved in the latter part of 20th lebanon earlier this year with the unemployment rate falling a percentage point over that period. however after running nearly 200,000 per month during the fourth and first quarters the average increase in payroll employment shrank to 75 per month during the second quarter. issues related to seasonal adjustment and the warm weather this past winter can account for part, but only part of the lost momentum in job creation. at the same time the jobless rate has leveled out at just over 8%. household spending has continued to advance the recent data indicate a slower rate of growth in the second quarter. although declines in energy prices are now providing support to consumers purchasing power, households remains concerned about employment and income prospects and overall confidence

remains relatively low. one area we see modest signs of improvement is housing in part because the low mortgage rates, both new and home sales have been trending upward since last summer as the measures of house prices have turned up in recent months as well. construction has increased especially in the multifamily chair. still factors impede progress in the housing market. on the demand side community with the fires are deterred by their own finances or economy more generally. other prospective homebuyers cannot obtain mortgages due to tight lending standards, impaired credit worthiness or because current mortgages are underwater. that is the own more than homes are worth. on the supply side, large number of bank homes boosted by the ongoing inflow of properties continues to divert demands for new construction. after posting strong gains in

the second half of 2011 in the first quarter of 2012, manufacturing production has slowed in recent months. similarly, by a single business spending on equipment and software appears to decelerated from the double division pace of the second half of 20 lead into a more moderate rate of growth over the first part of this year. forward-looking indicators such as surveys of business conditions of capital spending plan suggests further we have had. in part from a slow growth of production and investment appears to reflect stressing your, which together with some cooling in the economy of other trading part or as is restraining the demand for u.s. exports. have the time of the june meeting of the market committee or the fomc, colleagues and i projected under assumptions of appropriate monetary policy, economic growth will likely continue a moderate pace over coming quarters and then pick up very gradually. specifically growth in real gdp

for the meeting is an essential tenancy 1.92.4% for this year's and 2.2 to 2.8% for 2014. these forecasts are lower than those made in january, reflecting a generally disappointing tone of the recent incoming data. ..

indianan planas rate to decline towards a more normal level. however, given that growth is projected to be not much above the rate needed to absorb new entrants to the labour force, the reduction in the employment rate seems likely to be frustratingly slow. indeed the central tendency of the forecast now has the unemployment rate at 7% or higher at the end of 2014. the committee may prepared to make small changes to its projections for inflation. over the first three months of 2012, the price index for personal consumption expenditures rose about 3.5% at an annual rate boosted by a large increase in retail energy prices that in turn reflected the higher cost for oil. however the sharper drop in crude-oil prices in the last few months is brought inflation down. in all the price index rose at an annual rate of one and a half percent over the last five months of this year compared with a two and a half percent rise over 2011.

the central tendency of the projection is that inflation will be 1.2 to 1.7% this year and at or below the 2% level of the committee judges to be consistent with a statutory mandate in 2013 and 2014. participants of the meeting indicated that they see a higher degree of uncertainty about their forecast at normal and that the risks to economic growth have increased. i would like to highlight two main sources of risk. the first is the area of the fiscal and banking crisis and the second is the u.s. fiscal situation. earlier this year, financial strains in the area moderated in response to a number of constructive steps by the european authorities including the provision of three-year bank financing by the european central bank. however, tensions in the financial markets intensified again more recently reflecting political uncertainty in recent news of losses in spanish banks

which in turn raised questions about spain's fiscal position and the resilience of the area banking system more broadly. the euro area authorities responded by announcing a number of measures included funding for the recapitalization of the troubled banks from a greater flexibility in the use of the european financial backstops and movement toward a unified supervision in the zero area banks. even with these announcements however the europe financial economy remains under significant stress with spillover effects and financial and economic conditions and the rest of the world including the united states. moreover, the possibility of the situation will europe further and remains a significant risk to the outlook. the federal reserve remains a close communication of our european counterparts. although the politics are complex, we believe the european authorities have both strong incentives and sufficient resources to resolve the crisis. at the same time, we've been focusing on improving the

resilience of our financial system to the shock including those that might emanate from europe. the capitol and liquidity positions of u.s. banking institutions have improved substantially in recent years. and we have been working with u.s. financial firms to ensure they are taking steps to manage the risks associated with their exposure to europe. that said, european development have resulted in significant reduction in financial markets with inevitably posing significant challenges to the financial system and for our economy. the second important risk to the recovery as i mentioned is the domestic fiscal situation. as it is well known, u.s. fiscal policies are of an unsustainable path in the development of a credible medium-term planning and controlling deficits should be a higher priority. at the same time, fiscal decisions should take into account the fragility of the recovery. that recovery is by the confluence of tax increases and spending reductions that will

take effect early next year if no legislative action is taken. the cbo estimated that in the full range of tax increases and spending cuts were allowed the scenario widely referred to as the fiscal cliff a shallow recession would occur early next year and about one and a quarter million fewer jobs. these as thomas do not incorporate the effect likely to result from the public uncertainty about how these matters will be resolved. as you recall the market volatility spiked and confidence failed last summer in part as a result of the protracted debate about a necessary increase in the debt ceiling. similar effects could in suez the other difficult fiscal issues coming to clear a view towards the end of the year. the most effective way congress can help support the economy right now would be to work to address the nation's fiscal challenges in a way that takes into account both of the need for the long run sustainability and the fringe of the of the

recovery. doing so earlier rather than later would help reduce some certainty and boost households and business confidence. finally, on monetary policy, in the view of the weaker economic outlooks come subdued projected path for inflation and the significant downside risks to economic growth the fomc decided to ease monetary policy at its june meeting by continuing its maturity extension program, or mep by the end of this year. the mep combines the short-term secured with an equivalent amount of purchases of longer-term treasury securities. as a result of it decreases the supply of longer-term treasury securities available to the public putting upward pressure on the crisis of the security and downward pressure on the yield without affecting the overall size of the federal reserve balance sheet. bye removing additional longer-term treasury securities from the market the fed asset purchase also induces private investors to acquire other

longer-term assets such as corporate bonds and mortgage-backed securities helping to raise their prices and lower their yields and thereby making broad financial conditions more accommodating. economic growth is also being supported by the exceptionally low level of the target range for the federal fund rate at 02 a quarter% and the committee's forward guidance resolving the anticipated half of the fund rate. as i reported in my tiberi testimony, the fomc extended its guidance in january noting that the economic conditions including the low rates and resource utilization and a subdued outlook for inflation over the medium run are likely to warrant an exceptionally low levels of the federal fund rate at least for late 2014. the committee has made its conditional guidance at subsequent meetings. reflecting its concerns of the slow pace of progress in reducing unemployment have a downside risk to the economic outlook, the committee made clear at its june meeting that it's prepared to take further

action as appropriate to promote a stronger economic recovery and sustained improvement in the labor market conditions in the context of the price stability. thank you mr. chairman. i would be happy to take questions. >> thank you, chairman bernanke. next week the house will be voting on dr. paul's bill to of the federal reserve. would you please give your view on the legislation? >> yes. thank you. i agree absolutely with dr. paul the federal reserve needs to be transparent and accountable. i would argue that at this point we are quite transparent and accountable on the monetary policy besides our statement, besides our testimony we issue minutes after three weeks. we have quarterly projections. i give a press conference four times a year this credit information provided to help the contras evaluate a monetary policy as well as the public. also very importantly, the federal reserve balance sheet

finance operations are thoroughly vetted. we produce an annual financial statement which is audited by an independent external accounting firm. we provide quarterly updates and a weekly balance sheet. we have been dependent on eg. we've additional scrutiny imposed by the dodd-frank act and this is the crux of the matter the government accountability office, the gao has extensive authority, broad authority to all that all aspects of the federal reserve and the federal reserve acceptance that and is cooperative for the gao effort. there is, however, one important exception to what the gao is allowed to audit in the current law and that specifically is monetary policy deliberations and positions. so what the bill would do would be to either eliminate the exemption for the monetary

policy decisions from the gao audit so what it would do is allow the congress for example to ask the gao to audit a decision taken by the fed about interest rates for example. that is very concerning because there's a lot of evidence that an independent central bank that makes decisions based strictly on economic considerations and not based on political pressure will deliver lower inflation and better economic results in the longer term. so again, i want to agree with the basic premise of the federal reserve should be fairly transparent, fairly accountable. i will work with everyone sure to make sure that that is the case but i do feel that it's a mistake to eliminate the exemption for the monetary policy deliberations which would effectively at least to some extent create a political influence or political dampening effect on the federal reserve policy decisions. thank you mr. chairman. >> thank you. i will note that bill did not

come before the financial services committee, which surprised me. throughout your tenure as chairman, you warned that the committee would be warned, this committee and others about the dangers the duenas fiscal position, the annual deficit and the growing national debt, and now we are facing what you called correctly if physical cliff next january. i mentioned in my opening statement the need to the long-term restructuring of the entitlements and as the ranking member said, i was talking about medicaid, medicare, and to a lesser extent social security. would you tell us why you are concerned about the physical cliff and what will happen to the economy if we don't do anything to address it and what long-term strategies congress should be thinking about as we address these issues? >> certainly, think you. first to think that there's very little disagreement that the u.s. fiscal situation is not sustainable. under the current law, deficits

will continue to go, interest will continue to accumulate, and ultimately we will simply not be able to pay our bills. so it's very important over the long term to make decisions collectively about the tax and spending policies the will bring our fiscal situation into a more sustainable configuration. with that i should add it's very much a long run proposition. many of the issues that affect the long-term fiscal sustainability are decades rather than months or quarters in the future and therefore i think i would just suggest if i might but in looking at these issues you might want to go beyond the ten year window which is usually the basis for fiscal decisions and let least consider the implications of the actions for even longer horizons. so it is important for the fiscal stability for the financial stability for congress

to provide a credible plan for stabilizing our long term fiscal situation as soon as possible. that is a long run proposition however c'mon and the way the current law is set up, we are going to have a very sharp contraction in the fiscal situation increased taxes and cuts and spending that are very dramatic and occur almost simultaneously on january 1st 2013 and as i discussed in my remarks and as the cbo documented in some detail that all happens that will no doubt do serious damage to the recovery and probably would cost a significant number of jobs. it's not essential to do it that way. i think the best way to address this is to attack the long run fiscal sustainability issue seriously and credibly. but to do it in a more gradual way that doesn't have such negative effects in the recovery. i think both of those can be met simultaneously recognizing that

