and they come back and at some.have know greater risk of reoffending than any one of us. we have we have this question of how to reintegrate into our society those who have caused those arms have been adjudicated in the been taken away from us for a while? it's not just the system but these big, democratic societal questions that go to government functions but how we deal with conflict as well. it becomes more complicated when you add this to the equation. we have specialized the system and it has done an enormous harm to our pursuit

of justice. the optimism but i sense not just from our students but everyone who feels now is the time to do things differently is palpable. >> on that very optimistic note i think all of us should thank this marvelous panel. [applause] and i also want to say i no all of you are extraordinarily busy. they are so appreciative. let me then turned to my cochair and to all of the panelists or task force members for their final comments. >> a few final thoughts. this is the 7th and last listening session.

it it has been an interesting experience. we have gotten a lot of feedback from oral testimony, written testimony, people people who appeared and asked questions, and i am confident that will have concrete recommendations for the president on march 2 as he has requested. i am also optimistic that this is just the beginning of a much broader discussion that needs to happen if we really truly want change. change. as we all know the best opportunity for changes when you have a crisis. we are at that moment in history we can move in one direction or another but we know the status quo is not going to get us anywhere. i really welcome the challenge. i think this is an exciting time to be a part of this profession.

it is an exciting time to be a researcher. you have that opportunity but this is time to not only listened to listen to turn this into some type of action. how you make that happen as that was the lines of communication that the american transplanted but i may have to tweak it a little bit. what we don't need is another commission that does work for two years. there has to be ongoing dialogue. we have to continuously tweak continuously tweak and

improve the we're doing but also be sensitive and knowing that what we do has a ripple effect on the rest of the system. that's why we have to be careful. something as simple as not too long ago in philadelphia for a decision was made for some small, minor offenses that by state law we are required to make a physical arrest and now you have to issue citations. fine, but who we will process and handle the workload? if something as simple as that has a ripple effect, unintended consequences, i think a comprehensive look at everything the drivers what happens when somebody enters the final what happens when they come out and back in? we talk about crime prevention, but what does that mean? how much crime will we accept? these are serious questions,

and that is to be consistency. whether that is real or perceived to made is something we have to grapple with and deal with and it will require all of us to take a hard look at ourselves. initially it may be a little uncomfortable. in the long run it makes for a stronger and better profession. he we will have helped us a great deal, and i want to thank you for that. we'll start start with alexander and work our way down. >> i think you stated it

without being redundant. i want to to thank you all for being hear and sharing your experiences as well. i am very optimistic. i think we are embarking upon something that will be very important to this country now because something needs to be done now and as we move toward the future as well. thank you very much. >> thanks to all the panelists who came in today. very informative. good recommendations that we we will discuss. this wraps us up, i think. this is this is the last panel will be having. now we have a few days to deliberate and make some decisions and get this report to the white house. my hope is that we can do that, that the recommendations are strong

but they can be seen through and also that we can do it in a timely way this time is crunched. thank you to all of the panelists and all of the folks working behind the scenes. we have an amazing team of folks who have been assisting us in this process and guiding us along the way eric garner rice, ford jones 200 days ago michael brown.

these are the names that brought thousands of young and old people from there homes of the last 200 days and beyond. these are the names they continue to shake me out of my comfort and hold me hope me in the position of urgency the names that brought me here. and in all of our deliberation and reporting and testifying and wordsmithing and recommending we must remember this is fundamentally about the inherent, i'm negotiable human dignity that all of our systems should preserve and affirm and never threatened especially for our most disenfranchised and marginalized. lives must not be lost for us to continue to have this conversation. too often the story of oppressed people is one race

their deaths require that we turn tragedy into permanent systemic racially equitable change. we have the power to do good but only if we keep our humanity. i i am appreciative of the chance to take that step and deeply thankful to the people who have made this with possible. >> thank you. we began our hearings in january with the panel and at that panel one of our speakers, witnesses was professor sam walker. in addition to invoking the report we spoke about so much today he held up the book book, the report of the commission which happened about the same time the report was in response to some of the incidents

like the ones that were counted. it turned it turned out many of the police riots was sparked by some kind of police interaction, interaction, not necessarily a fatal incident but some kind of police action. in addition to being mindful of the name i want is to be thankful for particular history that was recounted before that that but that is also our jumping off. while much progress has been made the policing we have today is a function can only have made much too little progress. it is my hope that we can connect what we're doing on his task force today the

history and that we be mindful of those lessons and make a collective decision that it is time to change. >> i especially want to thank the panel. i think criminal justice students around the nation it would spur conversations for semesters and years to come. one of the things that i think brought us to this task force was but -- was what many of us call the elephant in the room of race professor sherman i appreciate you bringing the other element -- the only other in the room to our attention. i think that is an issue

that we must grapple with. at the end of the day know matter how and where their recommendations, we must convince 18,000 18,000 leaders to adopt them. i appreciate you escorting that elephant into the room. this has been an incredible discussion. >> i would echo my colleagues. we have engaged in an ongoing dialogue, and i hope this is the start of the dialogue. and for and for the most part, the dialogue has not been about blame but recognition. as professor travis said early the testimony police are the tip of the spear. they bear a burden not of their own making.

