last week -- let's start with last weekend -- americans woke to the news of a horrific mass murder in orlando, florida. gunman, a u.s. citizen, inspired by terrorist terrorists, legalld a weapon of war and turned it

upon members of the lgbt community on latin night at a nightclub in orlando, florida. 49 dead, 53 wounded, and senators returned from their home states last week to express thoughts and prayers, to observe moments of silence, and many of us resolved that while important, those were not enough; that we needed to follow up those thoughts, those prayers, those moments of silence with action. i joined my colleagues, a number

of us, on the floor when senator murphy of connecticut held the floor for 15 hours to draw attention to two common sense amendments that would have limited that easy access to a weapon of war by closing a loophole that allows so many of our firearms purchases to occur without a proper background check and to close something we're calling the terror gap which would allow the f.b.i. the authority to deny gun purchases to people who had been on a watch list suspected of connections with terrorism.

those measures gained a vote last night but both failed to advance. i don't think we can simply say that we tried and continue to accept shootings like the one in orlando as the new normal and then move on to other business, especially, and i might add our procedural posture right now, especially as the senate has before us at this period in time the commerce, justice, science appropriations bill measure in which we can prioritize our response to this tragedy and the preceding tragedies through amendment and perfecting the measure before us. you know, americans are

demanding more. we can't just carry on as usual in the wake of these enormous, enormous domestic tragedies. wisconsinites are demanding more. just in this last week, i received heartbreaking communications from my constituents asking us to act. i wanted to briefly share two. a young mother wrote to me, i am the young mother of two young children and every day that they go to school i say a silent prayer that they come home safely to me, that no one decides to walk into their school or on to their bus with a gun and an intent to kill.

another young person wrote to me, i'll quote from the letter. as a young lgbtq person, i'm devastated by this attack on my community. i'm scared that this attack happened in what was supposed to be a safe place, a free space in a world that is often hostile for lgbtq people. i am scared for my safety and for the safety of my community. i am also angry. i am angry the united states is the only country where shootings like this regularly occur, and i'm angry that our government is not doing enough to prevent this kind of violence.

the attack in orlando was, as i mentioned, an act that is allegedly inspired by maybe isil or other terrorist groups, but it was also an act of hate, a hate crime. and i've introduced an amendment with my colleagues, senator mikulski of maryland, and senator hirono of hawaii, to increase funding, to strengthen the prevention of hate crimes, and then the enforcement of our hate crimes laws and our civil rights laws. the amendment is now cosponsored by 18 other members of the united states senate. i think it's really important to

understand what a hate crime is. a hate crime is a crime, first off, that has to be an underlying criminal act so it's not about hate thought or hate speech. it's been a crime wherein the victim of the crime or victims of the crime are targeted based on a particular characteristic. sometimes we hear about hate crimes committed against the lgbt community based on sexual orientation or gender identity, but hate crimes are often perpetrated against people on the basis of religion or race or ethnicity or gender. hate crimes targeted against

people based on their characterization or their characteristics are done so because not only are the victims victimized but it sends a message of terror and hate through a community, through all people who share characteristics with the victims or who love people who share the characteristics of the victim. and they are terrifying, and they do deserve as we have chosen to do in the united states of america to be treated very specifically as hate crim crimes. it's only recently that the united states of america recognized hate crimes against members of the lgbt community or against women or against people

with disabilities through the passage of the matthew shepard and james bird, jr. hate crimes prevention act. there are too many of these hate crimes in the news these days where -- we're still grieving the passive numbers of dead and injured in orlando but it was not all that long ago in charleston there was mass murder in a church. the african-american community was targeted. in wisconsin in another place of worship in a sikh temple in oak

creek, wisconsin, a gunman came and targeted a congregation during sunday worship. now, in america hate crimes overall are declining, and that's good news and that says something about what we can do together when we pass strong laws and try to prevent these crimes, educate, as well as enforce our laws. but i'm sad to share that while overall our hate crimes are declining, those against some groups most notably muslims and members of the lgbt community are on the rise. lgbt people are more likely than any other group to be targeted

