issue since it started and i agree with cecelia, it was was 20 years ago, but since everything started a couple of years ago, it's ongoing. >> i'm from politico and i have a question. : the end of deliberation on how to do it. and we ran out of time doing that.

it is a large document. it goes back and forth. there were iterations that did not come out until late last night. people need time, you know. >> regarding today's vote on individual programs, d.c. do something that should be set forth? >> well, it's a notice and comment preceding. there will be a notice. there will be a comment period, then there will be a reply comments carried, then there will be how to make sense out of all of that. i do want to set an arbitrary date to it -- i don't. >> a small question. when would you expect the item to be resolved? >> i hope soon.

>> i have a follow-up. >> nice try, mikey. >> questions or public safety, raise your hands. public safety, come on up. the rest of my team comes up, some of you may of noticed yesterday we had a test of emergency alert system. went out to the entire nation over 22000 stations have responded to us with results from the and we're continuing to compile those results with our

partners at fema and industry, as well as the states emergency communication commissions. so really excited about result of that national test. [inaudible] >> i think we can if the others don't mind. >> talking to some of the state eas people yesterday, i know that some stations that would only send out a spanish-language alert did not. they get triggered to the broadcast, through the ipod system. do you know if he spanish-language votes did go out yesterday? >> they did. that's exactly the kind of thing we wanted to test. because the way the emergency alert system is set up, it's set up to be sale face -- fail-safe. the internet over the ip network, it will get it through the broadcast really.

the spanish part was through the broadcast really, and so we believe this will give us the data necessary to refine the transmission of that second language version of the same alert. so that's where we are at with that. >> do you think this is a more successful test down 2011? >> it would be hard for me to compare because the work that was required to get the first one going, i know was a significant, and my good friend was in my position at the time and so i would have been hesitant to say one was better than the other. i can tell you the foundation is set for the first test we built upon, and we think we were in a better place to capture result,

not just some broadcasters themselves but from the disability rights organizations, as well as communities in general. so if we were better it's only because that team prepared a table for us and we built upon that. >> thank you. >> i think that's accurate. >> regarding the trend by the item today. could you clarify -- wea item, requirement for support for pictures and multimedia? was that in the order or in the further notice? is about the pictures and the multimedia? >> let me ask james to clarify, because we wanted to bring in as much capability as we could wind the technology and the platforms providers operate could support it. so we make allowable as soon as

possible the inclusion of some, not james walked through the timeline. but then we walk through it, a timeline, that transitions from its allowable food you have to support it. so james, can you speak with respect to multimedia, we identify in the order the public safety value that they would have to include that kind of content in a large themselves. and in the further notice we seek comment on technical parameters that should be associate with the transmission of multimedia and alerts as well as an appropriate compliance timeframe. >> and the pictures? >> specifically with respect to multimedia, the kind of content we are contemplating including with the thumbnail sized images and informational symbols.

>> that's multimedia sent over the data channel as an include part of the alert. we, after 30 days, now will allow the inclusion of a link to images which we think will be very important. but it won't be that the alert pops up the picture on your screen as soon as you look at the alert, one click, you can get to the picture. and that we will make allowable 30 days after spinning with respect to embed references, carriers will be permitted to include in 30 days from and will be required to provide support for them one year. >> did that answer the question? >> i think so. i'm actually asking it for paul and he hasn't hopped up on my e-mail saying speed paul's proxy, i love it. >> just to be clear, he said

images and symbols, not video? this is in the further notice. >> james answered the question for us but multimedia. i just want to get the multimedia piece for which we outline, its allowable but we would defer to the future notice of proposed rulemaking, the details associate with videos. that said, there would be nothing that would preclude with the embedded links to have an alert originator posted that link if you click or something. >> are there any restrictions on where you can link to? >> we leave those details to work that we'll do in implementation with the public safety community. there's a number of considerations to make sure that we do that in a safe manner,