i am encouraged and look forward to working together with the rest of the task force to come up with solid recommendations to give the president asked week. i think that really we will be the beginning because we have to recognize our history. they have to be ready to make history, and history, and that is what i look forward to doing. thank you for the opportunity. >> just a quick story. about six months ago i was i was invited to a talk in sweden. i took the flight and was told to make my body adjusts to the time. i was -- i should stay up all day and not go to sleep until my time. i did that and walked

around. a much more diverse committee than i thought. and. then i saw something that worried me a police officer had an encounter with a young mother surrounded by three children who all looked under the age of six. i i cannot understand what was going on but it seemed like this mother was in crisis about something. i watched what was going to happen and saw something quite amazing. the mother left went into a store, and the police officer watched the children she went to get something. she then came back out, thanked the officer. and i realized, she had asked him to watch her children while she went into the store. my 1st reaction was, that

that would never happen in america. what i am most excited about is that i am revising that opinion. we have heard from people who have perspective that we can change the identity of policing the character. maybe that could happen. create communities where mothers with children in crisis feel like a police officer is the 1st person they should talk to. i am excited about that. i was concerned with absolutely that concern has been alleviated. particularly i want to appreciate this idea of reconciliation because for many of us the injury that has been created cannot be

addressed until we talk honestly about how we recover from that injury. i want to to especially thank you for advancing that idea in my colleagues for facilitating a process that has made me much more hopeful about what we can do >> well i think that i have experienced the world series, all-star game and super bowl. my thanks for bringing on his last panel. it could not have ended within a better representation of all of the expertise and knowledge. i think it brings up the. the basis of research and the importance of research in any recommendations we come up with. we have to not give them to

the attractive idea of basing their recommendations upon anecdotal paintings of issues. truth. truth is got to be the basis it has to be an all-encompassing truth supported by research. we need to be aware of the power of perception and how perception can influence the impact of our profession and the ability of us to do our job. o'brien story reminded me of something. i we will give another story to help to reinforce the newfound feelings. on valentine's day back home they're was a burglary in the flour truck that had thousands of bouquets and flower arrangements that were headed out to different obviously recipients. my officers located the truck and found that the

air-conditioning was off of the flowers were in danger of dying. we brought police cars and filled with cars with the flowers took them back to the florist. that is one day before we could have measured her crime provision efforts by all of the bouquets the government that they. [laughter] that is the type of people i see. it is good to get caught up in the high-profile mistakes that we do make. we also we also have to reason most police officers went into this profession to help others. we must reclaim that idea and help make sure they remember those thoughts and recognize that and do not get affected by the cynicism. my thanks to the staff for

putting this panel together and allowing me to serve. >> a few final thoughts. as a washington native and a student of history i think about the cynicism potentially about a task force set out to solve the problem. i i reflect back to the commission which i think has made a very substantial impact on our field. i teach about the crime commission findings to my students at george mason. they are interested. as some of you may know my husband served as a young a young staff attorney writing about the police chapter helping

contribute to that end i think it has had some fundamental influence on our field. moving far ahead to today one of the fundamental questions would be whatever we write out what happens to implementation? i think several of you have mentioned that and of course it is the big question. moving ahead the testimony has been helpful as has that of other witnesses and hail -- and thinking ahead of what we do in our recommendations and what others do in helping us to grab those questions. the issue about the 18,000 departments of their really goes to the fundamental heart this.

>> once again especially true among let me thank the panelists for coming, for those that are watching and especially for the contribution of the members. interestingly we talk about a 90 day task force, but but if you look at the process we are following, they're are multiple seasons. for example, as we close this out i am struck by a couple of things. i'm sitting hear after 20 years in law enforcement, my own thoughts about things just the process of public hearings, listening to 15 witnesses 50 witnesses and the quality of expertise and practitioners and community leaders that have destroyed so many stereotypes views have

changed on the panel, in panel, in this nation just by watching and listening. we have shown how we can have diverse perspectives ranging from community leaders to long-term police chiefs and how we can come together build consensus and agree to disagree without being violently disagreeable. now we will go to deliberations and provide a product to the pres. that everyone has worked hard to do and we will be proud of. regardless of where we ultimately end up in this nation still have an obligation right hear, right now not only come up with this product but deliberate, so improve it, implemented so i have good news and bad news. we're getting we're getting close to presenting a report. the bad news, we still have

18,000 departments. but it has been one of my greatest professional privileges to work with this team and see these professionals migrate americans come together in such a manner it is something i we will look back on and be proud of. there is a lot of work ahead i really want to thank the cultures. when we added this last panel and thinking, another facility. my team will company. quite frankly, this was brilliant to be able to wrap up, put a bow on on it as we going to deliberations and closest public park for the committee i i think they're is no better way to start the next chapter. with. with that, i think we are ready to close. >> i think we again thank

our panel and listeners and a task force. >> let's give them all around of applause. [applause] we are officially adjourned. thank you. [inaudible conversations] >> unless of funding deal is reached department of homeland security we will partially shut down by the end of the week. an update an update on the next washington journal.

>> the committee we will come to order. we have a quorum. quorum. the committee will briefly conduct an executive session

to award a congressional gold medal to the foot soldiers who participated in bloody sunday turnaround tuesday, were the final settlement montgomery voting rights march. i am pleased to serve as an original cosponsor of this bill. i think the other members of the community. with that i i understand they're are know amendments or objections. >> mr. chairman i i am pleased we can mark up this important piece of legislation today. it it honors those americans who fought so hard for civil rights with congressional gold medal. i want to thank senator scott for joining with me. commemorating commemorating the 50th anniversary of the march for voting rights. this is my 3rd trip. we best honor the foot

soldiers by remembering them not just with a metal but by staying true to their purpose. i have followed election law closely. it used to be the business of expanding folder roles but lately too many states have thrown up barriers to voting. fifty years later state governments are once again making it a burden a bit harder for in some cases a lot harder. let's honor the foot soldiers. >> thank you, mr. chairman. >> all those in favor. 527 without amendment is reported favorably.