it's not politically easy but like that is the correct approach for addressing our fiscal saturation. 64. the ranking member is recognized for questions. >> mr. chairman, you sit on page six we should address the siskel alleges in a way that takes to recount the long-range sustainability of the fragility of the recovery. there are some of the compass i would argue that it's important in the appropriations that we are now voting on for the fiscal year that begins in a couple of months that we substantially reduce what we are committed to spend. is that what you are warning us against when you talk about the fragility of the recovery is a timing issue that we shouldn't be trying to do this in the immediate next fiscal year put into place a long-term situation 5% of gdp which all had at the same time would be very negative

for growth it is important to combine a more gradual approach. >> you have been with your colleagues to try to provide an offset i think would be the way to put it. a number of people from the beginning of your reference to this, too defeasing head of the twists and all the other ways you are trying to make more money available, i warn that you were risking inflation and some of said this would worsen the fiscal condition that you might be losing money. you are aware of the criticisms. this many i don't know couple years into this what's the record? >> we are not wrong. i have a collection of all beds and editorials from a 2008 and 2009 about the immediate hyperinflation right around the corner and collapse is a dollar those sort of things we're using

monetary policy to try to support the recovery. we are very cognizant of our responsibility for price stability and we have the tools to withdraw the policy stimulus of the appropriate time. but markets for civil have reflected the interest rates and inflation adjusted treasury securities suggest that markets are quite confident. >> thank you. >> i will share with you in sight but i am sure that you have already figured out for yourself. being able to say i told you so improves with age and you are certainly entitled to do that with the people it is ideological we have legislation to introduce holden of that election because they might not be seen supporting it to popularly but if they can would

cut in half your dual mandate. you're mandated by law under which you appear today to be equally concerned about the price stability and employment and there are some that argue that is inconsistent and that you have in fact been distracted from your focus on the price stability by this equal mandate on employment. i believe by the way that is what people are trying to get at the audit because you do say we have put into the wall already auditing of all of your financial transactions and any activity you have with the private company will sometimes the public. this is part of an effort to undermine the dual mandate indirectly though to try to do directly if they can later. have you found any inconsistencies between the two parts of the mandate? has the consent for employment which i admire you for showing to think about price stability. >> inflation is low below the 2% market. and i think of your mandate has

served a slow and we have the ability to address both sides. that being said of course we will do whenever congress tells us to do. as committed but have you found any inconsistency in meeting both aspects of the dual mandate? >> generally speaking, no. in particular low inflation does country of to the healthy employment in the longer term so they are complementary in that respect. >> and your efforts to help the economy overcome is not by joining inflation? >> nope. >> another argument we have seen is that it's regulation that says slowing things down. you talked with the head winds. i noticed you didn't mention the committee meeting you are about to go to but one of those head winds. having talked to us about the head winds in your judgment the financial reform legislation that we passed is that one of the head when squawks >> i wouldn't want your out the tax as uncertainty. there's a lot of uncertainty. >> i mean the one that we have

adopted. so it's possible that some of these regulations have an impact on the cost of credit but there's been a lot of analysis that suggest the benefits in terms of reducing the financial crisis are extremely large and that whatever costs are involved are worthwhile. >> thank you. i hope that the analysis from our bipartisan appointee but some of my colleagues who preach the virtues of the benefit cost analysis will not ignore its benefits as you have just mentioned them. thank you mr. jarman. >> thank you, dr. paul. >> thank you mr. tremaine. i have a question prepared but i think i've ever followed up on the question that you asked, chairman bernanke, dealing with the audit of the fed. because when the fed talks about independence, but they are really talking to what is the secrecy, not transparency and it's the secrecy i don't like and we have the right to know about. what the gao cannot all that,

and i believe it would be the position of chairman is we cannot bought it monetary policy and you've expressed monetary policy it wouldn't be able to get agreements and operations in the foreign central banks and governments and other banks transactions made under the director of the fomc discussions and connections between the board and federal reserve system to related to all those items. so really it's not in all of it without this. it's still secrecy. why this is important is because what happened four years ago, it's estimated the amount of money that went in and out of the fed for the bailing out overseas was $15 trillion. how did we ever get into this situation where the congress has nothing to say about the trillions and trillions of dollars of bailing out certain banks and governments through these currency swaps? the chairman has publicly

announced that he is available. there is a crisis going on in europe. part of the dollar crisis going on that is unique to the history of the world and monetary policy, and we stand ready. who stands ready? the american tax payer because as long as they take our dollars we will print the money and bail them out and destroy the middle class. the middle class is shrinking. they shrink. if they lose their houses, they lose their mortgages. the system is biased against the middle class and the poor. so i would say that this is -- if we protect this amount of secrecy, it is not good policy, and it's not good economics at all and it's very unfair. my question is, mr. chairman, whose responsibility is this under the constitution to manage monetary policy? which branch of government has the absolute authority to manage monetary policy?

>> the congress has the authority and its delegate to the federal reserve as a policy decision that you made. >> but they can't transfer authority. you can't amend the constitution by just saying we are going to create a secret code of individuals and banks. that is amending the constitution. you can't do that and all of a sudden allow this to exist in secrecy. whose responsibility is set for oversight? which branch of government has the right of oversight? >> contras has the right of oversight and we accepted that, and we fully accepted the need for transparency and accountability. but it is a well-established fact that an independent central bank will provide better outcomes if you want to go there is no constitutional reason why you couldn't, why congress couldn't take over the monetary policy. if you want to do that i guess that is your right to do it billion advising it wouldn't be good from the economic policy point of view.

>> but if it is found to be done in secret this is the reason why i want to work within the system. but i want to say is congress ought to get a backbone. they ought to say we deserve, we have a right to know, an obligation to know because we have obligation to defend or currency. it's the destruction of the currency that destroys the middle class. there is a principal free-market banking that says if you destroy the value of currency through inflation and transfer the bulk of the middle class it gravitates to the jury will become the bankers, the government, the politicians, they all love this. it is the fact the federal reserve is the facilitator. they couldn't of big government. if devotee that his big government loves the fed because the can finance the war might get all the welfare that you want but it doesn't work and it eventually ends up in a crisis and it is a solvency crisis and it can't be solved by putting a whole lot of money. so i think the very first step is transparency and for us to know we have a right to know coming and you may be correct in

your assumption or a place to ensure you believe this. but maybe i should be talking to the contras that we should stand up and say yes, we demand to know. trillions and trillions of dollars being printed out of thin air and bailout their friends they stand ready to do it the crisis as far as i am concerned it is in the early stages. it's far from over. we are in deep doldrums and we've never changed policy. we've never challenge anything. we just keep doing the same thing. conagra's keeps spending the money. welfare expand exponentially. the war never ends and deficits don't matter. when it comes to cutting spending republicans and democrats get together and say we can't really cut coming and if we do we just cut the proposing -- >> regular order mr. chairman. >> congressman for five minutes? >> can we get the answer in

writing? >> you're all objections are to the structure as you mentioned the middle of the actions we took in the crisis, the swaps, all of them are fully disclosed. it's not a question of information it's a question of whether or not to give the fed the power and they don't want to. congress has the right to take them back. >> with the gentleman yield ten seconds? >> to mention the fact the bill unanimously whether it was in different, we repealed section 13 of the federal reserve act to the single biggest grant of power to the federal reserve to lend money anywhere in the quantitative that there was a chance to do it. so in fact this congress in 2010 made a substantial reduction in the federal reserve authority. >> mr. schramm, the national on a plan that rate is 8.2%, were then it was a year ago. and as i said, it's important to

put all americans back to work. but i am troubled by the large disparity between the unemployment rate in the country and african-americans which is 8.2 versus 14.2%. and i think that is a national crisis. mr. chairman, what do you believe is the large difference that can be attributed to? >> it is a tragedy and a problem of course it is the longstanding difference. i don't know how to parse the difference. some of it is educational and other differences. some of it is discrimination it's hard to say how much. age and other demographic factors play a role. unfortunately this isn't something on a tree policy can do much about. we can hope that a rising tide will list lift all ships so to

speak. but clearly african-americans remain disadvantaged in education and wealth creation and opportunity, and those are issues that collectively i hope we can address. >> do you think there is anything but the federal reserve along with congress can do to address it? >> the federal reserve monetary policies are limited. we have a variety of things that bear this indirectly such as the office of minority women inclusion which tries to help ensure that in our own employment we have diversity financial literacy programs to try to help people in the low-income communities achieve a better level of savings and wealth. but more broadly, to really address these questions, issues of mobility in the education skills etc. are more a function

of congressional and state and local efforts in the federal reserve. >> thank you for your response. can the federal reserve institute a monetary policy that is strong enough to avoid a double-dip recession? >> at this point we don't see a double-dip recession. we see the continued moderate growth, but we are very committed to ensuring or at least doing all we can to ensure that we continue to make progress on the employment side, and we have stated that we are prepared to take action as needed to make sure that we see continued progress on employment estimate in another area of the economy, how will the federal reserve expansion of asset rates for stimulating the economy succeed when many individuals have liquid assets that may lose value?