that has the right to bear confidence between alert originator's, and the providers. >> i which is clarify the order does not allow you to be included in the alerts themselves. >> no, right. >> want to talk about geotargeting. does the order require, the general presentation of allowing carriers to deploy a device based year targeting as soon as practical. does that mean, okay, it's okay if you don't have to? does the further notice, looking towards more towards that in the future? >> this is part of our thought process. let's make it a failed as soon as practicable, and so within 30 days we believe that with the rapid advancements that have been made and the ability for messaging in general to consult to location-based services

within the phone, that it's a coming a very useful competitive feature between phones. we want to make clear that we would not just allow, i appreciate and applaud the contact kind of effort while ensuring there's a data certain for which originates can count on that capability being available to all the available participants. james? >> that's accurate. and i would just add in for the notice we seek comment on the race will compliance timeframe that carries match the target area despite by alert originat originator. the dates we seek comment on -- 24 months from the date which standard is completed, whichever is sooner. >> it will not require alerting but the requirement that we

expected to find in the future notice to exactly match we think, while being technical, would drive the need for solutions like device space order or could be by then we are so good at 911 location that they can do it that way also. >> usability technology neutral but does the item currently any specific type of technology for the improved geotargeting? >> this item does not. we have been working for some time now on improved geo- location associate with 911, and in that proceeding and the engagement since the are in no for that proceeding with the industry, we see the emergence of some

wonderful new technologies that will make geolocation devices at scale across providers much more achievable, and we think that that will have a company could affect, useful effect for this item. >> questions on the foreign ownership? anybody? then we will do the media bureau. any questions? got one here, great. >> questions about the program item. does item defined like what independent programmer is?

is that anybody not connected to any mvpd or how you describe it? >> yes, if you notice. we propose a definition of independent programmer. >> can you share with a definition is? >> essentially someone is not linked with a major studio who does know exactly what the wording is but it's not only independent from and in mvpd but also independent from the major studios. >> is there also consideration of some kind of rule that would require companies to map certain percentage of the content they carry the independent programmers or was that let that? >> no, that's not proposed. >> can you get a better sense of what kind of questions are asked about? >> we asked very broad questions come at what we've identified our two sets of issues with respect to contract provision of which we make specific proposals. one is unconditional in the things which they can describe and the other is unreasonable

abms. what we've said is we don't propose to forbid any clauses that relate to putting programming on alternative to solution methods, but we want help in defining those that unreasonable because we did find in the record that independent programmers say that these abms are often a great obstacle for them in getting their initial carriage and also in being able to get initial carriage over the top. >> i guess i was under the impression, along with those -- questions about bundling. >> we've got a lot of input unbundling and the possible effects on independent programmers would ask additional questions on that. >> what sort of additional questions are being asked? >> essentially what effect there may be of bundling practices in eliminating the opportunity for

independent programmers to get carriage. some of the suggestions we that are that there may be capacity limitations by the mvpds, so ththey require to carry large bundles they may not have room for independent programmers. there've been some suggestions that there may be a financial matter that if they are carrying channels that they might not otherwise carry because of bundling restrictions, that might not leave that money to be able to carry additional programmers. it's the kind of questions that have been raised in the record and that we pose further in the notice. >> anyone else? >> thanks. >> hey, everyone. just a brief statement from the.

i don't know if -- with respect to the set-top box, a proposal, giving the proposal doesn't need more time behind closed doors. it needs the publics input for both legal and policy reasons. and that input can only happen if the commission considers this proposal in the context of a further notice. and that's what i believe the majority should release the red line that was circulated at 9 p.m. last night. we need to let the public know exactly what the fcc's proposal is and provide informed views on it. so let's unlock the plan. and with that, i'm ready for any questions you might have. >> can you tell us anything about what was in that version? >> yes. >> could you? >> no. [laughter] >> okay. didn't contain -- [inaudible] >> unfortunately i can't but i

think facilitate the importance of an open and transparent process. this process we heard about a couple weeks ago can only be such if the american people have a chance to have a seat at the table. >> can you tell me when divided it was going to be pulled, and how you are going to vote on it before a couple? >> i found out about it at 10 a.m. this morning. >> wow. >> the joint statement didn't include you guys, chairman wheeler and the two democratic commissioners. should we read anything into that? are you now prepared to -- >> to be able to support it means you're actually having any kind of conversation on the item. notwithstanding the pledges of bipartisan, collaborative discussions that would occur, we have had not. so if they were conversation that chairman of the too late last night, i had zero.