i ask unanimous consent that the staff be allowed to make any technical and conforming changes and that the wave the quotable. we we will now move to a hearing on the federal reserve semiannual monetary policy report to congress. the committee will receive testimony from federal reserve chair janet yellen as has been required by statute since 1978. although this video has been used to communicate directly to congress and the american people, myself and many of our colleagues have been calling for greater accountability and more effective disclosure. in response we have heard the chorus of current and former federal reserve officials lined up to defend the structure and the degree of transparency.

further accountability the congress, some have argued is not needed. i'm interested. i'm interested to hear what the current chair shares this view and whether she feels the fed should be immune from any reforms. as far as monetary policy committee questioned whether the fed can rein in inflation and avoided destabilizing asset price when the time comes. the minutes posted online do little to answer the questions of when and how this we will be done and the most recent fomc transcript available to the public is from 2,008 over seven years ago. even though the fed has several monetary policy tools at its disposal an action of this magnitude as never before been taken to my knowledge. the federal open market committee

continues to report that it can be patient and keeping the federal funds rate near zero. too much delay could lead to more painful correction down. what they are thinking and how they analyze this difficult problem remains a mystery. some continue some continue to dismiss calls for change or more transparency. i would argue that they're is an even greater need for additional oversight by congress and further reforms our central bank has expanded its influence on households businesses, and markets. not only pushing the boundaries of traditional monetary policy but consolidated unmatched authority as a financial regulator. as the fed grows larger and more powerful much of this authority has become more concentrated in washington dc and new york. the fed emerged from the financial crisis as a super

regulator with unprecedented power of entities it had not previously overseen. with such a delegation of authority comes responsibility for congress to know the impact these knew requirements placed on our economy. the role of congress is not to serve on the federal open market community but to provide strong oversight and when times demanded bring about structural reform. as part of this process the community will hold another hearing next week to discuss options for enhanced oversight and reform. >> thank you. welcome. welcome back. our economy continues to see strong employment gains but we go the improvements are not being felt by enough americans.

eleven and a half million that private-sector job growth comes on the heels of nine years when we lost for a half-million jobs. pundits pundits and politicians have been predicted runaway inflation for years but do not have a good grasp of what is happening. low wage growth has continued. declining participation in the workforce is troubling. as as you pointed out the income inequality gap widened. it is good that we begin our session by commemorating the foot soldiers. they must also know that the wealth gap has widened. these are issues congress should be addressed.

i appreciate your announcement last month of plans to create the committee advisory council were 15 members we will meet twice a year a year to offer perspectives on there economic circumstances and the needs of low and moderate income communities and consumers. i hope the entire federal reserve system we will engage community leaders more than they have in the past do what you have done by setting the tone in washington and incorporate diverse perspectives into decision-making. we too often hear concerns that the fed is a system that is run by and to benefit the very largest banks. last november i help the subcommittee hearing on one facet of this exploring

concerns about the culture of banks and the regulators a culture that produces rules and regulations designed to strengthen the financial stability of our economy and protect american financial interest. interest. i applaud the fed for finalizing strong rules. i encourage you to move forward to finalize outstanding proposals so that everyone will benefit from the certainty of having appropriate rules in place. in today's papers they're are reports of the doj investigation and we have yet to see a proposed rule. you must send the message to your examiners that these goals must be implemented and enforced.

finally while my colleagues are eager to help you decide monetary policy community that is the wrong role for congress. i think everyone of us knows that there are times when you can do better by having a candid discussion in private. our real goal must be to have a federal reserve that works for all americans can have a stable a stable and diverse financial system that provides opportunities. that is why your dual mandate to promote price stability and employment and i appreciate perhaps more than any of your processes understand the dual mandate including employment, how important that is. >> welcome to the committee. we look forward to your testimony.

your written testimony will be made part of the record in its entirety. >> chairman, ranking chairman, ranking member, members of the committee, i am pleased to present the federal reserve semiannual monetary policy report to the congress. in my remarks today i we will discuss the current economic situation and outlook before turning to monetary policy. since my appearance before the committee last july the employment situation in the united states has been improving on many dimensions. the unemployment rate stands at 5.7 percent, down from just over 6 percent less and from percent percent at its peak in the late 2,009. the average pace of monthly job gains picked up from about 240,000 per month to 280,000 per month during the

2nd half. unemployment rose 260,000 in january. long-term unemployment has declined substantially. fuel workers are reporting that they can find part-time work when they would prefer full-time employment. the pace has recovered to his prerecession level. however the labor force participation rate is lower than most estimates of its trend and wage growth remains sluggish suggesting that some cyclical weakness persists. in short, considerable progress has been achieved. the room for further improvement remains. at the same time that the labor market situation has improved to a the domestic

spending and production have been increasing at a solid rate. real gross domestic product is now estimated to have increased at a three and three quarter percent annual rate during the 2nd half of last year. gdp growth is not anticipated to be sustained but it is expected to be strong enough to result in the further gradual decline in the unemployment rate. consumer spending has been lifted resulting from the sharp drop in oil prices. however housing construction continues to lag the activity remains well below levels that we judge could be supported in the longer run by population growth and

the likely rate of household formation. despite the overall improvement in the us economy and the us economic outlook longer-term interest rates in the united states and other advanced economies have moved down significantly middle of last year. the declines have reflected disappointment in foreign growth and changes in monetary policy abroad. another notable development has been the plunge in oil prices for the bulk of which appears to reflect increased global supply rather than we could command. while the drop in oil prices we will have negative effects on the energy producers and probably result in job losses in the sector causing hardship for affected workers and there families it we will likely be a significant overall plus on

that for our economy primarily that boost will arise from us households having the wherewithal to increase there spending on other goods and services as they spend less on gasoline. foreign economic foreign economic development could pose risks to the us economic outlook. although the pace of growth abroad appears to have stepped up slightly in the 2nd half of last year foreign economies are confronting a a number of challenges that could restrain economic activity. in china economic growth could slow more than anticipated as policymakers address financial vulnerabilities and manage the desired transition to less reliance on exports upon exports and investment as sources of growth. in the euro area recovery remains slow and inflation has fallen to low levels although highly accommodative monetary policy should help boost economic growth and inflation.