>> succumbing you are talking about of various monetary policies and the fomc? >> welcome our monetary policy actually generally increases asset all use broadly speaking. there is the concern raised and i fully understand and sympathize with it that low interest rates penalize people that live off the interest earnings of their investments for their savings. and again, i fully appreciate that concern. my eighth response at least in part is that if we are going to have a good return on savings and investments over all we need to help the economy. and if we raise interest rates prematurely and cause the economy to go into recession that is not going to the internet where people can make a good return on their retirement funds or their other investments petraeus bigot the u.s. were to announce it was moving to a gold standard, what would you expect

to happen to the price, and how difficult would that make it for the country to six the value of currency in terms of the price? >> that is a very complex question. i think that there is an issue about whether at least there be enough gold to set up a global gold standard but the more fundamental issue is that which i address and other occasions, and in particular the gold standard doesn't imply stability in the crisis of the services. the price of gold itself. >> thank you. >> thank you. let me advise the republicans on the committee that mr. hensarling and mr. jones because of the question why not to go first and then under the grains and rules mr. manzullo if they are here we will resume with mr. rice. so at this time i recognize

mr. hensarling and the vice chair. >> thank you mr. chairman and good morning mr. bernanke. you were here before us because of your new mandate. and speaking of maximizing employment, according to the fed to the number of dramatic actions in 08, some of which i consider proper and some of which i still question. 2008 was four years ago. i think it was an inescapable conclusion. we have now seen the greatest monetary and fiscal stimulus throughout the economy in our history and what do we see but 41 months of 8% plus unemployment? 14.9% real unemployment if we look at those that left the labour and those that are seeking full-time employment. we have anemic gdp growth probably half of what it should be by the historic standards and my interpretation of the testimony is they are predicting much of the same.

why shouldn't the american people come to the inescapable conclusion that we have either had a profound failure of monetary policy on a profound failure of this fiscal policy and which is it? >> i don't think it is the case but has been no progress had a last quarter of 08 and first quarter of 19. we had the act of the economy a tremendous increase in unemployment. the unemployment rate went to about 10%. now it's true that you know, the recovery has been slower than we would have liked, but clearly we may have made progress in the job creation. stomach isn't it true that if you would get the ten post war recessions that we are in the midst of the slowest and the weakest recovery of all? >> there is some evidence that the crisis that the financial crisis leads to recessions that are slower to amend. we also had a housing boom and bust which is also a major factor so there's been a number of reasons that are consistent

with historical experience with the recovery should be slower than average. >> we are going to move on since you don't agree with the premise of that question. you at least acknowledged in a question from the gentleman of misery. i think you used the phrase there are limits to what the monetary policy can achieve. i would like to explore those limits for a moment. again, when i look at qe1 and 2i think we are on our second twist, and again, i think it is hard to conclude that again, we have seen the greatest monetary stimulus in the history of the country. obviously you had a rather unique balance sheet today with asset backed securities, yet you're own data reveals that public companies are sitting on 1.7 trillion of excess liquidity. banks have 1.5 trillion in

excess reserves, and so i am trying to figure out what is at that on a federal reserve menu, but what to more operation tests and to war q. even if you supervise them achieve that haven't already been achieved? >> welcome a first, i think that the previous efforts did have productive affects. qe1 was at the beginning of the recovery and to the middle of 2009. and qe2 can at the time when we were seeing increased risks of the glacier be the true deflation which was eliminated by the qe2 -- >> why is all this capital, mr. chairman, sitting on the sideline and you are putting in more to the access reserves? >> the excess reserves are not

the issue. the issue is the state of the financial conditions and we are still labelled to lower interest rates to improve broadly speaking asset prices and that provide some incentive. >> not in the negative real interest rate environment already? >> let me just agree with you the following that the monetary policy is not a panacea. it is not the ideal tool. part of the problem is that we hit the lower amount. we can't use the usual practice of cutting the short term interest rates. we would like to see other parts of the government -- >> in the very limited time that i have, mr. chairman, i've got to tell you when i'm speaking to either fortune 50 ceo, world class investor, small business people in east texas air is what i hear. number one, on certain federal regulation and certainly harmful federal regulation is crushing jobs. number two, the single largest tax increase in the u.s. history, number three, the

nation on the road to bankruptcy and member for comer rhetoric that bill fais success in the free enterprise system and monetary policies aren't going to solve that problem. >> thank you. mr. capano. >> thank you mr. chairman. first of want to thank you for your steadfast commitment to taking action as you deem appropriate. i don't agree with everything you've done, but today is another day wherever it begins to criticize everything you've done for the last ten years and i may take my shot here or there but i just want to say thank you for not giving up and for not wearing under this. we still need you to be actively involved even if there are things you do that i disagree with. there are so many things i would like to talk about that in five minutes i can't do it to the use of person going to talk about the labor situation. for me, and i am not asking for a decision. i know it isn't technically one

of the things that in the fiscal crisis of 08 so many people walked away scot-free. but the general public thinks that we, the whole government turned our back on any potential wrongdoing. but in this particular situation, if it turns out that our largest banks in the world intentionally lied to manipulate the market do think it is appropriate for them to be held to account either i'm not asking you to make a judgment. if others make a determination to diprete would you think that is appropriate? >> currently there is any number of and for some agencies including the the part of justice, the cftc and other foreign and state regulators looking at this and i sure that they will appoint all appropriately. >> i think the american people appreciate very much of somebody that intentionally lied to manipulate a worldwide market on something that affects every one of our daily lives would be held

accountable. i want to switch the fiscal cliff and again i'm not asking you to tell us what to do. i respect the differences of opinion but the whole fiscal clef is revolving around the foreign take the will be shifted and the give-and-take january of next year. $500 billion when the fed itself changed the fiscal situation in this country for a trillion dollars in a matter of less than a year between 2000 to 2008 and to suggest that 500 billion in the economy that's 15 trillion as interchange i think it is a little concern to me. but i guess i would like to ask if it isn't going to be 450, 500 billion, and i'm not asking you to tell me if it should be tax cuts or spending cuts, what is the number that you think in the general numbers of this -- if it looks like 3% of the economy of the jews of 5% call whenever the number is what is an acceptable number even the

tax cuts or tax increases or spending cuts because we are not going to maintain the status quo. we are going to do something that may be doing nothing that something will change. i'm wondering what is the number that you think will not dramatically throw us off the cliff? >> the actions are buying and selling securities, not spending and taxing. they are very different. they say the fiscal cliff is in the order of 45% of the gdp and that would have a significant effect on their activity and employment. so, i am in favor of an aggressive plan over a period of time off for the portilla never gets tossed around. i'm in favor of that and i can't give a specific number for the short term there ought to be more gradual approach. i'm not saying that you shouldn't come devotee the budget i just don't want it all to happen on one day essentials. >> as i understand this it may happen in one day that it would inductive read a like everything

else the spending does and that today we have obligations we have to continue. the sequestration cut isn't going to happen like that. tax increases don't give the federal government $3,000 more that david is a slow gradual item override your. so i think that some of the fiscal cliff gives a tone of the reality because of until now it was a person of reality and the conservative approach. spec the cbo estimates that would cost one and a quarter million jobs next year and i don't think that is reasonable -- >> i am to stand. i know exactly what they say. at the same time they are once was and you are another. he fully embrace everything they say. estimate i'm just saying that order of magnitude in terms of the jobs seems reasonable to me. >> i think every but he would, like that but there is a serious question they are not here today. you are. and i guess i am asking is it's

unrealistic to think that nothing is going to happen. either we are going to do nothing which will mean tax increases, which will mean massive spending cuts, then we will do something to read we probably will not do everything, probably not kick the ball down the road and extent of the tax cuts and get rid of sequestration altogether. we are going to do something in the middle. the question is what is in the metal that is reasonable -- >> i'm not hurting to jeopardize the economy -- >> we just think you should take this to their approach to achieve the fiscal stability. >> thank you. islamic mr. chairman, thank you very much. mr. bernanke, thank you for being here. i want to say it is the right were packed the to we didn't have to go to iraq and repeal glass-steagal. alves about reinstating glass-stegall. at this time because he's one of

my dearest friends and i supported him for the republican nomination to be president of the united states, i will yield my time to dr. ron paul. >> thank the gentleman from north carolina three by wanted to make a brief statement about the bill. it has nothing to do with transferring food osmometry policy. it's strictly a transparency deal. moderate policy reforms i believe will come but that is another subject. this is just to build more about what the federal reserve is doing. mr. chairman, one of the key points that you've made to your career has been the need to present deflationary. would you agree? and that you argue that the depression was prolonged by the federal reserve not being able to read and fleet. so in that sense i think that you have achieved -- you had the

chance you're put in a situation in that you alone and didn't create as far as i am concerned the system created and other managers helped create this, and there was this policy is a natural tendency to be free of liquidating and clear the marquette, and under door philosophy is a we can't allow this to happen we have to prevent it and i would say you've done a pretty good job. of the monetary base has been tripled, and in the last 12 months late think they've drawn about 16% from over 9% so it seems to be like the monetary system are still growing. the housing prices of devotee knows there is a bubble. the free-market economist knew about it and others did not to read the prices soared devotee knows there was a double and then the collapse. when the prices of the house is

to collect deflationary is committed the price of the current goods and services. >> i think one of the problems of inflation or deflation means because as far as i am concerned when the money supply shrinks just about everybody in the country especially the financial markets and the will think the conventional use of inflation as the cpi and i think it allows the measurement because if it is the money supply increases the price is going down if the house those are not deflationary i wonder why it is the deflationary as measured by the cpi our argument is that wants to distort interest rates supply

of money you end up with that assertion that is demanding some corrections. i've worked on this for years and we are not way to solve today the definitions would be much better if we -- of the prices of housing haven't gone down in deflationary and cpi is coming up shouldn't be inflation we have had trouble for five years. the monetary system is not. you can solve every problem of monetary system, and monetary policy. we've had this for five years and we're still in ms. is there ever a time let's say we go five more years and we have the same problem that much worse is there every time you might say i have to reassess my philosophy on the montreal was your do you think that it will be the same no matter what kind of crisis? can you foresee any kind of problem that we would reassess your assumptions?

>> i can't conjecture what specifically but yes evidence based look to see what happens and try to draw conclusions from that, certainly. >> the definition is very important if we don't come to this conclusion and we use these terms of inflation demands corrections, and the the market wants to correct. so this is why we believe we are going to have perpetual doldrums and finally have a big one. do you consider this recession that we are facing today to be something that is significantly different since 1945? much worse and different in any way? >> because it is a financial crisis, yes. >> thank you. >> that is a double dose you got. the was pleasantly unexpected i

guess. >> mr. miller? >> thank you. mr. capuano has already asked about the need for accountability if they were in fact systematically banned. but we frequently hear with respect to whatever the latest scandal is and certainly with respect to the conduct that led up to the financial crisis that the conduct may have been unethical. it might be of objectionable but it probably wasn't illegal and it certainly wasn't criminal, and the fault was with congress not passing tougher laws. for having passed the week laws, and i have no stake in defending law passed by the congress until i got your. but i have read the transcript of the conversation between an employee of the new york fed and the barclay of some trader and i examined the criminal fraud statutes. the transcript, several interest groups show that door cleaves

admitted that they were filing false reports. some of filing an honest interest rate. but one transcript sort of set out why. they said that the financial times had done a chart that showed that our barclaves as pay a higher rate and folks knew something about barclaves that wasn't generally known, and barclaves's stock went down from their share went down. and he said that was why they were not filing on the streets. there were filing a rate the would be like everybody else's. so they wouldn't call the attention like the financial times that called attention and it wouldn't affect their share. the definition of fraud seems to be the willful intent of providing the cost information with willful intent to proceed