we were told by the chairman team that when we made, suggested, not to this document by the previous document we made, things we want to see happen. we made specific requests and we were told that unless they were included in the other two democratic commissioners list, they would not be included in any form. there was no conversation about that. they were immediately ignored. i don't have that is deliberative and i don't know if that is even inclusive of any of our thoughts. so unless they proposed them and we just happen to agree with the thoughts, it happened overlap, then not of our thoughts matter. i'm having a tough time figuring, and to think i'm some people have argued that find the problem with bipartisanship at the commission. so it's a very interesting dynamic we have. >> do you think there's any chance it doesn't get done this year?

are you pleased to see a delay? >> well, i'm pleased because i don't think the document itself is ready. i suggest a number of changes to it. i'm never pleased that, i always say, we want the document to be in the best form and whenever it's ready. i have no clue in terms of the timing antidumping part of any discussion. this morning i learnt the same time commissioner pai learned. they colleges before the meeting saying it was going to get pulled. >> to me the lesson of this particular episode is that that process yields bad outcomes. if the commission adopted an open transparent and bipartisan process from the get-go i have to think that what you saw transpired today and last night likely would not have occurred over could have been mitigated. unfortunately, we've been entirely excluded from the process not listening the fact several other days of offices

did come with our proposal on the entropy no chain and say here's a way for we think. we would like to get your input. this is all too typical, our suggestions were just dismissed out of hand. >> can you be specific about when you offer up your proposals for the item? >> speaking for ourselves, it was, want to say, it was over the weekend. it was not this week. i think it was sunday. maybe saturday. >> so i've got two quick questions. the first is can you speak to what you way forward was that wasn't adopted by the leadership? and then decide what is for commissioner o'rielly. you alluded to this but you essentially accused of you said being -- by senate democrats. and i'm wondering if you regret the comments ar were brought upt that hearing as evidence that you perhaps have been contribute

to the partisan at this are insignificant conversation with senator nelson of anyone since then about those concerns? >> what which way forward on this item? >> i can't get into the details but what i can say is the would'vwouldof been insisted i h our legal authority and would've reflected largely by think the marketplace is evolving. if lucas some previous statements i've made, what i suggested would not be a surprise to you. >> fundamentally, it is to get the commission out of the placement between programmers and distributors, and multiple layers and multiple parts of the item. we still, you know, this licensing entity, the commission still has its tentacles into and i don't believe it should. so i would like, those are two areas identified as part of my

testimony in the senate commerce committee. they are more specific of a bunch of different things have come forward that are lesser known but still need to be addressed in my opinion. we will have to see if there's any willingness. your second question, i didn't find my comments intended to incite artisanship, and i said to senator nelson that i wasn't trying to antagonize or inflame. i was just speaking what i think were accurate. it's interesting process we have, that we are not included and yet somehow that i shouldn't be upset about that in some form. but you know, i have not talked to send her since the hearing. i think, my proof is i work on all items and is happy to work on this item, if included. i'm somewhat of sources is ready for dialogue on foreign ownership i've been pushing hard

trying to get somewhere. there's a ton of things i tried to find a bipartisan agreement on so i think that's my legacy and history here at the commission so far. >> do you feel like the language used at the time, i'm forgetting the substance of your concerns, but the language used about democrats can be trusted, whether on who or here, to think that was the right language to use? >> i was repeating the phrase that was used on capitol hill. it wasn't my phrase. it was a long-standing and it's been used for decades. i just restated it. that was just, that wasn't my phrase. i was repeating. it went to the heart of the fact that multiple items since my time has been you, my colleagues have backed away from deals either the morning of core delayed meetings. it's problematic when part of this as i said to the senator, part of my commitment to