for hate violence, and lgbt people of color and particularly transgender women of color are at the very greatest risk. so the amendment that i have offered along with my colleagues senator mikulski and senator hirono would provide in the commerce, justice, science appropriations bill additional funding for the civil rights division to focus on hate crimes prevention on one hand but also enforcement and prosecution of those crimes when they occur. this amendment will provide important tools to the justice

department that they need to combat discrimination and hatred in communities across this country. we're pleased to have a large number of human rights organizations in this country endorse this as an important step forward. we need to take action. we need to do more to address terrorism, to address gun violence, and to address hate crimes. and i urge my colleagues in the senate to join me in calling for a vote on this amendment and supporting it when we get that opportunity. madam president, i yield the floor ande chairs this to

an half hour meeting.s to

>> today we received testimony from federal reserve chair janet yelling for the semiannual report on monetary policy. while humphrey hawkins testimony is a key part part of congress' oversight of our nation central-bank, it is not sufficient to provide congress and the american public with the full picture of fed policymaking. i've often remarked during these hearings about the importance of striking the right balance between transparency and independence. one of the fed stated reasons for maintaining is independence

is to avoid politicizing this decision. i agree that politics have no place at the federal reserve. while the line between politics and policy can be quite fine, it should nonetheless be clear and on ambiguous. the feds should act, i believe in a manner consistent with the statutory mandate in the interest of the stability of the u.s. economy. whether or not such policies align with the goals of congress or the administration. our central-bank is independent and should remain so. the desire to preserve the fed's independence should not preclude consideration or additional measures to increase the transparency of the board's actions. the cover so argue that better disclosure monetary policy strategy could bolster independence. it earlier this year prominent group of economists, including three nobel prize winners agreed

in a statement that and i will call, publicly reporting the strategy helps prevent policymakers from bending under pressure and sacrificing independence. the fed continues to resist calls from congress even though it claims to use such rules regularly. it is public communication the fed has veered further away from data-driven analysis toward the exercise of even more discretion. for example, rather than a hearing precisely to its stated goals for inflation and employment, the fed will open a market committee appears to have a certain decision on factors such as quote financial and international developers that cannot be derived from quantitative analysis. similarly, the fed's feds were dilatory conduct is becoming increasingly opaque and

complicated. this is demonstrated by the inherent complexity and overlap in capital and liquidity rules, stress testing and resolution and recovery planning. two weeks ago a ago a panel of experts testified before this committee that complex regulations might actually increase rather than decrease in the banking system. they also criticize the lack of analysis and transparency in the rulemaking process. this is especially true of the rules established by the international committee and imposed by domestic regulators on our institutions. without adequate tailoring. the fed did not even to its own quantitative study as it did madame chair, for wanted to. it instead relied on the basel committee's analysis which included data from only 13 u.s. banks out of the 249 banks that

were study. such an approach is concerning. the feds should perform, i believe rigorous analysis, not only for each rule, but also on a cumulative impact on capital and liquidity regulations. if our banking regulation and regulators are unable, and unwilling to conduct such an analysis, then conduct such an analysis, then we should consider mandating it. even the european commission analyzing these factors in its predatory framework. in a recent recent call for evidence, it solicited feedback from the public quote to evaluate the interactions between financial regulations and assess their cumulative impact. we should expect no less from our own regulators. chair lady yelling, i look for tier testimony today and your thoughts on these important issues. i think. i think it is a very important hearing. >> thank you mr. chairman.

madame chair, welcome back to the committee, we're so glad you're here. since your last appearance the economy has made only modest gains, inflation remains low, job creation seems to have slow, the economies of our training partners are struggling, uncertainty most notably with are struggling, uncertainty most notably with the possibility of britain's exit from the european union and that certainly remains high. in the face of these headwinds you would think that politicians here at home would do everything we could to promote our economy. instead, many of them seem intent on doing just the opposite. my colleagues on the other side of the aisle are failing to invest in infrastructure and public works and research development, education and training, the very building blocks of economic success. at that were not enough they're trying their best to undermine the safeguards that dampen the economic crisis and were erected to prevent the next one. we'd like to read field that