and a could be words or acts to the suppression of a material fact again with the intent to the material fact and it is one that a shareholder or investor but attacked determining whether or not to sell and determining the price at which to sell the shares with respect to the barclays share presumably the traders and many executives held as a substantial number of the shares they probably had options brough they probably would pay bonuses in the shares. so it appears they are providing information that they need. they are providing information that they knew would affect the share price. they provided with the intent of affecting the share price and they personally benefited from the effect of having provided false information. what is missing? what does the congress need to do if that doesn't meet the definition of criminal fraud how

does congress need to change the wall? >> i would recommend the federal rates isn't under the purview of the department of justice and others. >> of the time of those the governor of the bank of england and secretary geithner but there doesn't seem to be any dispute that there was no referral to a u.s. attorney for criminal prosecution. they are not able referral for the prosecution. >> with the information can across is not quite as explicit as you characterized the bid was more the market chatter -- >> that is to merkley from the transcript of the conversations to the barclays employees and employee of the federal reserve. >> the trader was based in new york and was talking about rumors and things he heard. he didn't have explicit information, but the point of the important point is the federal reserve of new york did

have the appropriate authorities and it briefed all of the financial regulators who in turn undertook investigations which began about the same time in putting especially the cftc -- >> you said yesterday you didn't know anyone in the federal reserve knew of the reports that there are providing false information to affect the libel writ because it affected their derivatives interest-rate swaps. there were many reports that there were obviously of conduct would be much more effective if it was done in concert rather than independently but what makes sense to act in concert you wouldn't be affected independently if the positions for all over the place. is there an examination now as to whether the derivatives of the interest-rate swap positions are of the various banks in fact need in concert?

it's not under our jurisdiction. other agencies are addressing those questions. >> thank you. >> what role does uncertainty in the marketplace have to do with our financial recovery >> i think uncertainty is as i mentioned once or twice in this venue my phd thesis is about the effect of uncertainty on the investment decision and that would impede decisions the would be hard to reverse later when it became available. so i'm sure the uncertainty is playing a role of different kinds of uncertainty no doubt repertory and uncertainty are a part of the broad set of issues that are concerning investors and entrepreneurs. we hear that a lot of our

anecdotes. it's also the federal uncertainty about the recovery itself will the recovery be sustained or not in order to be confident about hiring people for example, you would like to have greater confidence that in fact to respect hearing from a lot of the small business people that have around 50 people that they are going to fire people and get below 50 so they are not covered by the president's health care i could tell you story after story of solomon schechter and facilities that are going to fire people because they are not going to tolerate having to put up with the affordable health care act and even one major employer back home in illinois was the employee's i'm going to offer you no more health care. i will pay the 2,000-dollar fine because i am well over 50.

these business people have money. large corporations have money. have you heard about the uncertainty out there with a the business affordable health care act and the impact that that has on the recovery? >> we get lots of anecdotes. research from around the country come to the meeting and talk about what they're hearing from their context and the context frequently cite uncertainty including regulatory uncertainty. as i said it is hard to judge whether this is a small factory or large factor. >> from i could tell, it is a jury large factor. i've spent most of my time in this place working on manufacturing issues and coupling that uncertainty with the weak orders coming from the e.u. which i think is the second largest trading partner besides canada and the institute for the

supply management isn't at all 58 hermetic six points just in one month if the manufacturing sector isn't going to lead the recovery, what will? >> i noted in the remarks manufacturing seems to have slowed somewhat and part of it is the global economic situation demand in europe and asia, and that was a part of my earlier point the multiple factors involved here. one sector which is doing better this housing. it is true as mr. hensarling pointed out for example but it has been slow, and part of the reason is solving the financial crisis, the factors that normally lead to a stronger recovery like the housing recovery or extension of credit of sectors to some extent.

>> the manufacturers involved in mining, oil and gas exploration, anything dealing with energy or spanning because they see the need for that. the massive uncertainty in the manufacturing sector, the fact that companies are willing to make decisions is as you said, compounding everything and there was a bunch of european union parliamentarians yesterday. they believe close to their self-interest they think that things are stabilizing in europe what is your opinion of that? >> i don't think that they are close to having a long-term solution bill will solve the problem and until they find the long term solutions we are going

to continue to see that period of the volatility i think. stacks before. i yield back. >> mr. space? >> thank you. >> thank you, mr. terse. >> general bernanke in the previous testimony before the committee of mentioned one of the best ways to strengthen our labour force is to improve the quality of education especially in the disadvantaged areas suffering from the unemployment and underemployment. some encouraging names - the new monetary report is that a consumer debt -- it's not clear to me whether the savings rate is increased in proportion to the decrease in consumer debt on the financial litigation particularly for young people and especially students a disturbing aspect to me the current consumer debt is the

alarming increase of student loan debt. do you believe that investments in financial education can help strengthen our economy and are there any successful models of programs that you see as being effective in this area? >> it's free committed to the economic education marginally. later this summer i am going to meet with teachers from all over the country during the financial education to talk about different approaches and the value of thought. it's very clearly important that they show people made that financial decisions and that hurt not only them but the broader economy. so it is extremely important. at the same time, i think on the other side of the ledger, it's important we make sure that financial and information such as credit card statements and the like are understandable, they are not full of full pride in those sort of things, so it

is the two sides to it. so yes, that's very important there's still a lot of work going on to figure out what works in the financial education and i would say the record is next become mixed. one of the things is that the financial the education should be introduced in school but it's also important to have a lifelong opportunity coming and many folks don't pay much attention to these issues until the time comes to make a financial decision but that is when they are most likely to listen carefully and of some of those lessons. >> i yield back. >> thank you. >> thank you mr. chairman. privileges to the lowest ranking member myself i'm close to the action, so thank you for coming in today. to the chairman of's opening question, mr. bernanke about auditing the fed, novels are

challenging -- i am not challenging transparency that you have given to us seeing what has happened but moving forward to the future, not the past, the ranking member's opening comments about playing politics, i know the freshman class, we are not here to play politics. this is about trying to prevent or hopefully build a better america than we have now. auditing the fed to most of the american people seems like something that's responsible. that opposed to auditing the said. >> very much so because i think the term audit the fed is perceptive. the public thinks the main checking the books, looking at the financial statements, making sure that you are not doing special deals and that sort of thing. all the things are completely open. the of the complete ability to address all the things they did during the crisis.

all the books are audited by an outside private auditor. if there's anything that the congress wants to know about our financial operations also have to do is say so. the one thing that i consider to be absolutely critical though about the bill is that it would eliminate the exemption for the monetary policy and the nightmare scenario that i have this one in which a future federal german would decide to raise the federal funds rate by 25 basis points and somebody in this room would say i don't like that decision. i wanted gao to go in and get all the records, get all the transcripts, get all of the predatory materials and give us an independent opinion whether or not the was the right decision and i think there would have a chilling effect and would prevent the fed some operating on be a political independent

basis that it's so important that it's more likely to add to the inflation of the currency kind of economy. >> is their anything that could be done from any kind of compromising your opinion that needs to be done any more than it's being done now? .. some of us fear that we are dumping tons of money into the economy and sooner or later

things will spin out of control when we have a recovery. >> they are of course temporary. the economy rose in the long run because of all sorts of factors. the quality of the infrastructure and help take to the tax system is. research and development. monetary policy can't do much about blogger growth. all we can do is smoothed out. spur the economy is depressed because of lack of demand. because of the financial crisis, the economy has been slow to reach back to potential them are trying to provide additional support for the recovery can bring it back to its potential. but in the medium and long-term, monetary policy can't do anything to make the economy healthier or grow faster except keep inflation low, which were admitted to doing. things like education, infrastructure, r&d, tax code, all those things are the private

sector in congress. speed make you fear, last question, that when the economy starts to turn and move that it's going to move? hopefully when washing can and cannot certainty and stability and get confidence back that we won't mess things up? there's so much money out there that this thing will really go and inflation is going to be a huge problem. >> know what will not. we know how to reverse what we did. when i had taken money out of the system and raise interest rates. it will be a similar pattern to what we've seen in previous episodes for the fed to raise, provided support for the recovery of many economy reached a point of takeoff, work is supported cell phone at home, the fed pulled back, took away the punch bowl and we can do that will be the job for ms. time comes. >> thank you, mr. chairman. mr. chairman, thank you for being a witness and for your

efforts over the course of the last several years to stabilize our economy. >> mr. chairman, i read closely and listen to your testimony on the things holding back our recovery can read that monetary policy report here. i just want to dwell for a minute or two. i saw financial strains associated with europe and type wearing conditions for restraining effects of fiscal insurgency in the house he marked it. presuming we are not in the near term going to do a lot about number one and number four, i want to explore refused type are wearing conditions and whether there's anything congress can do to assist in that. i know you're hesitant to make prescriptions to the congress and i understand that. the federal reserve has been clear in the message that monetary policy alone is not enough. i'm going to explore that a little with you. and the report you say still tapering conditions are resulted in certainty and economic outlook and high unemployment.