committee and did was to keep my word. you can trust what i said. i think i'm honored that other times. >> commissioner o'rielly, you've emphasized today that the team telecom review needs to be completed your i recognize you're in the minority but do you have any sense as to the status of that review? do you think a final vote could take place this your? >> i would certainly be hopeful that can occur. i think the record is complete on the item and we can move forward. i don't have an id on the timing for that or any of the other items potentially. >> is a sense as to whether parties are stalled or gridlocked over some of the proposed changes? >> i don't get that impression. i think there's quite a good deal of agreement on the item. there was certainly some do some administration i thought were not reflective of the current

situation and maybe a little unnecessary and particular i think there's a way to get to home in my opinion in the coming months. i just don't control the agenda. >> regarding the global star order, can you give us an update on just had and what you think you will make a final decision? >> sure. i don't have any new data or information to provide on the situation. you can see a continued conversation with anyone is interested in coming in. i don't have any idea on the timing. i don't know it's in different than last month. >> also the two of you voted no on all of the personal items. can you give them which we don't know what they were, can you give us any insight at all as to what would be about it personal item that would -- >> i'm sure we can. >> well, we can get into the merits of any particular item but what i will say this about

that chairman unilaterally without consultation changed the process. and that at least i think informed our decisions. at least my decision. >> i guess i can agree. i raised this in my stand during testimony that's available, that you can see here's the u.n. decision to wear changing the process and here's how it's going to be resolved. but then asked what do the same thing for any of the processor from items that you agree with? he has testified in front of house commerce committee agrees with the number of the changes that i've proposed. so there's a great deal of agreement in the universe. if you can unilaterally do want to like it to be some of the others? that seems to fall on deaf ears. >> we are traditionally across the board. >> for those of us who are not fcc negotiating experts, can you explain what a 9 p.m. red line

means? is a red light proposed from the chairman's office, from another commission or what is that document you have? >> so typically what will happen is that that your staff in charge of drafting every single item will soon around to the five commissioners offices a red line. so you have the black letter document that was originally circulated. you all the changes we've made that are quite literally in red in microsoft word. [inaudible] >> after the redline, after the redline was regulated, to this natural in a change guys have, were any other changes suggested by any commissioner? >> i'm trying to get the timing. not that i remember. well, this was a good around 19. i'm trying to remember when some of the other changes were sent around. i don't think so. >> okay, thank you.

>> just for clarity. so for it to be a redline, that means someone has proposed and the chairman, the chairman's office has allowed it to be in the redline. so what happens if you'll proposed that and they never show up in red? >> particularly ours never show been readily. what happens is a particular commissioners offices and we suggest changes a dnc. if changes in india three votes but c. does not, traditionally the chairman office will direct the bureau, incorporate the change into the eye. the item and circulated either within the document itself it will say, you assure the redline change and will be a comment bubble included in this edition of the commissioner. court within the text of e-mail in which the redline is that they will say to these changes reflect suggestions made by the commissioner? >> but they have got a certain number of votes yet. just excepted to be put out

there for other commissioners tuesday yes, i like that, or no, i don't like it. >> typically will be the case they are incorporate only if there are three votes but has in some cases with the news to me there were three votes but nonetheless it magically appears. >> from getting three votes on it is worth putting in a redline come is that -- >> not necessary. in addition there was one particular change that i'm not at liberty to discuss to this redline that was not made at this gist of any particular commissioner. on these new commissioner suggested it in our internal e-mail chain. i'm not aware of anyone asking for the we are curious how it ended up there. >> sometimes commissioners will have an idea and the redline is intended to reflect, goes into action wording to see how it functions and read it in context with other paragraphs. so provides more context. >> a follow-up on that?