frank and return our country to the casino capitalism that caused so much ruin for families and communities across our country. they're trying to politicize and undermine the federal reserve despite the key actions that it has taken to help the recovery. congress rated its reserves and reduce dividend payments in order to pay for transportation bill. many my colleagues are trying to insert congress into military policy decisions, this committee has yet to even hold a hearing on the two nominees to the board of governors of the federal reserve, and bad legislative ideas continue to multiply. the presumptive nominee of the republican party as a factory bad ideas. moody's analytics recently released a report that if adopted, his economic proposals will leave our economy quote significantly weaker, unquote. he suggested he replace the current fed share based on a

match and partisan political consideration. that is a bad idea. you might argue someone is feeling to pursue the right course and monetary regulatory policy, but partisan label should never be part of that discourse. the presumptive nominee. the presumptive nominee is suggesting he would simply renegotiate or renege on our debt, comfortable in the belief that the united states can never default quote because you print the money. in his opinion he understands that better than probably anyone buddy. his words, he also thinks with the runner-up for the republican nomination of that this country should return to the gold standard. when ron paul was promoting this idea a few years ago, the wall street journal reported a pull of a panel of of economists and whether a return to the gold standard would improve stability and on employment. the response was split between those who disagreed and those

who strongly disagree. not one person thought it would help. so we don't know if it's just a bad idea or a really, really bad idea. but as one university of chicago professor put it love of the gold standard implies macro economic illiteracy. if your own very good brain is your top consultant i suppose unanimous diverse group of

economists does not count for much. but for those of us in the evidence-based world, the prospect of this nominee trading imagined for real authority gives added significance to what we do in the banking committee and what we do in congress. that is true in general, that's particularly true with maintaining the independence of the federal reserve and the other regulators and the financial services industry. madame chair, i think you've shown your commitment to an independent data driven federal reserve. i commend you for that. we are grateful for that. i hope we can work together to maintain it. >> madame chair your written testimony in its entirety will be made part of the hearing record. we welcome you here today again, you're no stranger to this committee. and you here today again, you are no stranger to this committee. and you may proceed as you wish. >> thank you. chairman, ranking member, and other members of the committee, i am pleased to present the federal reserve's semiannual monetary policy report to congress. in my remarks today i will briefly discuss the current economic situation and outlook before turning to monetary policy. since my last last appearance before this committee in february, the economy has made further progress toward the federal reserve's objectives of maximum employment. while inflation has continued to run below are 2% objective, the federal open market committee expects inflation to rise to that level over the medium term. however however the pace of improvement in the labor market appears to have slowed more recently, suggesting that art

cautious approach to adjusting monetary policy remains appropriate. in the labor labor market they cumulative increase in jobs since the early 22,010 has now topped 14,000,000. while the unemployment million. while the unemployment rate has fallen more than five percentage points from its peak. in in addition, as we detail the monetary policy report, jobless rates have declined for all major demographic groups including for african-americans and hispanics. despite these declines however, it is troubling that unemployment rates for these minority groups remain higher than for the nation overall. and the annual income of the medium african-american household is still well below the median income of other u.s. households. during the first quarter of this year, job gains average 200,000 per month. just a bit slower than last

year's pace. and while the unemployment rate held steady at 5% over this period, the labor force participation rate moved up noticeably. in april and april and may however, the average pace of drop gains slow to only 80000 per month or about 100,000 per month after adjustment for the effects of the strike. the unemployment rate stopped at 4.7% in may but that decline mainly occurred because fewer people reported they are actively seeking work. a broader measure of labor market includes workers largely to the workforce and those working part-time who would prefer full-time work it was unchanged in maine may and above its level prior to the recession. of course it is important not to overreact to

one or two reports. in several other timely indicators of labor market conditions still look favorable. one notable development is that there are some signs that wage growth may finally be picking up. that said, said, we will be watching the job market carefully to see whether the recent slowing of employment growth is transitory as we believe it is. economic growth has been uneven over recent quarters. the u.s. inflation adjusted gross domestic product is currently estimated to have increased at an annual rate of only three quarters% of this year subdued growth weight on exports it was hard hit in a steep drop in oil prices since mid- 2014 in addition it was