he did not mention uncertainty associated with dodd-frank and the role writing process and the new regulation. can i assume from that omission that the federal reserve does not believe that regulatory uncertainty is in fact a material cause that still type are wearing conditions? and if it is material should be do something about it? >> there's a lot of reasons for the problem. parties on the demand side. the fireworks are financially paired from the crisis and they and they are not retracted two blunders as they were earlier. his other various type areas, including for example concerns about banks and other mortgages put back to them if they go bad, et cetera. there's a lot of conservative than the mundane as well. i don't think i would say there is no effective financial

regulatory policy and any events this. for example, as we try to develop rules for mortgage lending for mortgage securitization, there's still uncertainty about what the playing field will look like when the private sector securitization market comes back. >> i'm sorry to interrupt, but they question was and was there no effect. it was was their material? performer dodd-frank are terribly, terribly important. i'm sort of looking for materiality because frankly you don't mention in the report. if you were to face a material fact i might rethink my position. >> is currently on regulators for that on congress are some things have not been resolved the way the other people have talked about uncertainty. if we can move to provide clarity about how regulations favorite and so on, that would be helpful and i certainly agree the benefit of financial reform to reduce the threat of a financial crisis 62 mayport to

take into consideration. >> thank you. second question and reason for headwinds here is the restraining effects of fiscal policy. i wonder if you could elaborate what you mean by restraining effects of fiscal policy. how a separate setting had went to economic recovery? >> probably speaking, fiscal policy of federal, state and local of those contractionary and pulling demand i'll rather than putting it. you can see that most clearly at the state and local level, we're tight budgets over the last two years has meant at the same time we try to increase employment in the country as whole to many people are laid off by the state and local governments. i'm not making a judgment about that. obviously fiscal issues they had to deal with. but it's just a fact of fiscal tightening, particularly at the state and local level has been something of a track on the recovery. >> can i conclude from all that though that your achieving your

mandate of full employment, where we abide by the policies suggested by simon this institution for more severe austerity now. can i conclude if we do not be helpful towards full employment? >> what i advocate is a too poor policy, what makes strong and credible steps towards achieving sustainability over the next decade while avoiding sharp cliffs and sharp contractions in the near term, yes. >> last question turn on experience as an economist. there's all sorts of debate around here about things they might do. extending safety net programs, unemployment insurance, tax cuts for middle-class families, for the wealthy. infrastructure investment. each fiscal policy has more positive impact on the economy. i wonder if you might just

relatively breakables attire affects of those four initiatives legislate out. >> that would come too close to advocating the different approaches and each is not only multiplayer fix, but different cause, different benefits to the economy, different policies outside the government one. unfortunate that the congressional prerogative to figure that out. >> thank you, mr. chairman. mr. royce for five minutes. >> now on the long road ahead of us, virtues studies that seem to indicate the same thing. one recently came out of the iron mask, which indicated that a 10 percentage point fall in the debt to gdp ratio typically leads to output rising by 1.4% in a similar conclusion the other direction from broke off and running hard to say in a paper growth in a time of debt, debt earnings above 90% are

associated with a 1% to 2% lower medium growth. our entitlement obligations will consume all of the average postwar projected tax revenue in a few decades. we just look at the studies that frankly you've shared with us. will we be able to see strong sustainable economic growth without addressing our entitlement obligations, which you've labeled unsustainable in terms of the way they are currently set to compound? >> well, on current law, health care expenditures are expected to rise very substantially to the extent they would be crowding out other parts of the government or alternatively requiring significant tax increases. if you want to avoid outcomes is

important to find ways to reduce expenditure. i hope it can be done in ways that don't involve health care, but more efficient delivery of health care. >> would you like to make other observations in terms of the deficit or the size of the debt as you look out out, 15 years now? >> many analyses showed the fiscal side that is unsustainable. even if we avoid some kind of crisis at some point, why don't necessarily buy into the 90% number, it's pretty clear the high-level of debt to gdp, both because of future tax obligations is going to impede growth, all else equal. >> that will impact in the future. when they go to another question in regards to basel three. i think it is a step in the right direction. but at the end of the day,

capital is the ultimate buffer that stands between the taxpayer and the systemically risky institutions, right? so under basel three, my concern is that continues to align internal risk models of financial institutions when you said the capital levels. i don't mind those being used internally for purposes, but to use that to set the capital levels, you know, if i quote your former colleague, he says, you know, he says prior to the crisis, and these novels were gamed as the argument he's making to avoid raising additional capital. and of course if that means is they had excessive leverage. and you look at the basel committee study. capital levels and american banks employing the approach

would have a capital reduction of 7% to 27%. those adhering to standardize approach typically used by smaller banks would experience a 2% increase in capital demands. so we have a recent study, which found 83% of institutional investors want to get rid of novel discussion. mr. chairman, given the history of the gaming of these models in capital levels and the institutional investors are demanding a move away from model of discretion, are you comfortable with continuing to use these models and setting capital calculations? you know, if you look at the minimum leverage ratio, are you comfortable with this 3% level of capital to total assets were dirty three to one total leverage their? >> the overall system with a

leverage ratio and her capital buffers liquidity rose and so on istrsyem. oint is well taken. they need to be validated it may need to be good. the federal reserve and the other regulators don't like to use whatever model you want. they have to be approved invalidated by regulators. >> the only way to guarantee that doesn't happen is to focus on the old fashion minimum leverage ratio, which under basel three is far too low. >> thank you, mr. roy. mr. carney. >> thank you, mr. chairman. chairman bernanke, thank you for coming in today. by the tank it to me, many of the questions i have a verdict in a dress. i'd like to address some of the things in your statement and in europe word to confirm my

understanding. the fed is doing everything it can with respect to monetary policy to address with my dual mandate. is that correct? >> we can continue to evaluate the situation and it don't look good we are committed to make sure we continue to have improvement unemployment. but i do wonder employee but done everything they can. we may do more in the future. >> there is more you might do? >> is possibly take it fictional action if we conclude were not make an process towards higher levels of employment. >> there seems to be little reason for concern on the price stability site at the moment. >> for now, inflation seems to be well in check. >> you also said progress has been made in terms of recovery,

but unemployment is still too high. the recovery has stalled about as strong as you would hope at this point. >> the recovery has decelerated recently. we've seen for the last two years things seem to be stronger at the beginning of the year and slow down during spring in number. so we will try to list says whether it's a temporary slowdown or whether something more fundamental is happening. we are committed to doing what is happening to make sure it continues to grow. >> at one point he said to best for economic growth in the european situation and effects of the u.s. fiscal policy is a fiscal cliff. part of your response to that is the most effective thing congress can do with the to address the fiscal cliff and the sooner we did that, the better.

what you mean by that? >> one of the issues and this is not explicitly accounted for. the cbo study is that even putting aside the effects on activity of the fiscal cliff, there's likely to be as time passes and make it closer to the end of the year, likely to see increased uncertainty in financial markets and among people making investment in higher decisions about what programs will be in place and which ones will not do my tax rates will be. >> certainty and can't punch her in confidence or a big part of that. >> i will try not to ask you to suggest things we should be doing, but i would like to ask you to go back to the question, which is a sense of what gradual means. can you describe that numerically and someone is

supposed to prescriptive way in terms policy? >> there is a range people would have different views about whether you should be more proactive or just avoid the cliff. the range of views there. >> when you say more proactive -- >> we want to do more physical activity. there's more views. what i take here is a do no harm approach. say you want to avoid the impact of the cliff. >> have we learned anything from european response? have they taken through the requirements figure rose zone has imposed on the numbers and fiscal policies that the best. >> i think we have learned the sharp fiscal contractions can slow economic dvd. that is not to say we have any

choice. greece for example doesn't have many options about cutting back on fiscal deficits, but we have seen countries that are very sharply contracted fiscal conditions, experiencing recessions at the same time. >> two of the big issues and our fiscal situation with health care spending is the biggest part of the spending side and of course tax policy. is certainty more important than the underlying policy for the affordable care act was intended or in the long term that creates a lot of uncertainty in the short-term. i see my time is running out. >> what every of clarity about the supplies of the federal reserve, too. >> is as time has expired. the chair recognizes himself.

>> mr. chairman, press reports have indicated that the new york fed first learned the possible labor and to designate. however, when the cftc announced enforcement action in the 200 million-dollar sign against barclays in june said the break and continue sporadically well into 2009. chairman bernanke commented anyone at the new york fed and from the federal reserve in washington d.c. a potential breaking in to designate? >> in 2008 -- let me be clear, there are two types of behaviors that the cftc has identified. one is manipulation. but information is only recently come to life. none of that was known in 2008, 2009. with the federal reserve heard about in 2008 now members of the panel possibly underreporting

for borrowing costs they were becoming known with media reports in april 2004 example with widespread chatter in the method. prior to the problem was the structural problems with good sistan in the new york fed to two kinds of steps. one was to inform relevant regulators would have learned, but also took steps to make try to make improvements in how this could have been calculated. >> you can understand >> derivative contracts which fall under the committee were settled to potentially use

>> can i take your answer to say therefore that someone from the federal reserve did indeed tell the cftc about this issue into designate? >> up so they were as released on materials on friday, the new york fed and presentation for the working group in a separate presentation to the treasury and communicated with authorities and strength in an address this underreporting problem. >> thank you for your public service. i would like to note that the consumer financial protection bureau entered its first important in action today, ordering a financial institution to pay a fine for what the agency described as process is tactics related to credit card products. i wanted to publicly thank you

for your leadership in congress leadership on credit card reform and note that it's good to see that consumers have been agency speaking up and fighting for their protections and financial products. the problem is really rapidly front of goal if we use a different index, one that is subject to come the public, readily verifiable and manipulation resistant by any single bank. i would like to ask you what are your favorite alternatives to library and have you relate that to mr. king at the bank of england and what was his response? >> as i discussed yesterday, still are problems with the system because they would protect and actual market transaction.

federal reserve made recommendations, which had not been fully adopted. one strategy would be to switch to a market-based indicator. the federal reserve has not come out in favor of a specific one, but the number of possibilities include our repo rates, so-called ois index. and even potentially treasury bill rates, for example. a number of possible candidates. i have not addressed this issue to governor king. i have talked to mark carney who is the head of the financial stability board tumble which is an international body, which looks at issues pertaining to regulation stability and that body is going to be looking at the controversy implications for

financial stability and possible ways to move forward. that is when international effort to look at alternatives. >> why is the american economy doing better than europe? the europeans seem to be more focused on debt and working towards austerity and austerity and their public policy instead of a stimulating the economy. what role do you think stimulating the economy with monetary stimulus and fiscal stimulus. mobility at the back plate and american recovery, which is better so far than the european one? >> it is somewhat disappointing, but has been stronger than some areas. in europe they are facing a number of challenges mostly related to structural problems associated with the common currency and with the structure of the euro zone.