>> with a 9 p.m. red line, the first new version of the item guessing that they announced that they were circulating, that they put the fact sheet and everything? >> it was a circulated version, then it was i think, whether another one? i'm trying to think. do you remember? i cabinet when that was circulated. there was one in the interim between three weeks ago and last night. >> i remember reading it. i just don't know when it was. >> you know what, i must admit i went to bed by 9:00 lasting. this baby thing is just killing me. i'm a little off on the days their, whether it was a week ago or 9 p.m. last night. >> it was a few days ago. >> this is for commissioner by the you said the sec still has

its tentacles in between programmers and providers on the copyright licensing board. to clarify, did you mean that in a redline that was sent out last ipo still some sort of fcc oversight? >> i didn't get a chance to read 9 p.m. document i was already in bed but my understanding is it had not changed too much i believe they're still come have a role in that equation. it's different than previous version but it's still involved in my opinion. >> that includes one just referenced a few days, week ago or whatever but that was to end there? >> that's my understanding, like i said, i haven't read the document. i was doing statements this morning but my feeling hasn't changed. the last version i saw still had a role for the commission. it's arguably that someone was it the backs of but i would argue it's still got its tentacles involved. >> both of you raised the

specter of charter time order commission on that spreading into general regulation. .. it is pretty clear that the agency was forcing the party to the transaction, not because it was murder but because it was things they wanted to impose on the entire industry. i think that is the good example of one that a particular majority would like to impose sooner or later. >> i agree, i think the difficult thing about the conditions as we had no involvement in them until they were sent around.

we weren't part of the formation in any form or fashion now there being implemented into other items and that's problematic and doesn't reflect what the record was because the record flex as it relates to that particular merger and not the industry of the whole or all the players involved. >> remember how important this is. this is where the american public doesn't get to have a say essentially the department of justice says we want to agree to these conditions and the fcc says these are great conditions and will approve the deal too. then without any public input the agency will say we agreed to it in the charter transactions let's apply to everybody. it's only fair we did it to these companies so we should do

it to everybody. that's how the process should not work. if it's a good idea for the industry then team up in a full and prepared way and then make a decision that doesn't shoehorn every other company that didn't have a say in the hearing proceeding. >> charter agreed to those circumstances. they were a party to that. the rest of the industry wasn't party to that item. you can say they got something for weather is good or bad, nobody else has. >> it's a process and there was public input right there, wasn't there? >> not in some states, the entire foundation for this was the charter merger. you heard today, we refer to the

thinking and impose this condition. >> i think i've said this before and i'll say it again,. >> this is a formality before we see the final outcome, we know the conclusion, that's what the item is going to say, there are definitely exceptions to that general rule, but the general rule applies that what you see is pretty much what you get, it's a matter of when they will pull the trigger. >> okay, i wanted to ask if you have this nine pm red line, were there any suggestions from commissioners, why wouldn't there be votes today?

>> that's a very good question for members of the majority. >> i was not party to any conversation last night or this morning so i don't have any insight for you. >> this may be a similar question and it may already have been answered, but you referred earlier to an item for a provision in the nine pm red line that had never showed up before and for which you had no chain of custody. what did it provide for? >> unfortunately, given my understanding about the vehicle's closure of non-public information, i kick it i kick it into what it was. >> were you surprised at its effect?

what would its effects have been >> its effect would have been to grant almost a singular exception to a particular company involved. >> anyone else? >> just some updates on your lifeline investigation that have been ongoing. they sent out a number of letters, as you know to state commissions and others. are you in the process of receiving responses? we are taking a look at that information in trying to synthesize it to try to figure out what the next steps are. working on in ongoing conversations with all of them, we have reached out to see if there are any lessons from the

data we have received, can we come up with as practices or other actions to make sure there are appropriate funds. >> this singular exception for the particular company you are referring to, do you think that had some affect on the delay that occurred today? >> i don't no, i read the red line that came out last night and then we found out at 10:00 a.m. it was going to be yanked from consideration. i had no insight whatsoever into what was going on behind closed doors. >> can you at least tell us, what side of the ecosystem are we talking about, the third parties? >> i can't get into it anymore.