surprisingly weak. however the available indicators point to a noticeable set up in gdp growth in the second quarter. in particular, consumer spending spending has picked up smartly in recent months supported by solid growth in real disposable income in the ongoing effects of the increases in household wealth. and housing has continued to go up gradually. it it is by income gains in the very low level of market mortgage rates. the recent pickup in household spending, together, together with underlying conditions that are favorable for growth lead me to be optimistic that we will see further improvements in the labor market and the economy more broadly over the next few years. monetary policy remains accommodative. low oil prices and to going job

gains should continue to support the growth of incomes and therefore consumer spending. fiscal policy is now small positive for growth and global economic growth should pick up overtime supported by accommodative monetary policies abroad. as a result, the fomc expects that with gradual increases in the federal funds rate economic activity will continue to expand at a moderate pace and make labor market indicators will strengthen further. turning to inflation, overall consumer prices as measured by the price index for personal consumption expenditures increased just 1% over the 12 months in the ending in april. up noticeably from its pace of

much of last year but still short of the committee's 2% objective. much of the shortfall continues to reflect earlier declines in energy prices and lower prices per import. core inflation woods excludes energy and food prices has been running close to one and a half half%. the transitory influences holding down inflation fade and the labor market strengthens further, the committee expects inflation to rise to 2% over the median term. nonetheless, in considering future policy decisions will continue to carefully monitor actual unexpected progress toward our inflation goals. of course, considerable uncertainty about the economic outlook remains. the latest readings of the labor market and the weeklies of investment illustrate one downside risk. in addition, although i'm optimistic about the longer run

prospects of the u.s. economy, we cannot rule out the possibility expressed by some prominent economists that the slow productivity growth seen in recent years will continue into the future. vulnerabilities in the global economy also remain. although concerns about slowing growth in china and falling commodity prices it or to have eased from earlier this year, china continues to face considerable challenges as it rebalance as its economy toward domestic demand and consumption away from export led growth. more generally, the current environment of sluggish growth, low inflation, and already accommodative monitoring policy in many advanced economies investor% cheers can change abruptly.

one development that could shift investors sentiment is the upcoming referendum in the united kingdom. a u.k. vote to exit the european union could have significant economic repercussions. for all these reasons, the committee committee is closely monitoring global economic and financial of elements and their implications for domestic economic activity, labor markets and inflation. alternet's to monetary policy, the fomc peaks seeks to promote maximum employment and price stability is mandated by congress. in in the economic situation i just described, monetary policy has remained accommodative over the first half of this year to support further improvements in the labor market and turn inflation to our 2% objective. specifically the fomc has maintained the target range for the federal funds rate at one

quarter to one half% and has kept the federal reserve's holdings for longer-term securities at an elevated level. the committee's actions reflect a careful assessment assessment of the appropriate setting for monetary policy taking into account continuing below target inflation and the mixed readings on the labor market and economic growth seen this year. proceeding cautiously and raising the federal funds rate will allow us to keep the monetary support to economic growth in place while we assess where the growth is returning to a moderate pace whether the market and whether inflation will continue to make progress toward our 2% objective. another factor that supports taking a cautious approach in raising the federal funds rate

is that the federal funds rate is still near its effective lower band. if inflation were to remain persistently low or the labor market were to weekend, the committee would have only limited room to reduce the target range for the federal funds rate. [inaudible] >> . . . .

it means that the interest rate operating near its potential is low by historical standards. if these headwinds slowly fade over time as the committee expects then increases are likely to be needed. in line with that view than the projections for the june meeting estimate less than 1% at the end of this year and 2% at the end of this year will be consistent with their assistant assessment of appropriate monetary policy. of course the economic outlook

funds rate are not a predetermined plan for future policy. the actual path of the funds rate will depend on economic and financial development and their implications for the outlook and associated risks. stronger growth or a more rapid increase in inflation than the committee currently anticipates would likely make it appropriate to raise the federal rate more quickly. conversely, if the economy were to disappoint a lower pass would be appropriate. we are committed to our dual objectives and will foster financial conditions over time. we are considering the policy of maturing treasury securities and