as a number of factors contribute to the slowdown of the economy. one is the fact the number of countries under the pressure from market are severely cutting their fiscal positions and that is contributing to solid economic and dignity. in addition to that, their banking system is having problems in the credit has become very tight in some countries. moreover, all issues related to the possible default of various countries are the risks of boring by financial institutions have lead to volatility in financial markets, which has also been a factor. they face headwinds and it's a difficult situation. >> iowa especially worried about the affairs of some of my colleagues on the other side of the aisle to limit the fed's ability to use monetary stimulus, long-term unemployment is really high and i'm worried

that we don't have enough tools to combat it. don't she believes the long-term unemployment would be even higher if the fed had raised the federal funds rate and not purchased government security? >> i am quite confident of that. we haven't had recovery was i coming to certainly monetary policy has contributed to growth and reduction in the last three years. >> i would like to hear your comment from positive signs that she's the in the latest you economic data. >> the gentleman from california is recognized. >> it's good to have you come a chairman bernanke. >> california is kind of an interesting process. what kind of going the other

way. in the touring california standard 3.5 down to to come which is a really good trend. it was hit very, very hard. it's down to about 40 days and that's where it's nice to go into real estate office in a list of buyers incentives list of homes for sale. what do you think we can do to keep the trend going because i believe the economy will come back to the housing market recovery. >> well, as you say, there is improvement in the market as a whole and particularly in some areas. i am not sure the low inventory situation will persist. if the backlog of houses that are in the foreclosure process and make him onto the market and that will be an issue. we provided a working paper earlier this year that discuss some of the issues and housing. for example, in order to keep down the inventory, one strategy is to undertake programs that

convert reo real estate owned by banks and other owners to rental properties and the gac is renting a program like that that has some promise. it is important to do what they can to avoid foreclosure obviously where possible. and if that's not possible to give people a way through deed and mu or short sales or other mechanisms to get out of their home and salad and to avoid a lengthy process, access to credit remains a significant problem. it's hard to point things that can be done, but one thing that is promising. it will reduce the concern banks have about put back rest.

it was all too standing on friday. if the mortgage goes that if there's any kind of public documentation, it will be reliable to the law. .. objecting to it and they said it's been on the market. 70% of the homes have never even been listed. and my concern is why would we

do that for the market value if we sold the traditional foreclosure process we would get more money, but we're actually going to cost the taxpayers money starting a program and a pile the country that has a very low amount of funds listed. why would we do that? it doesn't make any sense. i agree there are probably some in the country where there's a high inventory levels. but why would we take the one area of the country where the house prices are depressed but your but selling them out costing taxpayers some money. why would we do that? >> i'm not sure it's costing taxpayers money. i hope not. one of the reasons they would be doing that is if in order to make the programs work you want to have a large number of houses close together plus together so they can be managed by -- >> you will sell them less than market value.

ceramica but more quickly. >> if you have authority day supply of inventory -- my argument is the seven months is normal. we have 40 days' supply of inventory, and fannie and freddie are both selling goes to the fha and at a reduced price when the houses could be listed and sold. >> that's a good point. i haven't heard that before and i would urge you to talk to ed dmarko. >> the response was we were afraid we would lose credibility but not now that we bid them out. my response is i'm concerned you're losing credibility by costing the taxpayers money selling homes in the region that have no inventory. i think that is something when you are in meetings you should talk about. >> the time is expired. the gentleman from florida. >> welcome mr. bernanke, good to

have you. i want to talk about what is the core of the issue now dealing with especially unemployment, and that is the very serious problems as of partisanship that is basically hijacked this congress. and i say that because i think that you all have done pretty much what you can. you have reached in the fed your point of what you call the low round where you can't go any further with your interest rates and everything that we have done here we talk about the policies that we have made. nowhere is the economy more impacted than health care. it is a rising cost of that. we passed the health care bill, and in that bill it has a direct impact on unemployment and employing people. for example, we have the medicaid expansion which will bring in another 18 million

individuals. and most important, it will have an extraordinary impact on job creation, maintaining jobs and other jobs. most critical you find on a base of the partisan basis. already those states have the most to lose that have the highest rates of uninsured and the highest rates of unemployed are saying they are going to turn away billions of dollars in medicaid that would go directly to the largest employers which are the hospitals. one first of all hospitals in this country are facing foreclosure which means rising unemployment and so what message can you give the nation and the congress and how we can get our act together and how devastating

this partisanship we were denied the unemployed, we were denied this and it is strictly because of partisanship. how serious is this in the country? >> it's an enormous problem that represents not only wasted resources, it represents hardship and given the large number of people that have been unemployed for six months or more there are a lot of people who will never really come back to the labour force or if they do they will have lost their skills and will not be as employable as they were before so the costs are very high. the federal reserve is, as you say, doing our best to try to help the economy recovery and put people back to work. but the monetary policy isn't a panacea. it doesn't have all the tools that could be used. and so, i would urge the congress to work together as much as possible to address this triet is a very serious problem and it's not just a temporary cyclical problem the long run unemployed in effect the labour

force for many years. there are lots of skills. >> i know my time is up. thank you very much. let's talk about what we can do in the future. we have the sequestration coming up for example. how can we formulate our policy dealing with the sequestration shorten and lessen the impact on unemployment. let's look at the defense for example. we have 50%. we are going to cut. can we not have some indication of how devastating this is going to be in employment particularly with many of our defense industries who have huge, cute and police coming and what impact would it have not just in cutting the defense capabilities , but in employment? and can we not have a direction or leadership where we would be very careful as we move forward

with sequestration to make sure we have not less ann pact how will put people out of work? >> i cited a number of one and a quarter million jobs from the fiscal cliff would be lost or fewer created an otherwise so there is a big in plant simplification. on the other hand it's very important not just to forget about the long run. we have to make sure we are addressing our long-term issues in the fiscal sustainability. so what i am recommending is a combination of more moderate fiscal retrenchment in the shorter term to respect the fragility of the recovery but with serious and credible actions to address the fiscal and sustainability in the long term. >> very quickly the other that we had double the drop is the ending of the bush tax cut. what is your advice on which way we should go in that direction as far as having a lessening impact on unemployment?

>> i can't advice that specific tax cut in spending but looking at the package overall i am concerned about the contraction of the entire program. >> the gentleman from new jersey is recognized for five minutes. >> ever since 09 you've been hearing that the fed is sort of felt of bullets but we also argue that you and your colleagues have been pulling the trigger quite a bit whether it is through the free round, the defeasing and the six years of interest rates being almost 0% balance sheet stands almost triple its normal size. it's obviously safe to say that we have been -- we continue to be in the u.n. charter territory. through all this you normally come and defend yourself on these policy decisions by are doing the counterfactual. that is to say things could have been a lot worse had we not taken these actions. but before we go down that line of argument we have to think about where things really are.

with the recent decline in the interest rates or we are in the market today, is that the result for the fed is doing or what the marketplace? the return now they're on a ten year treasury is roughly - 5%, right? is that a function of the action keating the rates down or is that a function of the market in general? and if it is an action of response to the fed cut in the question would be what is the appropriate rate that we should have in the market? if it is where the fed is trying to keep it where you said you were going to keep it for the next foreseeable future down a mere zero isn't that actually discouraging of the investment on individuals and businesses at the same time? if i know as a businessman or individual with the interest rates are going to be this low for this year and next year and beyond, maybe all i would put off those investment decisions to a later date some of these

decisions may actually have a negative side to them. in other words, maybe there is a counterfactual to your counterfactual. maybe there is a risk inherent in the policies that you have taken and i will close on this. the fed involves itself all across the economy. you fix the run. you manipulate the operation twist. you essentially monetize the national debt and manipulate the mortgage market along with a every other part of the quantitative easing. you attempt to manipulate the stock market's through the portfolio balance channel. you involve yourself in every aspect of the economy. there's not a price in marketplace that is not subsidized in one sense or another by the fed. and yesterday at the hearing i've listened to the tape of the hearing you said you had more bullets than you could pull. you said there's a range of possibilities buying treasuries, using the discount window, employing additional communication tools even below

2:54 beyond and the fed pays the excess reserves. so these are all additional bullets that continue to the center of the territories. but i would ask is is the fed being as transparent in all these things going forward on the downside of all of these come on the downside of the accommodation particularly what i would say is the field of accommodation. how does it create a single job? is it proper hope the market and that is great for those in the commodity market area but if i'm on the obverse side of that trade, if i am an individual airline to see what the down sides are on the portion of the policies? >> we have provided even some years ago we provided research that showed based on the models and analysis how easing the

financial conditions lowering interest rates and it is - half a percent not - 5% increase is the spending investment and the incentive to provide extra demand and help the economy recover it is certainly not a panacea and it isn't without the cost and risk which i talked about and i agree but i think on the whole that there is evidence that it has provided support for the recovery. it's not the only solution, but it has had a positive affect. >> my time is limited and if you would come back to us to indicate that you made any mistakes in these areas where you would have liked to see other actions you should have taken to give that in writing but i would close in the last 30 seconds on the situation with regard to labour. i saw your testimony in the senate hearing yesterday that when you said you knew about it and the entire media knew about it and 08. you sort of planting a river of london and you made some suggestions over to them what they should be doing on this.

is their something that both the new york fed and you could have taken for dodd-frank over the last four years and that was coming forward is their something you could have done as far as regulations perhaps with regards to how the bank's report their information to regards to the requirement here in our banks perhaps setting up fire walls with regard to the offices within? >> the time has expired. >> the gentleman's time is expired. >> can i have an answer -- >> the gentleman's time is expired. >> the gentleman's time is expired. the gentleman from north carolina is recognized for five minutes. >> thank you, madame chair. let me do things quickly festival of one to apologize for not being here for the testimony, chairman bernanke at the hearing in the subcommittee on the ranking member on and the judiciary on the intellectual property so i couldn't be here.