>> if the commission agrees to release the document as i think they should, then you will get all the insight into that. >> i don't think they will. >> no. >> i would say the pressure is building, both in congress and within the community to make the documents available so we can all have a conversation on what the specific test is. maybe it's not the media, but i think it's increasingly, i saw a letter from a number of democrats on the hill that thought that the document be made available. i think you're seeing a number, an increase of people who would like the document to be made available. >> anyone else? >> thanks a lot. [inaudible conversation]st: than

>> good morning, thanks for for having me. >> thanks for joining us today. explain to us in civil terms, if you can, what's going to happen to the internet oversight tomorrow. >> that's actually a bigig question right now, originally the obama administration had planned, beginning on october 12 transition it to the international community and its global non- profit known as i can.e in real people terms that mean the system that we are on, your browser like google chrome, it's the gust guts that make that website show up when you type it in. we want to make sure they have greater oversight over the system. things have recently hit a snag. members of congress wanted to prevent it but they didn't prevail. now we hear from the federal

court of texas.issue an the judge later today might sayy that he wants more time to take a look at an issue and hect imposes a preliminary injunction on it, that transition that was slated for october 1 may not happen for quite some time. lit >> okay, i'm in a read from your story about this that said in their lawsuit the attorneys general for arizona, oklahoma, nevada and texas contend that the transition lack congressional approval amounts to an illegal giveaway of u.s. government property, and it could effectively enable free speech on the internet. does this have merit?operty

>> they post studies from what dogs that say there isn't any giveaway of u.s. property and'r there isn't a free speech issue here because what were talking about isn't the content of what were seeing on the internet but just the day-to-day oversight of the architecture, the the things that the group called i can is already doing with the u.s. government standing overhead. this really boils down to just a few weeks ago when senator ted l cruz began to use the september budget bill, the most recent continuing resolution to block the commerce department for proceeding with this transaction and folks like senator group has said this might empower the likes of russia and china who seek to censor the web.face it was pretty resonant among republicans on capitol hill, but if you talk to tech companies like google and facebook and amazon or two technical experts all they say is the obama administration plan doesn't do any of that things that republicans have said images.the

republicans as trying to stall on an issue that the obama administration has put a lot of priority on in the past few months. >> proponents of the transfer say engineered businesses,t technical experts, civil society groups should lead the internet forward rather than the u.s. government or conservatives like ted cruz of texas think president obama is diluting power and it's creating space for rogue actors like china, russia or iran to wield greater influence over web access. is this something congress can stop? >> it might be something they can stop, senator ted cruz wanted to use the most recent bill funding the governmentt ths until september to block the commerce department from proceeding. they were essentially going to use the power of the purse to prevent this from happening but senator mcconnell, others in the senate ultimately prevailed in

the issue and they didn't preclude that. that only keeps the government running until december. we have a world in which the court comes back today in texas and says we need more time to study it, we want to discuss constitutional issues here, that creates another opening for republicans who want to try one more time to block. , administration. that being said we also have next year, we haven't president with this issue hanging over 2017 we've heard both hillary clinton and donald trump weigh in on this very wonky issue about the domain name system. as you might expect, clinton has taken obama's side and believesr the international community should have the say and the oversight and donald trump unexpectedly rushed to the defense of ted cruz last week and he was very quick to point to his support from trump despite that they were pretty bitter opponents on the primaryt trail. that election ultimately have

some consequences for the domain name system, but just to go back to something else you said, the international community has been so vocal on this, particularly because of what the u.s. did when it comes to surveillance. it has been since the '90s that washington has tried to transition oversight of the domain name system to world control but what weekend it was reports that the u.s. was havinf its thumb on the internet's traffic and many of the webpages that have been loaded around the world, there really was a push to see if other governments could have more of a say over what happens with the architecture of the internet. that's why the obama administration pursued this plan because they want to keep governments, including the us, out of out of it. they want the technical fontrtise from folks that i can and they want the academics tos. really be the future of the internet and not the likes of

russia and china were very angry at the expense of u.s. surveillance. >> thank you so much for joining us. >> thanks for having me. >> coming it up live, a debate on the u.s. presidential election. newt gingrich and laura ingram debate jennifer granholm and labor secretary robert rice. all or part of the month of a bait from toronto. the african-american history museum opened last weekend. the ceremony re-air's tonight at eight on c-span with president obama and the first lady saturday at 6:30 p.m. eastern, charles murray, author of the book in our hands, a plan to