principal payments from agency debt and mortgage-backed securities. as highlighted in the statement released after the june meeting, we anticipate continuing this policy of federal funds rate is well underway. this should reduce the risk that we might have to lower the federal funds rate to the effective lower bound in the event of a future large adverse shock. thank you. i would be pleased to take your questions. >> mdm. chair, in recent years the fed has used forward guidance to shape market expectations. how are their incorrect predictions of increases caused

it to lose credibility how would you rate the utility of your forward guidance over the past several months? >> in the past several months we have used forward guidance less than we did in the aftermath of the financial crisis when we named calendar dates or gave explicit economic conditions that we would need to see prevailing in the economy we need to help participants understand how serious the crisis was.

>> are you saying you're not using forward guidance now or you're not relying on it as much. >> were not relying very much on forward guidance. we do publish every three months or does up and projections for the paths of the federal sponge rate that will be appropriate in light of expectations about the performance of the economy. sometimes those paths which participants discuss in their remarks are thought to constitute forward guidance about policy i believe those productions. if those conditions prevail they would see monetary policy is

progressing and those paths while they are helpful are not a preset plan and not a commitment. we are trying to evaluate in light of incoming information and you see those paths change over time and i think the critical part of monetary policy. >> has the slowing of the economy in certain areas caused you to hold back a little bit at times information that you see? >> so for quite some time now we've seen mix development in the economy. some sectors because of

declining energy factors or strong dollar or a true offset. throughout the last couple of months the labor market has held up extremely well in the last few months i mentioned a substantial slowdown from the first quarter and from last year, and it is important to see ongoing progress in the labor market so that is something we want to carefully evaluate and is the focus of our attention, but economic growth has picked up from a weak weak base and if that slowdown is a reflection of weak growth earlier in the year, i am hopeful that we will see

stronger job gains going forward and while it is an important report i would also have the size that it's important never to overflow the significance of a single report or small amount of data. in regard to the labor market i for see it will continue to do well. >> do you see a trajectory on the economy picking up or are you not sure yet. >> there is uncertainty about that and that inflation remains low and we watch economic

developments and make sure the economy is on a favorable path before raising rates. >> it has been a one half percent or lower since december 2008. in a report last year from the bank of international settlements found that the prolonged interest rates may be damaging the economy resulting in too much debt and too little growth. in addition they state that low rates may contribute to financial booms and busts. do you perceive that low interest rates can have negative effects on the u.s. economy. >> i believe that the persistent low interest rates have been

keeping the progress, but of course low rates can induce house loads or banks or firms to reach for yield and can stoke financial instability and we are very attentive to the possibility. i would not say at this time that the threats from low to moderate are elevated. i do not think they are elevated at this time. it is something we need to watch because it can have that impact. you mentioned that. i don't think we are seeing an undue buildup of the economy.

we are looking at credit growth which has picked up but it is not at worrisome levels. we are monitoring for potential impacts on stability which i think is appropriate. >> mdm. chair in an interview earlier this month the governor stated that the fed is reviewing the application of stress test to regional bank and he uses the word probably will exempt reasonable banks from the qualitative, last december they mention they were tailoring it but the tailoring turned out to be a restatement of existing policy. what assurance can you give that this current review is a meaningful effort to tailor it in a way that recognizes the different risk profiles of banks and if so, what do you expect

those changes. >> we are engaging in a five. review. it has been informed by consultation with both financial sector participants and outside economists and i do think that you will see meaningful changes in suggestion that governor cirillo made that banks that are subject to this might be left out of the qualitative portions of c car. still a stress test would be applied but the all qualitative part that really true capital planning that they might be exempted from that. i think that's very likely. we will look at other changes as well that as you said are designed to appropriately tailor

it so that its impact is most significant for the largest and most systemic firms. it will be very meaningful to review and i believe we will be proceeding on it shortly. >> my last observation has to do with the big referendum in the united kingdom onto whether to stay into the european union or start leaving. what is the real implication or can you tell at this point if the british were to leave the common market, could there be implications for the common market and for britain? >> it is a very important relationship that would be significant for the united kingdom and for europe as a whole. i think it would usher in a period of uncertainty and it is very hard to predict, but there could be a period of financial

market volatility that would negatively affect financial conditions and the u.s. economic outlook that by no means is certain but it is something that we will be carefully monitoring. >> thank you, senator brown. >> thank you mr. chairman. adam chair, i first think you for your role and i'm pleased that the fed has put out rulemaking templates for the two large insurance companies. i appreciate how quickly you have moved on this and your constructive dialogue with stakeholders. i think the response to your efforts made a huge difference in doing this right. this week a banking committee will have a hearing, a second hearing for quiddity roles.