downside risk to economic activity in the region remains. the uncertainty surrounding the foreign outlook does not exclusively reflect downside risk. we could see economic activity respond to the policy stimulus now being provided by foreign central banks more strongly that we currently anticipate, and the recent decline in oil prices could boost overall global economic growth more than we expect. inflation continues to rumble below the community's 2 percent objective in large part the recent softness reflects the drop in oil prices. indeed, the pce price index edged down during the 4th quarter of last year and

looks to be on track to register a more significant decline this quarter because of falling consumer energy prices. core core pce inflation has also slowed since last summer in part reflecting declines in the prices of many important items and perhaps also some pass-through of lower energy cost in the core consumer prices. despite the very very low recent readings on actual inflation and inflation expectations as measured in the range of surveys of household and professional forecasters have thus far remain stable. however, inflation compensation is calculated from the fields of real and nominal treasury securities. as as best we can tell, the following inflation compensation mainly reflects factors other than a reduction in longer-term inflation expectations.

the committee expects inflation to decline further in the near term before rising gradually to a 2% over the medium-term as the labor market improves further in the transitory effects of lower energy prices and other factors dissipate. we we will continue to monitor inflation development closely. i we will now turn the monetary policy. the federal open market committee is committed to policies to promote maximum employment and price stability consistent with our mandate from the congress. as my description of economic development indicated, our economy has made important progress toward the objective of maximum employment reflecting in part, support from support from the highly accommodative stance of monetary policy in recent years. in light of the

cumulative process to progress and the substantial improvement in the outlook for labor market conditions the stated objective of the community's recent asset purchase program the fomc concluded that program at the. even so the committee judges that a high a high degree of policy accommodation remains appropriate to foster further improvement in labor market conditions and to promote a a return to inflation toward 2 percent over the medium-term. accordingly the fomc has continued to maintain the target range for the federal funds rate is zero to one quarter percent and to keep the federal reserve holdings of longer-term securities at there current elevated level to help maintain accommodative financial conditions. the fomc is also providing forward guidance

information about policy outlooks and expectations for the future path of the federal hundred. in that in that regard, the committee judged in december and january that it can be patient and beginning to raise the federal funds rate. this judgment reflects the fact that inflation continues to run well below the community's 2 percent objective and 11 11 for sustainable improvement in labor market conditions still remains. the fomc assessment that it can be patient in beginning to normalize policy means that the committee considers it unlikely unlikely that economic conditions will want worldwide an increase in the target range for the federal funds rate for at least the next couple of fomc meetings. if economic conditions continue to improve as the committee anticipates the

community we will at some time "it are in an increase in the target range for the federal funds rate on a meeting to meeting basis. before before then the community we will change its forward guidance. however it is important to emphasize that a modification of the forward guidance should not be read as indicating that the community will necessarily increase the target range in a couple of meetings. instead of a modification should be understood as reflecting the community's judgment the conditions have improved to the.where it will soon be the case that a change in the target range could be warranted provided that labor market conditions continue to improve and further improvement is expected the

committee anticipates that it will be appropriate to raise the target range for the federal funds rate went on the basis of incoming data the committee is reasonably confident that inflation we will move back over to medium-term toward our 2 percent objective. a continues to be fomc assessment that even after employment and inflation levels consistent with our dual mandate economic conditions may, for some time, weren't keeping the federal fundraiser for all levels that the committee's use committees use as normal and want to run. it is it is possible that it may be necessary for the federal funds rate to run temporarily below its normal longer run level because the residual effects of the financial community continue to weigh on economic activity.

if such factors continue to dissipate, we would expect the federal fund rate to move toward its longer run normal level. in response to unforeseen developments of the community we will adjust the target range for the federal funds rate the best promote the achievement of maximum employment and 2 percent inflation. let me turn to the mechanics of how he intends to normalize the stands and conduct of monetary policy with a decision is eventually made to raise the target range. last september the fomc issued its statement on policy normalization principles, and plants. a statement provides information about the committees like the approach to raising short-term interest rates and reducing the federal reserve security holdings. as is always the case of the

community we will determine the timing and pace of policy normalization so as to promote its statutory mandate to foster maximum employment and price stability. the fomc intends to adjust the stance of monetary policy during normalization primarily by changing its target range for the federal funds rate and not by actively managing the federal reserve balance sheet. the committee is confident that it has the tools that it needs to read -- raise short-term interest rates when appropriate to do so to maintain reasonable control of the level short-term interest rates is policy continues to firm thereafter given the level of reserves held by depository institutions is likely to diminish only gradually. the primary means of raising

the federal funds rate we will be to increase community we will also use an overnight reverse repurchase of the facility and other supplementary tools is needed to help control the federal funds rate. as economic and financial conditions evolve the community we will phase out these supplementary tools were no longer needed. they intend to reduce security holdings primarily by ceasing to reinvest repayment of principal from securities held by the federal reserve. it is the committee's intention intention to hold in the longer run no more securities and necessary for the efficient and effective implementation of monetary policy and that the securities be primarily treasury securities. in. in sum, since the july 2014

monetary policy report they're has been important progress toward the fomc objective of maximum employment. however despite this too many americans remain unemployed or underemployed. wage of the sluggish and inflation remains well below: objective. as always the federal federal reserve remains committed to employing as tools to best promote the attainment of its objectives thank you. i am pleased to take your questions. >> mdm. chair, i 1st want to get into measures of inflation. the federal reserve, i understand currently uses and inflation measure the core personal consumption expenditures which excludes volatile food and energy prices.