place the welfare state with a universal basic income for americans. he talks jared bernstein. >> anybody who has worked with people with serious problems knows that some people need a pat on the back and helping hands and sympathy and other people need a kick in the pants. >> than a on "after words", "face the nation" moderator john dickerson reflects on key stories behind some of the most memorable moments of presidential campaign. >> going back to 1824, when andrew jackson ran he was an outsider, the way donald trump was. they worried about him being a demigod not because he was a reality star, but he was a reality star star. he had been a general and there was great worry that investing all of the hopes and dreams of this one general would take democracy off its mark. >> he is interviewed by clarence

page for the chicago tribune. at noon eastern on in-depth, we are live with author and historian who has written over 30 books including the counterrevolution of 1776, slave resistance and the origins of the united states of america. , can the u.s., the haitian revolution and the origin of the dominican republic and the latest book paul roberson, the artist is revolutionary. >> so when japan bombed pearl harbor in place, in black america was this infrastructure of support that paul roberson began to chip away at, that that is to say that he was able to convince many black americans that their destiny and fate should rest with solidarity in washington. >> join the conversation with your phone calls, e-mails,

facebook comments and tweets. for complete schedule, go to booktv.org. >> fed chair janet yellin tells the house committee about proposed changes for annual stress test given to banks. also the fed's role in seeing that u.s. lenders are complying with banking rules after the wells fargo scandal in which as many as too many unauthorized customer accounts were opened. >> the committee will come to order. without objection the chair is authorized to declare recess atr any time. the hearing is entitled sent on semiannual review of the stress test. we know they increased it way beyond their monetary policy responsibility. the act has made the fed but it cannot make it omniscient.

no act can. the exercise of heightened standards, the head fed can control the largest financial institution in our economy.he former fed governor kevin recently wrote, central-bank power is permissible in a democracy only when its scope is limited, it's track record only strong and none of that do we observe today. the big banks are now bigger and the small banks are fewer and economic growth lags and there is scant evidence that our economy is more stable. the new fed expanded authorities under dodd frank which have been controversial and problematic. the secrecy surrounding it make it almost impossible. as columbia university professor has testified, it is hard to believe that the current

structure of stress test could incur in a country like the united states which prizes the rule of law, the protection of property right and the adherenci to do process.process. dodd frank living will created the fdic and the fed unbridled and unreviewable discretion to restructure private businesses under a process that relies entirely on the personal discretion of washington regulators. indeed it stands at the center of the too big to fail. it occupies the board rooms of the largest financial thstitutions in our nation andnd this decides if they can deploy their capital sending a signal that washington will bail them out if they get into trouble. despite claims by this fed that it taylor's institutions, we know small banks are suffering disproportionately under washington's thumb. as we lose on average one.mm day, they lose lose options to help them achieve financial independence and they lose the

opportunity to grow job. given elevated capital buffers they need to be for less concerned about the portfoliose since any losses would be absorbed by shareholders, not taxpayers. this would enable the dodd frank act. current chair has said u.s. banks engaged in core banking ad activity. former chair has also expressed support of use of higher capital levels in place of regulatory risk rating. the fed doesn't know what it's risking print the f dic doesn't

know what's risky, didn't we learn anything from the crisis. financial choice by this committee offers a better way. it has been endorsed nationwide including by three nobel prize winners and financial choice act as financial bailout and make sure they remain focused on good monetary policy. they now recognize the ranking member for five minutes.nking m >> thank you mr. chair for holding this hearing and thank you for making yourself available to testify. just a few weeks ago we passed the ninth anniversary of the lehman brothers failure. leading up to 2008, they quickly address fraud and mismanagement and it resulted in the loss of 8 million jobs. as unemployment topped 10%,