please discuss for us the approach to capital and acquitted the rules the largest banks, specifically these new rules have they made our financial stronger? >> i do believe the enhancements we put in place to these requirements that are tailored by size and systemic importance have made an enormous difference to the safety of the u.s. financial system. the quantity of capital with the largest banking organizations is essentially doubled from before the crisis and the quality of that capital is very much higher in addition to imposing higher static risk-based capital and leverage requirements our stress testing and capital planning exercises are very detailed

forward-looking exercises that are working to ensure that the largest firms and extremely stressful conditions would be able to go on supporting the credit needs of the u.s. economy of households and businesses and i think this has been a very significant exercise and has resulted in far superior understanding by the firms themselves of the risks they face an improved managements of those risks. it's not sufficient to ensure financial stability. often liquidity is what disappears in the financial crisis. we have put in place, especially for the largest banking organization enhancements to liquidity through the coverage ratio and the funding ratio and

so i think this also works to enhance financial stability. i think we have a much safer and sounder crisis prone system because of the enhancements that we have put in place. >> thank you. we have talked in the past about how the current labor market data do not reflect what's happened to minorities where rates of unemployment are still much higher than the average. in your testimony today, you talked about minority unemployment rates and included a new section in the semi annual policy report with this data and a discussion of whether the gains of the economic expansion had been widely enough shared. discuss why the fed made this addition to the report. >> the federal reserve's job is to try to achieve maximum employment and broad gains in the labor market that are as

widely distributed as possible. i believe it's very important for us to monitor how different groups in the labor market are doing to see if what we perceive is labor market improvement is being widely shared and there are very significant differences in success in the labor market across different demographic groups. i think it's important for us to be aware of those differences and to focus on them as we think about monetary policy and the work that the federal reserve does in the area of community development in trying to make sure that financial services are widely available to those that need it including low and moderate income. >> that brings to mind a meeting

i had just a few minutes ago with three people from my hometown of cleveland. three community leaders, about the lack of diversity in terms of gender and ethnicity and race and the lack of diversity in terms of ideas that are in many of your 12 federal reserve's around the country including in cleveland. i would like to see, and i think many of us on the panel would like to see a more diverse federal reserve and employees discuss what you've done as chair of the fed. what more you can do to better address the financial needs of all americans as you reach into the community better. i know you've had a goal of doing that and you said that at one of our first meetings, particularly serving those underserved by the financial

system. >> so i am personally committed in the federal reserve as an organization is committed to achieving diversity within our workforce and within our leadership. i believe we have made progress. i am committed to seeing us make further progress and in order to make sure that we are taking all of the steps that we possibly can to promote diversity in economic inclusion i have launched an interdisciplinary effort within the federal reserve to focus on all of our diversity initiatives in terms of our own hiring, hiring throughout the federal reserve system and working to promote access to credit, our work in the payment system to foster

better and faster payments, to promote financial inclusion. i do believe we are making some progress but i want us to make greater progress. the board of minorities currently represent 18% in women represent 37% of senior leadership and that is relatively common throughout the federal reserve system that you would see similar numbers and we have worked very hard to increase diversity among reserve bank directors and directors on the branch board who made quite a lot of progress. at this point minority representation stands at about 24% of reserve bank and board directors, about 30% of women and it's a matter that the board focuses on annually in its

oversight of the reserve banks that we regularly track our progress in increasing diversity in the boards of directors and it's something we will continue to focus on. diversity is an extremely important goal and i will do everything i can. >> thank you, i last question i would like you to share with us in a continual way the progress you are making their, especially in the class c directors that they represent the community that it's not just in diversity of background but also of ideas. there are currently a record number of job openings, almost 6 million what do we need to do better?