second, i want to follow-up on congresswoman waters encourage men to be encouraging in the outreach on the real estate settlement as money there there is a disincentive for the lenders to go and find the people because they didn't keep the money. if they don't find the people, somebody needs to be more aggressively reaching out even to the point of sending people from door to door to find these folks who would be eligible. so i want to encourage that and we will do more encouragement offline on that. sir, i want to pick up on mr. garrett's point and take the counter position. i want to express my thanks to you for shooting all of these bullets because if i had given

what mr. garate is saying that he would prefer the fed would be as dysfunctional as the congress has been and that nothing would be done and the economy would just be allowed to collapse which i think would be the result if they hadn't taken some significant actions. and i think you point that out on the bottom of page five and the top of page six in your abbreviated testimony. when you say the important risks to our recovery it is the domestic fiscal situation that is well known in u.s. fiscal policies on an unsustainable path, the development of a credible medium-term plan for controlling the deficit should be a high priority. and you paint unfortunately kind of a doomsday scenario if congress doesn't act because you

lay out the dilemma that we are in because we need to be spending short term to stimulate the economy keeping tax rates low short-term to stimulate the economy. yet we need to be more fiscally responsible. you can't spend and keep taxes low without increasing deficits. that is unsustainable. and i guess i'm expressing my belief that congress doesn't seem to be up to that task. a layout that scenario. i don't want to get you in the politics of this, but talk to us a little bit more about a the

delicate balance short-term about what we ought to be doing versus long term about what we ought to be doing, and maybe at least edify the public about how difficult these choices are going to be both short and long term. >> they are very difficult traces. if the congress only allows this to happen and doesn't do anything else is actually kind of counter-productive because higher taxes mean people will have income to spend. less spending means layoffs and the industries for a sample so it will slow the economy and the in the tax revenues would be less than expected and the benefits in terms of the deficit reduction would be smaller than it was anticipated and we will see a slower economy and less job creation. at the same time, if you simply pushes everything off without

any additional comment, then there's the risk that people will become concerned but the congress has no intention ever of addressing the deficit coming and you could see for example concerns in the bond market about that. so, it's a difficult balancing act but its recommendation is made not just by the fed and the cbo with the imf and pretty much every sort of non-partisan fiscal authority, which is to mitigate and moderated the extent of the cliff in the short term and avoided the destabilizing the weak recovery. but at the same time work together to establish a free-market a plan, a credible plan that would over time over the ten year when deutsch and even beyond that will bring our fiscal situation and to the balance. >> the time has expired. the gentleman from texas is

recognized for five minutes. >> mr. chairman, thank you and i want to think you and your office is very responsive and recently bader in response to the issue. i think we will be sending you an additional letter today or tomorrow. one of the things that this kind of interesting to me, one of the 16 banks i think that we report on in the index would be difficult for just one bank to influence, wouldn't it? >> generally, yes. >> it had to be more than one bank under reporting or not accurately reporting the borrowing. would you say that is correct? >> the reason the banks come some of them apparently under reported during the crisis of sent to affect the rate necessarily but rather because the numbers are reported publicly, they wanted to avoid

giving the impression that they were weak and others were strong >> but if one bank is reporting differently than the other one obviously what not influence the overall index. sprigg if they were in the top four or the bottom for the would be cut out. >> so, when the fed first learned about this, we had some correspondence with the bank of england, and the domestic banks involved did anybody say no wonder if anybody else is doing this work was all of your focus just on our plates? >> our focus wasn't on a specific we are after all the british bank not for by the federal reserve. our focus was on the general phenomena, and the new york fed did two basic things. one was to inform the militant

leaders -- regulators here and in the u.k. about this problem so that they could look at it. but also to try to address the structural problems which were as you were indicating coming you know, were incentivizing banks to the rate information said it was approached as an overall problem. estimates are you familiar with of the term price fixing? >> of course. price-fixing if a bunch of us were in the business and we got together and what a sight that we are going to at this price that is price fixing, right? switch money is a commodity and a function of that, was in this almost price-fixing? >> may be that as you pointed out, one is did the individual

reporting affect the overall it may or may not have and i think that needs to be investigated. the other is that in some cases there were no transactions taking place. so, during the crisis they were mostly just overnight transactions and yes the banks were asked to report that they would have to pay for money a year out so the question is whether or not they were in fact this report or whether they were simply shading their estimate in some way so i think there is the question of the 50 tells me to come out and we don't have enough details get to know whether this was deliberate price-fixing or whether there was another interpretation. >> i think the thing that is alarming to some of us is the fact that given how widely used that index is throughout the economy just from about every area of the financial community's fault light it was a

fairly lukewarm response if somebody was manipulating the rate it could have huge implications whether you are a benefit from that you're on the buy side, but can you explain why you thought that why the fed felt that wasn't as big a deal? >> i'm sure that they thought there was a big deal. the information was widely known and was reported in the press, and the british bankers' association is not subject in any way to u.s. policy, so there was hard to affect but surely it is a very big deal that affect lots of different financial contracts, and as i mentioned in my comments yesterday i think that one of the bad effects of all this is that it's going to further erode confidence in the

financial markets and financial instruments. >> thank the chairman. >> the gentleman yields back. the gentleman from texas is recognized for five minutes. >> thank you madame share and mr. bernanke for being here today. i would like to yield most of my time to you because i have something i would like for you to respond to. i find the we have some very credible people that makes an incredible statement coming and one of the statements that causes a great deal of consternation as that we are now doing worse than we were in 09 that the economy is in worse shape today than it was in a nine. i can give my opinion on that but i don't think that it will have the impact that a person of

your stature were standing would have and i'm betting that if you would juxtaposed the auto industry today in a nine financial-services lending and general just please if you would so that we can bring some clarity to what i believe has been an incredible statement. there's been significant improvement since may 2009 when the recovery began. we've had economic growth now for about three years. the unemployment rate has fallen from about 10% to about 8%. obviously not as far as we would like that it's in the right direction. banks are much stronger, have much more capital than they did a couple years ago. manufacturing is much stronger.

we've seen steps in the energy area in terms of u.s. production and conservation was completely dead in 2009 and is not where we would like to be that it's moving in the right direction. there's been improvement. i recognize many americans will still feel this attrition is not >> would you say it's not worse than it was a mr. bernanke? >> not by all the criteria i mentioned. i want to just restate a couple things. we are about to lose the auto industry. we now feel the industry and it's coming back. the banks are about to go under. they're now stabilizing. aig was about to the wonder and we lost lehman brothers and now

is better than it was obviously not prior to what it was in the decline, and it just amazes me that credible people would make such incredible statements and that adds fuel people want to have some of credibility to speak truth about the conditions, and it is just amazing that this line of logic seems to have some degree of credibility in certain circles. number if you would come just for the record as the auto industry in better shape now than it was a nine? >> it's producing more cars, yes. >> is the banking industry in better shape now than it was in no nine? >> yes, it's more profitable and has more loans. >> is the economy in better

shape now than it was in no nine? >> again it's not where we would like it to be but in many parts of the economy they have been proved, yes. >> my next line of questions will have to do with something that we refer to as structural and cyclical if we use the cyclical solutions generally speaking and it's difficult to ascertain that amount of what we are dealing with structural as opposed to a cyclical. do you have a sense of how much of what we are trying to -- for want of a better term what we are trying to fix is structural as opposed to cyclical? >> that is widely debated but i guess my view and the view of many economists is a good bit of the unemployment for example remains cyclical which means it could be addressed in the principle by monetary and fiscal policies, but structural

problems are probably interesting in a particular long-term unemployment problem risk is they will over time become unemployable and they will contribute their fortress structural issues. >> thank you mentor all i yield back. >> thank you for your service to the government and the people. certainly appreciate that. now, with the quality of easing, do you think there is a limit to how much quantitative easing can be used and that we are approaching the limit right now? >> there's certainly a theoretical limit which is the fact that the federal reserve can only by the treasury's agencies come and more over the quality of these untypically is

opposed to the bills for example so there are finite amount of fat and moreover, beyond a certain point if the federal reserve owned too much, it would greatly hurt the market function in which would have the effect of reducing the efficacy of the policy. so i wouldn't say that we are not that point yet but obviously there would be some limit to how much you could do, yes. >> so there is someone that but we are nowhere close to approaching it is what you are saying? >> i don't have a number for you, but we still have some capacity at this point, yes. >> okay. >> he said to have a target inflation number ideal and what is that?

would the fed be comfortable with inflation rate a little higher than that? with 93%? >> i don't know what you mean by comfortable. if for whatever reason, and we have seen for example in the last few years the oil price shocks for example to the to a sandwich or 3% or higher that isn't a good situation it is our objective in that case to try to move inflation gradually down back. so if you are asking what we target 3%, what we seek to get 3% the answer is no estimate are you more comfortable with 3% or 1%? a little higher on a little lower? >> i think both of those are concerned because three per cent of course means we are moving towards the more inflationary situation but 1% is closer to the deflationary range which is also not helpful to the economy. islamic the reason i'm trying to get at this is because there's been a lot of discussion that with a little higher inflation

rate coming and i don't subscribe to this, with a little higher inflation rate reduces the debt burden and perhaps can spur spending in the perception of less debt and actually the impact of that that might spur the economy as more consumer spending. do you think that is desirable or not desirable? >> i recognize some people would advocate that recent the inflation target say 4% to maintain that for a number of years. i don't think first that we could do that without losing control of the inflation process. second of injury skeptical that it would increase confidence among businesses and households and increase economic activity. i think it would create a lot of problems in the financial markets as well so i don't think that is a strategy that has a lot of support on the federal market committee. >> so a lower inflation rate the target inflationary in round two would have more control than

perhaps a higher inflation rate. >> we have maintained for 2% and there is a lot of confidence in the financial markets that the fed will keep inflation close to 2%. specs of the confidence but also the capacity. >> welcome the issue is the we currently have well people are strongly accustomed to the 2% inflation. if we were to say for the first would be the issue of getting their can we get there with some accuracy but beyond that people would say as they said before why not six, why not eight? so in the short run at least it's not at all clear people would be confident that the new target of the 4% would be stable and sustainable. instead they would wonder where the inflation is going to be in the medium term. >> so, right now in order to which the fed contemplating more easing we also have a question of liquidity in the marketplace making sure the fed policy

enables more liquidity marketplace we also see you're not running counter to that. those of europe are making it liquid. does the volcker will do you have a concern about the timing of the rule that would rein in liquidity? >> we are paying close attention to the market liquidity and market making which are exempt activities under the felker rule. in any case it doesn't come into effect for a couple more years so i would say that isn't the first order of issue right now. >> thank you. >> let me say this, we have a hard stop at 12:45, so if you want all the time we would have it mr. pierce would like a minute if you could work that. >> i will be quick. >> thank you for being here and for maintaining a steady hand through all of this with your it was kind of the collapse on wall

street or some of the clashes but we have here in congress ideologically that don't give the economy some of the fiscal tools that i think what also helped continue to improve our economic situation comes alive and to ask a couple of specific questions and then see where we are. can we talk a little bit about basel iii and dodd-frank we have established some lower limits as a lot of the regulations that go in place, and i think either with a ten or $15 billion institution and we have many more things that you have to do with it is dealing with derivatives or the light, and as a understand it now, the regulations that could

potentially become worldwide tight regulations are going down to half a billion dollars and would take into consideration lots of smaller banks and this should try of the capitol and it difficult for them to continue to operate. can you comment on that? >> yes. certain parts are being proposed to go down the smaller bank. some of the risk flexible on some of the basic capital definitions. the large banks as well as small banks are well capitalized but it's important to know two things. first is that many of the aspects do not apply to the small banks. they're things like the derivatives and they are not relative to this marble small banks and the international leverage ratio which applies only to the largest international banks. >> i want to impress upon you if i could. i'd like you to take this away

and say you are a smaller, rabobank you are generally going to have the loans on the shop and real estate and some home loans and small business loans coming in in my opinion it wasn't the smaller banks that led us into the deep recession that we suffered in 2008 and in 2009. and i would just ask you as the chairman of the central bank's to make sure that we don't penalized. we were pretty tough in some of the dodd-frank regulation and we passed to make sure that the banking system had some restraints, didn't just run amok, the there was capital and that there were certain things that had to be watched closely. but i would ask you, sir, to just keep an eye on that if he would. my last question and then i will turn it over to mr. pierce is can you describe for us what has happened with a liquidation of the assets that were in need in

lane one, made in lane two and three. islamic they've basically then sold off in the federal reserve and the government and the taxpayer received all their money back with interest and profits beyond that. so, it's all been sold back into the marketplace. we pretty much liquidated all. we have a little bit less that we have paid off loans. so from now one of ressa was for pure profit. 64. mr. chairman, and mr. pierce for one minute? >> thank the gentleman for his consideration. mr. chairman, thank you for your service. i'm looking at page four where you talk about the great risk, and i assume that is because of the size and the underfunding but when i look at that i consider the pension systems and just yesterday the california pension system said the only got 1% rate of return.