several alternative measures of inflation exist including one called veteran which strips out a larger basket of volatile items from the calculation. i no you know all this. do you think the federal open market committee should incorporate alternative measures of inflation such as trim? could you explain to us the risk of not properly gauge inflation expectations. >> let me 1st say that the federal open market community's 2 percent objective refers to the increase the annual increase the total in the total pce price index that includes food and energy. food and energy are important components of every household spending

basket and i don't think it would make aches -- makes sense for be acceptable to americans to focus on a measure a measure that strips out these important components of the consumer basket. so we focus on total consumer prices, including food and energy. at the at the same time we recognize that food and energy are particularly volatile and in order to get a better forecast sometimes of the underlying trend of inflation we do look at so-called core inflation that strips out these measures. and in trying to understand trends in inflation and the factors impacting inflation we look at a broad variety of measures although our index is the so-called pce price index.

you look at the cpi, well known to most americans and also to these terms means. >> you have opined on the use of monetary policy which provides the fed with a systematic way to conduct policy in response to changes in economic conditions. i believe they would also give the public a greater understanding of and perhaps confidence and the fed strategy. he stated, and i i quote rules of the general sort sure while our statutory mandate to promote maximum employment and price stability. you have expressed concerns over the effectiveness of such rules and times of economic stress. would you support the use of the monetary policy will

have the feds choosing if the fed had discretion to modify it in terms of economic disruption? >> i i am not a proponent of chaining the federal open market community in its decision-making to any rule whatsoever. but monetary policy needs to take account of a wide a wide range of factors, some of which are unusual and require special attention which is true. in the original paper on this topic, john taylor himself pointed to conditions such as the 1987 stock market crash that would have required a different response. i would say that it is useful for us to consult the

recommendations of rules and reducing routinely, and they are an important input into what ultimately is a decision that requires sound judgment. >> in a recent speech richard a recent speech richard fisher, the president dallas federal reserve bank is suggesting a reorganization. specifically advocating for a rotating vice chairmanship of the federal open market committee as well as a stronger role for regional banks. do you support any of mr. fisher's proposals? why or why not? >> i think the current structure of the federal open market community and the building structure was decided on by congress alone time ago after weighing a whole variety of

considerations about the need for control in washington and the importance of regional representation. it is of course, something that congress could revisit but i would say that it has worked very well. we have a broad range a broad range of opinion that is represented at the table and active debates. the decision to appoint the president of the new york fed is vice chair, reflecting the realities that the new york fed conducts open-market operations on behalf of the system and has special expertise pertaining to financial markets and i

think that has worked well and continues to be true that they're is special expertise in new york. >> a recent article written by two economists at the think tank he to one proposes reducing the number of federal reserve district from 12 to five and making the presence of all regional bank voting members of the federal open market community. the article the article states that this would preserve regional diversity are giving more authority. it also posits that it could allow for greater safety and soundness and remove the uncertainty created by 19 independent fomc members. do you oppose consolidation of the federal reserve districts? >> sen., senator, again, this is a matter for congress to decide. the structure of the federal reserve reflects choices that were hammered out a hundred years ago.

i think the current structure works well, so i would not recommend changes. again, the federal reserve bank -- >> the congress -- >> they play important roles in the community, but this is up to congress to consider. >> my last question to you as a threshold for banks, a recent report by the office of financial research shows a large disparity with systemic risk between the largest banks and those that are smaller and closer to 50 billion in assets. all banks about 50 billion are subject to enhanced regulation regardless of where they fall. do you think the findings of the office of financial research should be incorporated, considered in the determination of whether

this is systemically significant? >> senator, we absolutely recognize the federal reserve that the largest banks in those closer to 50 billion for -- are quite different in terms of there systemic footprint. ..

>> >> have cause systemic risk?

could you provide that for the record? >> i will certainly look into that. i will agree with you. >> by and large that is not the case. >> i have one comment about capital requirement there is no question and to make for stronger banks and a more stable financial system so to have special interest with strong capital standards so thank you for that. with my opening statement last october you gave a speech jon income and wealth the quality of the best way to address that is a more robust economy.

what steps are you taking to incorporate your concerns about monetary policy decisions? >> senator earlier committed to the price stability and maximum employment we have said running a accommodative monetary policy from the labor market with a wide variety of indicators and market performance end in particular the large magnitude of part-time involuntary employment with the decline of labor force participation in parts of which we understand or

believe to be cyclical losses we monitor very closely. and the fact this is not picked up very much with your recovery with the labor market is improving to promote full recovery. >> productivity has changed and has continued to grow while wages have not and had to explain those dangers being uncoupled from productivity? >> we have seen a significant increase in the sheriff the priority dp.

with the growth of inflation adjusted in productivity so that has been occurring of for some time during their recovery. wages tend to rise more rapidly in this market so i interpret part of that phenomenon as a signal as a sign the labor market is not fully recovered but also there are longer-term structural factors that are affecting the shares of labor and capital. end points to the fact that many labor-intensive activities in the global production change are being increasingly house first and

that phenomenon i think tends to push down and come as opposed to capital over the last decade or so. i think it is the combination of structural factors spirit that includes the organization of labor is of factors. >> i appreciate the steps your predecessor made for greater transparency to notice the house to go one step further to honor the of monetary policy. what are your thoughts? >> i want to be completely clear that i strongly opposed that i believe the transparency to provide congress and the public with adequate information to

understand our operations or financial condition conductive to me to the responsibilities that congress has assigned to a us is essential but to politicize monetary policy were short-term political pressures to bear off the fed in terms of openness of the financial accounts and we are extensively audited of this volume which contains auditors of deloitte and touche of financial statements the people understand what it is about.