there are an enormous number of job openings and there is a certain degree of mismatch of workers who are looking for work with the job openings that are available and i personally have been looking at job development programs and training programs, some of which are doing a good job trying to build the skills that are matching workers with jobs. i was recently in philadelphia and visited a very impressive program that is placing people in the job market into real jobs that can lead to upward mobility in a career in some of the

philadelphia hospitals. i have seen such programs around the country that i think have been effective but obviously our job at the fed is to make sure we have a strong job market and that there are enough jobs that are being created and helping that process, looking at training programs and educational opportunities, i think that is a piece of the puzzle as well. >> as you have from time to time mentioned, congress needs to do a better job in terms of investment and public works in infrastructure. you have also made comments from time to time about job training. can you give us more instruction on what we should do here? >> i'm not going to give you detailed instruction. i think this is up to congress to decide, but when one looks at

either inclusion or inequality or more broadly the fact that we are suffering as a country from very low credit growth and disappointingly low productivity growth and we think about the factors that over time influence productivity growth, the things that have long been identified as important our investments, both private and public and we have had private investment since the financial crisis but private and public investment, education and workforce development and the pace of technological progress which is influenced by the environment that contributes to innovation in the startup of new firms and

research and development and other basic support. i think all of those areas should be on congresses list to focus on. >> thank you we think you for being here and think you for your service. i had numerous conversations with your predecessor and i know the normalization process was announced in 2014 and it stated that the security that we had built up on the balance sheet would be held and they would run off the balance sheet. you basically announced today that we are embarking on qe for by reinvesting the proceeds and new securities which is a major policy change from where the fed

has been in allowing these securities to run off and maybe i'm misunderstanding what you're saying but i thought i heard you say that when we reach maturity we are going to reinvest them which is a policy change. is it not? >> it is not a policy change. that's long been our policy ever since qe three ended we made clear that we would reinvest proceeds and we been doing that ever since. we did say that as the economy recovers and the funds rate rises to a higher level than it is at present, a day would come when based on economic and financial conditions the committee would begin the process you just described is gradually allowing securities to

wear off our balance sheet so we reduce things to a more normal level and we fully intend to do that but i can't give you a precise timetable to win that policy will begin. it's going to depend on how the economy evolves but a long time ago we put out a set of normalization principles where we make clear that is how we would proceed and we would continue reinvestment until after we hid had begun the process of raising the federal fund rate and achieve significant progress there. >> thank you for clearing that up. i appreciate that. i know last time you were here we alluded to a negative rate and i know that's what's happened in japan and the eu. you were looking into the legality of whether you felt that you had the legal basis to

pursue negative rates. have you come to conclusion relative to that? >> i believe we do have the legal basis to pursue negative rates but i want to emphasize, it is not something that we are considering. this is not the matter that we are actively looking at, considering when we looked at that in the past we identified significant shortcomings with that type of approach and i don't think we are going to have to provide accommodation and if we do, that's not not something that is on our list. >> very good. i appreciate you clearing that up. obviously the japan and the eu have not had good benefit from that or at least not benefit that we can see. i appreciate you clearing that up. we look at the rule from time to time and we know the fed has not adopted it but there's a chart

that tracks it and basically fed rates have been within a range. recently the biggest dichotomy that we have seen in years and years between the fed funds rate and what they would be if the data rule was being employed. under the taylor rule we would be at 3.7%. that would be our target fed rate today. that's a big range difference. is that because of the headwinds that you have been alluding to and what you are generally seen in the market? >> yes i believe it's because of the headwinds. one of the numbers in the taylor rule reflects professor taylor's estimate of what we sometimes referred to as the neutral level of the fed fund rate. it's a level of the fed's fund rate that is consistent with the economy operating at full

employment. that is something that by our estimate has been very depressed in the aftermarket of the financial crisis. discussions about secular stagnation are very much about what is the level of interest rate that is consistent with the economy operating at full employment. i am hopeful that we will rise over time although i'm uncertain at the moment most of the diversions between our sittings and what would be the higher levels that would be called for really reflect the headwinds that have been facing the economy. >> the employment rate really is misleading, is it not relative to where we are in the labor market today? >> meaning that there is still a