their protection in order to be solvent is on the borders the beat justin at one system the 500 billion-dollar shortfall now just on the teachers and then that is the smaller of the two nationwide may be 3 trillion-dollar shortfall. i didn't see that, but i do see that spain talked about it and yet spain is only 1 trillion exposure. could you kind of tell us what the risk is associated with the unfunded pension? >> so the lower interest rates do put stress on the life insurance companies for the reasons the you just describe. i think that our goal is to get the economy strong enough that the returns will rise and that things will normalize over time. obviously the pension funds can't be underfunded forever but if the economy strengthens and returns the but the more normal level than these underfunding

problems will not disappear of course but they will be mitigated. >> thank you mr. sherman. i yield back. >> chairman bernanke did we appreciate your testimony today and you are dismissed. i might ask the audience to keep your seat until you and your staff exit. you are excused. the chair notes and some members may have additional questions for the chairman. without objection, the hearing record will remain open for 30 days for written questions for the witnesses and responses in the record. mr. schweiker is recognized for unanimous consent request. >> seeing the unanimous consent to place a letter into the record. there are some concerns amounting additional stability on that pcra premium capture

reserve accounts. >> everybody is dismissed now. without objection the letter will be entered into the record. >> anyway, this hearing is adjourned. but are changing the nature of the large corporations and that is in fact the amount of

time they have to stay on the top of the pack has been incredibly compressed by the globalization, by technology shift, by regulatory shifts and in fact large corporations not only now need to do with existing markets and known customers and known products, the need to be with disruption, and disruption is when they have a great core business and some crazy comes along and says we are going to take all this company. the best examples of this are to of the smartest companies. anybody ever had a blackberry or nokia phone? i was in finland talking to somebody asked the board meeting the month the iphone cannot. they passed a copy of the iphone around the board meeting and the fiddle quote was where should we care about this.

>> homeland security psychiatry janet napolitano testifies tomorrow morning before the house judiciary committee oversight hearing. it's live on c-span3 at ten eastern. then

the administration of ronald reagan and bush and obama have done more to come from the production of the rich getting richer and everyone else flowing behind them 75 years of the soviet union perhaps

national journal hosts a conference today on women in politics and the business world. the event kicked off with a discussion on women and innovation in the business world. >> we want this to be a lively discussion and we want you to tell us how we are doing this morning and welcome comments, questions, suggestions through twitter@#njwomen2020. taking questions over tauter we will also have audience q&a portions throughout the program. this event wouldn't be possible

without the generous support of google and the american beverage association. here this morning from the american beverage association, we have susan, president and chief executive officer to offer some remarks to you all. prior to joining, she was one of the architects of the nation's first department of homeland security. she also held positions of congress and the office of governor terry branstad of iowa. most recent data the chair of the commerce association committee of the 100. [applause] good morning everyone. the american beverage association is a proud underwriter of this very important and interesting conference, and i want to do two things this morning in the brief time that i have here the podium before we get into the interesting part of the day. one is to give you an unabashed

and comment about some of the company's i work for. brands that you know well like coca-cola and pepsico and i would say that they really are great forces for the advancement of women in this country. pepsico is chaired by one of the 4% of women that are running the fortune 500 companies, the chairman of coca-cola runs an executive committee that is trying to figure out part of a united nations global impact to in power women through business are none of the globe and on and on the. i guess my main point is that we think today about how to continue to advance women and keep in mind the private sector companies like the ones i represent as a great force for good and as part of our strategy for the advancement. the second thing i want to do is get a charge to this group.

as someone that is older than a lot of people in the room, i started here in the late 70's working for my congressman from iowa and one of the first things i did is three years later when i went back to work on the campaign i think the same day as signing a six month lease for an apartment to take me through the campaign i joined the political caucus. those were the things you did in the small bands of women to try to make advances. here we are how many decades later with vol room of women in the lineup of very powerful women. my charge to the group is to not figure out how we overcome the barriers to the progress i think maybe that is the rall question. i think the question we should ask yourself is how do we harnessed a considerable power and influence we have as consumers and voters and employers and employees as leaders to make changes for good, not just for women but all

of the societies and because i am always an optimist like to look for signs of progress but i'm going to close with one story about my son that is 12-years-old right now but for years ago, and he was eight in the middle of a hotly contested presidential primary, he told me he wanted to bring a friend of his to my office to give a tour. i felt okay it's always nice when you're someone to do something with you. well, it was here is my mama's bathroom she has her own bathroom interoffice and here is her flat screen tv and pictures of her with former president of the united states on a film is the former president bill clinton said that might when we took the little guy home, she ran out of the car and up the steps and burst into his house and yelled mom, she is a picture with hillary clinton's husband. [laughter] and i said to my friend

obviously is mom is giving him perspective on these things but i figure we can harness our power in this room and make change for goods there's always the next generation's ritual of the good moms and grandmas and sisters and friends and leaders in this room by the court to our discussions and conversations today and all that we can do together. thank you very much. [applause] with we are going to the panel wind up here. i want to give you a rundown of this once program which will feature five panel discussions that cover everything from innovation, demographics, and entrepreneurship, politics and developing future leaders. we also have three conversations including house democratic leader nancy pelosi and exit interview with senator kay bailey hutchinson and a final conversation would be the luncheon interview with the senior adviser at assistant the president. we hope you'll join us for the

entire day. now one to the first on imagination and innovation. ideas that can change the world. there is a companion article to the session in this issue of national journal. moderating the discretion as nancy cook budget for correspondent national journal and joining martha aqsiq of director cofounder of the action network, corrine redmon, trends to the crow coordinator of the department of energy and the energy and founder. >> in the magazine last week each of these three amazing women outlined the different ideas of the hat for innovation and of i wonder if each of you could offer three or four sentences about what you proposed and what you think would be innovative to transform the military energy sector and education. you want to start? >> sure. in my work we deal with sex discrimination and violence in the u.s. military medal of the

aftermath and after a fact of the women and men affected by those come and it's not really rocket science but what we see oftentimes with federal agencies and governments in general is that when you have these scandals erupt in where the drill instructors are charged with everything on the misconduct which was a lot of young women, the leadership may not be surprising but it's segregation of men and women in the military and returning in the advancement for young women in the military. and so, these things -- and a lot of research and analysis when we see the opposite which is the leadership and all kind of security implications whether

it's the defense contracting like all of blackwater serving women being raped in the conference, really pushing the boundaries on what can be possible around the world. u.s. peacekeepers. it's all of the world. some are mixed units and some are all female. these examples of drastically improved the peacekeeping operations for many populations in putting the u.s. military. >> what about the department of energy. you know that is a sort of big government agency. you know, what do you think that we can do that this sort of innovative in that sector? >> i would like to say good

morning to everyone and think the national journal for putting together such a great program. so, what i've done and what i would say this focuses on is the support from government support for science and research because of the amazing innovation this is borne out of the basic research. so i talk about a lot of the things that we have today that we take for granted before based on government funding, and with of the economy the way that it is and the cuts on the case of why it is that we need to continue to invest and as a, i talk about all the great things that we currently have available and just the possiblities because the standard of living of any society is based on the material that is available in the society, and a disadvantage as we were making in solar flare believe we could use.

i talk about having been a will to power our own mobile devices and control them with a wink of an all i which i don't think is -- things that can be done now or not on a commercial scale. and just fall to the benefit that we receive gps i'm sure we are all very aware of gps and how we ever got along without them i have no idea. we also are very reliant i've been in d.c. and have taken can barely get their as you know it is on autopilot but those are the kind of things and like i said, for us to be able to appreciate the investments that were made it is the example that we would use that research the was done for the military and the fact we have cameras in the cell phone was nasa looking for

the sheep will cost lightweight cameras that they could put in space to look out into the objects so again those are the type of things and we can't take our current status of the leader and innovation for granted because there's a lot of other countries that are learning very quickly from us and again we can't rest on our laurels we have to keep moving forward and continue to pressure to be to push the resources to become. >> how do you think we push innovation and education which is something everyone thinks they are familiar with because they went to school but maybe isn't familiar with all the different policy. >> first of all there's a lot of things that have to be innovative but when people think about that question automatically the mind moves towards technology that has to be bolstered by wrote about

something that's more common sense which is how we pay teachers. what we know based on the resources and also based on our experiences is the most important factor that impacts the experience our children have a free day in school is the quality of the teachers in the classroom every day and the research bears that out. it's not about class size. it's not about technology. it's not about the state of the art of building. what is going to impact your child the most is the teacher quality. yet when we look at how we pay and compensate teachers come it absolutely doesn't edit to ensuring that we have the most high-quality teachers in the classroom we have an antiquated lockstep pay schedule where most teachers nowadays start at about somewhere between 40 to $45,000 a year. after five or six years and

making a few thousand dollars more. i think that we have to turn the profession into one where teachers really recognize and are rewarded for the work that they are doing, and we also have to recognize that what they are doing is important in terms of the society overall. so we believe the most effective teachers ought to be paid a whole lot more money and certainly then less effective teachers are making. we put in place a new form of the pay system in washington, d.c. when i was the chancellor here where the teachers who were beginning their third year of teaching, who had just been teaching for two years prior to that, but if they were teaching in a high need school and subject area and they were a highly effective teacher they could think about $100,000 heading into