it is extensively audited but i think it is critically important that the fed be able to deliberate the responsibilities that congress has assigned to was to achieve maximum on employment and be able to do so of free a short-term political pressures and i would remind you in the air of the '70s costs when deflation co and history suggests there was political pressure to insulate to

perform better the economies are more stable with better

performance in terms of inflation and macro economic stability. >> you mention in your community would be doing to encourage them to follow suit? >> most are actively involved and have community development programs to address the special needs of their communities but in washington real also encourage oversight of those activities with similar practices. >> mr. chairman thank you and i would like to use my a time to go through the process we are in right now with you. the first economic growth submitted to congress states besides reviewing of existing regulations in an

effort to eliminate unnecessary burdens the federal banking agencies work together to minimize burdens from current policy statements the report submitted to congress for the consumer protection issues and include the recently adopted rules. however included in the federal register put forward for this current process we're supposed to be having the financial regulators look for a run to leave perdu and has a remarkable footnote that says this time around to review new regulations that will go

into the process and clarified it is not a part of the process my question to you is with the process the reviews all rules m the consumer financial projections and bureau should be a part of the process? we had a hearing last week dealing with credit unions and banks in the regulatory burdens that they face. with this set of rules and regulations that they feel tough on tool protestant - - , from the anti-money-laundering arena

that as recently enacted that would be exacted. with qualified mortgage rule and the volcker rule and it is the son of the scope the process is now undertaking. >> so in the process under consideration related to dodd/frank with the federal register notice and public comments that is an important part to design those rules considering in the appropriate way to design regulation to meet the dodd/frank objectives.

for those agencies is something we go through very recently in the process for even those have not gone into effect. >> is it the same with the cfpb wheat it is news and we don't need to review the rules? >> we don't have that rulemaking authority. >> day understand vague argument. but that is not what it says and does not say let's review the rules and regulations that our old but let's review them all. that is why the law was passed.

but that recently is through the process but the dodd/frank legislation in itself is 48 pages long but the page cavanaugh of the regulations required has mushroomed to more than 50,000 pages so far in the over 50 million self-regulatory text to say the fact they are new end day implementation process with that response to look at their regulations. >> we will be taken extensive public comments. sort to reduce the burden on

community banks so to look for ways we can reduce the burden of regulation some twofold intent to expand your review. >> the federal reserve has a provision responsibilities of monetary policy then it is that supervises the operation for the federal reserve the has a great deal of authority and several of us with the regulatory

oversight that has been criticized but even recently >> in the aftermath of the hearings held here with the allegations raised about the new york fed is a an internal review that is in a process. put the question we think is important to raise their, let me step back rehab process for supervising the largest banks that is led by the board. the reserve banks that are

involved with the supervision of the institutions to take part in the process. so the question we thought it is important to look bad is it me in the process those to be and the highest decision making and the extent of the reserve bank there may be a divergent opinions and the dissident views reached the highest level and that is of a question asked of the internal team with the new

york fed with large banks of supervision including two major decisions could be heard at the highest level but will also ask the inspector general to take his own independent review. and i expect him to be completed this year. >> and the board of governors to take action and to recognize. >> and we expect to report to you on the investigations with the suggestions for improvement are found and put those into effect.

>> petasus strikes most people that some change has to happen. >> we will certainly take any administrative changes. a day would like to wait in see before deciding on those measures. >> perhaps i could follow up with a question? we're all acutely sensitive to systematic risk so declare the house is that take bilateral transactions to put them on the multilateral basis but i

just want to put jon your screen the sensitivity to the oversight of the clearing house is. because of the potential because of a systemic problem with that on the table? >> absolutely. so to be careful in our supervision but to have agreed to of clearing houses with eight financial market utilities and have been designated as systemically

important market utilities to be supervised by the federal reserve the fed and the cftc and sec have all been put in place and agreed for what best practices are for liquidity standards and other risk-management standards for the financial markets utilities and is extremely high priority for us that we vigorously enforce those standards in the process to do so because although we have reduced risks they create their own if not appropriately manage so we give this the great deal of attention.

>> thank you for being here today there is a push with currency manipulation and you make trade negotiations end of monday's stu's the effort of the arbitration panel under the enforcement procedures for companies could challenge future monetary decisions by the fed. >> the me first say that currency manipulation is undertaken to alter the competitive landscape to give one country an advantage in international trade is an appropriate and the needs to be addressed. but that said there are many factors that influence the

value of currencies including differences of economic growth and monetary policy is a factor that could have an impact on currencies. so i would be concerned about the regime that would introduce sanctions for currency manipulation when it could be the case with monetary policy that is undertaken with the federal reserve as have been designed for valid domestic objective as monetary policy to of the -- achieve those objectives but monetary

policy through many channels through interest rates that it may have on currency values so we would see that direction as potential to even have the conduct of monetary policy. >> with that part of a trade deal is that correct? i wanted to do audits the fed end then looking at the discount window for the financial crisis that

congress addresses give a news. [inaudible] that sanders amendment of the crisis or credit facilities? >> the gao conducted a complete review or use of the landing authorities that were created were concluded in mid 2011 in the dishes to have open market operations and the discount window lending with the two year lead on the discount window.