lot of excess capacity. i know ranking member brown was alluding to that. that equation is a little bit off just because you're not really feeling the employment levels even though the rates that we show are there, the involvement is not what we would like it to be. let me just ask one thing, living wills. i know that under section 155 of dodd frank, the larger institutions are supposed to present living wills and you all are supposed to ensure that they can be resolved in bankruptcy. i was confused in that the governor recently mentioned that if the fed keeps raising capital level these institutions will downsize or become less complex and i'm confused on that. if the federal reserve

institutions cannot be resolved in bankruptcy, are they going to do what section 165 of dodd frank gives them and tells them to do or you can rely on raising capital to have the banks do it themselves? >> we are suggesting that the firms at risk and another places in the living wills in the last submission and there's a timetable for doing that. if the firms failed to address the decision or if later on by the summer of 2017 they failed to address the shortcomings we've identified and then we find them deficient, dodd frank does say that the f dic and the fed can impose higher capital requirements that are ultimately structural changes and we aren't

insisting that the firms at risk are cave carefully identified. >> inc. you. >> thank you very much. it strikes me that over the last several years you've had a very difficult challenge, we all have but we've been operating in some respects with one hand tied behind our back and that you've been pursuing new policy and reluctant to raise raise well rate while we have not had a comprehensive fiscal policy invest in infrastructure and other things and allows you the room to raise rates if necessary or to complement your activity in the point that you just made in response to senator brown is that this productivity gap is

related to infrastructure because it takes two hours to get someplace amounts to lost ours to someone delivering a package. if it takes ten minutes that's productivity increase. you are in a position i think that you are doing all you can but it's not enough. we have to stuff up. is that something that you would ten to sympathize with? >> i think in the united states and other advanced nations where interest rates are at very low levels, it's common to say that monetary policy and central banks that have been carrying the load in many parts of the world, fiscal policy, because of concern about large debt or deficits have not played a supportive role. i think we have achieved a lot in the united states.

we have created over 14 million jobs. the unemployment rate has come down to 4.7%. inflation is still under 2% but i believe it's moving up. i think we're making good progress but if there were to be an negative shock to the economy, and i mention this in my testimony, starting with very low levels of interest rates, we don't have a lot of money using our tried-and-true method to respond. if fiscal policy were more expansionary this level of interest rates, that's one of the factors that stands with policy that fix what level is neutral for the economy keeps it on an even keel in the level would be higher with a different stance of fiscal policy. >> okay we have made progress, i agree but not only could we have

made more progress but we are at a point now where you've exhausted most of your leverage in a nonfinancial sense and if there was a shock when you have very little to respond with. >> we have the same tools that we used earlier, maturity distribution and those are the tools we would rely on. >> just very quickly, the the other part of this dilemma is that in some places because interest rates have been so low there's a possibility of creating a bubble, for example driving people into equities because there's no return and the prices driven out not because of the underlying quality but simply that's the way they can get some money fast. are you concerned about that? >> yes, as i said earlier i

don't see signs of extreme threats to financial stability at this time. this is something we monitor very closely but it is something that can happen in a low interest rate environment. i don't think i see any broad-based evidence of those financial stability concerns but it is something that's possible. >> i have less than a minute. with respect to cyber security, it is is an increasing problem and in fact the federal reserve reports that you have been breached in some respect. just getting to the point, do you have the authority to require your regulated companies to put people on their boards that have cyber security expertise, and also also to publicly disclose what their cyber security general parameters are or something to indicate to the public that they

are taking this seriously? >> it is a focus of our supervision. we do have standards that we expect financial institutions to meet and just what's expected depends on the complexity and importance of the firm. so this is, we do do regardless is a very significant spread. on your question about boards of directors, i don't know that we have looked at that. i need to get back to you on that. we are certainly supervising financial institutions ability to address cyber threats. >> thank you madam chair for being here and for your service. >> madam chair, in april the fed finally released the results of the 2015 resolution