>> the second concern is size and composition of the 4.5 trillion dollar balance sheet have they disclosed those assets that makes that up? to make a guess we have ordered financial statement sky-high then i have a copy of right here to report on security by security bases all of them are in that reported. and we have a weekly balance sheet. >> i hate to wrasses question but william a. issue the updated balance

sheet each week how do we know the securities actually exist? >> to have the independent auditor from deloitte and touche to review the balance sheet that is contained in the annual report for both the board and the federal reserve takes for the systems. >> so they do exist? >> it is obvious that the fed's effort is to do not address auditing the fed and every day you published the things that you own and the credit facilities and all of that is audited now.

so with said members relative to monetary policy. that is not a particularly good idea causing it to put off tough decisions to you agree? >>. >> said if you look at modern times with chronic high inflation or deflation of what you'll find is the ability to print money by politicians. >> with a greater transparency with the

regulatory area. so the is the area we should focus over the course of the next several months so we can fully understand how you go about the process. that they should be a far more to transparent. >> thank-you chairman for your testimony and hard-working and dedication and. that is the driving force behind the recovery but i don't into your position in. you end members have the important decisions to make the me urge you to wracked with caution.

but let me be clear but with accommodative policy until it sees clear evidence of a consistent improvement of wages it tends to be a of major factor when it decides whether to raise rates as i have said over and over it again the single problem the country faces is well economic progress has been seen strong and expectations of growth of gdp in remains sluggish suze economy the way all those of statistics over the decade $3,600 lower. so the fed must think long and hard before implement

during monetary policy and wage growth atomizers to benefit middle-class workers with consistent wage growth prior to raising rates serves the dual role to the fed the 2 percent rule. so to raise rates and though wages are back on a steady trend of word. so with the normalization of rates with that wage growth prior to decision making and those who are worried about inflation that they should look over the last several years. that many economists believe

with drastic rises of the inflation with raising rates too soon. as well as middle-class families across the country to wait until wages begin to rise. do you agree it is critical for his system wage growth prior to decide to raise interest rates absented decatur's it is climbing above clearly whether the potential consequences? >> those that we have defined as 2 percent inflation and as i indicated beginning to raise rates to

be reasonably confident over a the middle term but i don't want to sit down and the single criterion that is necessary for that to occur but the committee does look get wage growth. but we have not seen any significant pickup of wage growth. would do affect the inflation outlook to be considering carefully a range of evidence that pertains to the inflation outlook that will determine the confidence that we forecasted. with the labor market and

thence to the confidence also. angeles get a wide range of the evidence. >> so is any greater than the worry of deflationary with 70 percent of the economy is wages or jobs broadly defined? >> the committee feels i think or anticipations that inflation is held down by a factors particularly with the decline in oil prices. we also had considerable slack in the labor market diminishing over time when his we are a lagging indicator of improvement and if we continue to see improvement it would add to

my confidence especially as the impact of oil prices is diminished over time. >> to you see any real evidence of inflation heading over 2 percent right now? >> i don't. but they need to be forward-looking the committee is forward looking to set monetary policy and reduce the labor market is improving as we get closer to the goal of maximum employment. remember monetary policy is highly accommodative with the of rates at '02 1/4% range to have a large balance sheets in these but unfortunately appears to be

recovering but i want to assure you we want to see the recovery continue and that is a process we want to go on to hamper that but it is very accommodative. >> i urge caution. stemming thank you for joining us today. this is not a shock to members of the committee. with that economic crisis is over and it has been over four years at least 67 but we still maintain crisis of interest rates.

we have unemployment going 2/6%. betting is easily explained by a policies and consumer sentiment is relatively high slew to describe that economic recovery has solid and wal-mart said that the crisis has with over for a long time. sometimes there is a price to be paid with this accommodative policy. the problem over by constituents spend a lifetime to sacrifice so they could save for their

retirement to have money on deposit at the bank using that jews supplement social security payments for right now they get nothing year after year. with the risk associated with this high would argue the fixed then, markets are like this henry facilitates access deficits and what are the benefits? at best to remove economic activity that would otherwise occur and has paid no afford officially own interest rates led to economic growth of every one have zero interest-rate leno

be disagreeable i would suggest the crisis is over in the time for normalization is well overdue. yes said repeatedly the goal of price stability is 2 percent inflation but certainly there is a congressional mandate but the fact it is met to lose 2 percent of the purchasing power annually. the above the time she retires what she has saved at that plan would have lost half of the value how was that consistent with price stability? >> the fomc it does have to lou defined with price

stability with 2% inflation rate that we chose largely for two reasons first of all, the price indices with those biases because the of the failure to adequately capture but nevertheless the afford bias and a second of all because deflationary is dangerous with the environment to very low inflation and one of extremely low interest rates make it difficult for voluntary -- monetary policy

with damaging episodes. >> i would just urge you to consider that impact so historically we have changed level of accommodation typically buying and selling securities and to in the process of normalizing you intend to achieve that by changing the target level of the fed funds rate so with the interest of reserves but over time and normalizing environment so what goes to

is the taxpayers why do you do that instead of simply selling to the bond which is a more conventional way to operate? >> remember that first of all, we don't pay their reach them is comparable to what they can learn in the marketplace all the payments don't offer the subsidies and in addition remember we are expanding the provision of reserves we are required longer-term assets and the spread above what we are seeing in terms of interest is quite large so although the will diminish over time as monetary policy is to normalize the expansion of the balance sheet even

though at present paying 25 basis points the interest on reserves is record transfers to the treasury close at 100 billion the past year and 500 billion since 2009. there has been large transfers associated with that policy. >> but that situation is likely to reverse the. >> is likely the transfers will decline in short-term rates rise but we will remain positive with remittances. >>. >> sorry mr. chairman.

>> thank you for your service and as you know our economy continues to recover from the damage inflicted from the financial crisis but gdp is growing and employers are hiring so it is only natural that some are starting to look ahead to a time when the fed can withdraw the monetary stimulus that has been critical to recovery but i believe we still face challenges we're still waiting to show up for income growth and employment is still high a inflationism runs well below target as it has now from my perspective it is critical that we don't tightening touse soon be you have said the timetable for raising rates will depend on the data some say the

federal reserve should tighten preemptively based on unemployment or wage growth for at the first hint of inflation without waiting to see if it is a statistical blip what is the risk for a raise is too soon compared to the risk of waiting? >> of the fed were trees rates too soon we would risk undermining a recovery that is just taking hold and in succeeding to improve the labor market. and though think we are back at two conditions of maximum employment things have improved notably bill we are not there yet we want to see

a healthy recovery continue and in addition inflation is running well below 2% objective and though we think a significant reason for is that is of the transitory factors put the decline will be seen in energy prices we are committed to the 2% objective just as the dollar to overshoot of the high side we don't want to shoot on the low side either. so before raising rates we are confident it will move up over time. there is a risk of waiting too long we have a highly accommodative policy in place we have to be

forward-looking if the labor market tie-ins inflation could pick up to the point end conceivably there could be financial stability risks in. ♪ to be attentive to those as well to do a balancing their risk free try to make a deliberate and thoughtful. >> i hope that balance is what i hope you can get right because i concede choking off the recovery before middle-class families actually feel the gains entrapping that too low inflation. i have heard several commentators say the

interest of the fed would signals confidence about the health of the u.s. economy to have a stimulative effect. do you agree? and is so wouldn't that be offset by its the contraction neary impact? >> it is fair to say when we raise the target for the fed funds rate it is because we're confident about the recovery and inflation will go back to the 2% the objective but that confidence will reside in real improvement with the underlying condition where we're not attempting to

bootstrap and improvement of the economy the purely ochers from the confidence of raising rates there is reason to feel good about the economic outlook and households are going through major adjustments with their balance sheets and are in better condition end than they were. the job situation is improving even though wages are not rising rapidly there are more jobs so household income is improving in the oil prices are boosting income on housing prices have rebounded and that has helped a lot of households. >> so a real confidence not that this blood in. >> there is no spin has improved when we raise rates is of a signal to the

confidence of the underlying fundamentals. >> good morning. thanks for being here. to change the conversation and to talk about the insurance industry in place is like south carolina will rehab life insurance in place with the transfer of risk the insurance company provides via spent 25 years in the insurance industry preaching the fact that the transfer of risk is nonexistent so that will reverberate throughout the economy i take a specific interest impact the fed may have to regulate these insurance companies and my

thought is last year when the president signed a law to not impose the bakelite capital standards that was for obvious reasons for loans and deposits the most hope that delineation and edo from experience but expertise does it supervises insurance companies and how we working with regulators. >> we have hired individuals to go the expertise there

and with the state insurance regulators we're gaining experience in the fourth annual supervision cycle that has significant insurance activities and of course, they have bent designated that we are supervising those of us well and taking the time to do the work that it is a necessary to understand unique characteristics to plan the supervision and liquidity requirements that requires them to make that supervisory regime appropriate there are

important differences from insurance companies that we have undertaken and a steady to be actively engaged rookie with the firms we are supervising into a understand the characteristics of their operations before promulgating supervision regime. >> with these advanced notice of the rulemaking with those capital standards ? >> yes. every will issue proposed rules we recently issued a proposed rule that pertains to use a provision of our capital and privileges the same with the other firms.

>> with the issue of the stress test with other non-bank financial companies to determine how well the entity could withstand of what the fed currently has 4.5 trillion dollars as a result of the program but it appears nobody is stress testing the fed the fox is guarding the hen house soever issue began to unwind the massive balance sheet what assurance is can years to give this committee it will stress test its own plan? >> with respect to our own balance sheet we do stress test and ways have issued some reports and papers

raise wages scribe was stress test would like with the interest-rate cut it is important to recognize the reserve is not identical to a banking organization in. first of all capital plays the very different role congress and the rules put in place regarding capital we never intended to make a play the same role, and it is unnecessary but unlike of bank the liabilities are mainly reserves to the banking system and currency ended is a like deposits of

the ordinary banking organization so what the federal reserve faces is of a different character but with that stet said it elected the likely consequences for our balance sheet of different interest-rate scenarios. >> very different scenarios no question of 4.5 trillion dollars is the way to wind it down to reverberate to that no other organization wed have impacted. >> that is one reason one of the principles of our plan is to wind down the balance sheet in a predictable play

and have decided to use as the main tool of policy for normalization something that is much more familiar to us that is a variation of short-term interest-rate the alternative is to say we could sell assets but we have more experience in the short-term rates and we want to proceed in a way to end is familiar to us and marketplace participants through ending reinvest --

reinvestment of the principal. >> coming down to the home stretch. we appreciate your could work because they start down the path to unwinding but trying to get this right is so important. talk about the status of the economy after said january meetings one of the items you mentioned were international development with the potential increase and europe and the slowing economy, how do these affect

the fed's decision on monetary policy? >> with the international development will look at the likely performance of the u.s. economy and factor both in tuesday economic forecast grossi in europe has been very slow and growth in china is living there is a huge decline in the oil prices with chad repercussions all over the globe it affects the al look through developments of financial markets with the attempt of many central banks to have accommodation