millions of families lost their homes and entire industries were on the brink of collapse. congress responded to this devastation by passing the most comprehensive overhaul of our financial system since the great depression, the dodd frank wall street reform and consumer protection act. the dodd frank act greatly increased the fed's responsibility and authority for safeguarding the financial system that also sent minimum standards to ensure that regulators didn't lose sight of emerging risk. [inaudible] the dodd frank act has required regulators to increase capital and liquidity standards, reduce, the financial markets and scrutinize risk management. however there's much more work left to be done. as we have seen from the

enormous failure of risk management at wells fargo, it's important to remind there committee and the public why these reforms are necessary in the first place. retail banking practices may not, in and of themselves pose systemic risk, but they surely indicate mismanagement that could be catastrophic and moree complex division of a bank holding company. supervisors and law enforcement must continue to hold both institutions and individuals accountable. chair yelling, i know you will keep that in mind over the next few weeks as you review living wills and that includes wells fargo. chair yelling, i am eager to we hear about the banks progress in

implementing wall street reform and how the boards supervision product practices have evolved pr over the past several years. specifically, i am interested to hear more about how the fed is using the flexibility embedded in dodd frank to tailor regulations appropriate to the sizes and risks of different types of banks. dodd frank also provided the feds in consultation with the financial stability oversight council with new responsibility to regulate the activities of systemically risky, nonbanks entity such as the insurance company aig whose near failure imposed systemic consequences on our economy just eight years ago since the passage of dodd frankp they have given the federal reserve additional authority in setting capital standards for insurance terms subject to enhance supervision and we look

forward to hearing about the progress on regulating insurance. yet, just a few weeks ago, in this committee, republicansee pushed a bill that would rep severely undermine efforts by the fed to regulate the financial system. the miss guided legislation would change their ability to designate nonbanks supervision by the feds creating a huge amount of risk in our system. it would also replace carefully considered limits on banking activities with nothing but an insufficient 10% equity cushion encouraging the reckless b behavior of our economy and we consider another resolution, we must be mindful keep regulators

work. for the first time in recent memory, economic data indicates that the middle class is benefiting from the recovery. that will put that progress in jeopardy. thank you and i yield back thero balance of my time. >> the chair now recognizes the gentleman from texas, chairman of our subcommittee for two minutes. >> thank you. today's hearing is fundamental to understanding developments in the supervision and regulation of our institution. vice it serves as a designated official to oversee regulation and supervision. they noted that the creation of this might turn out to be one of the most important things in o here, meaning the dodd frank. a focus responsibility on one person. the present obama has failed to nominate anyone to fill this

important position that sets policy and represents the united states and international banking forums like the financial stability board. i remain concerned that the governor continues to exercisese these authorities outside the statutory and oversight of congress. tuesday i hope to understand better many of the regulatory actions taken by the federal reserve, for example how does their posture on reducing bank leverage interaction with its regulations to appeal the banking authority. what type of risk is the fed trying to mitigate in proposals for commodity activity. similarly, what would the impact be on end-users of physical commodity activity decreases or stops. finally does the federal reserve recognize the characteristics of segregated markets and do they plan to reevaluate its position given recent committee discussions.

while chair yelling may not be in the best position to answer these, it is important for her. [inaudible] i want to say this is my last time to be in this committeeo with chair yelling and i want to thank her for making herself available to us and thanks again for her service in her capacity, and with that, i'll back. >> the gentleman yields back. today we welcome the testimony of the honorable janet yellen.. chair yellen has testified before our committee on a number of occasions so i believe she needs no further introduction. without objection, chair yelling, your written statement will be made part of the record and you are now recognize for five minutes to give an oral presentation of your testimony. >> thank you.ch >> ranking member waters, chairman, and, and members of the committee, i appreciate the opportunity to testify thisate

morning on the federal reserve regulation and supervision of financial institutions.tion and we at the federal reserve's, we have fundamental goal to make sure that our regulatory and supervisory program is tailored to the risk to different financial institutions posed to the system as a whole. as we saw in 2007 and 2008, the failure of systemically important financial institutions can destabilize financial systems and undermine the economy. the largest most complicated firms must therefore be subject to standards that are more stringent than the standards that apply to other firms. small and medium size banking organizations whose failure we generally pose much less risk to the system should be subject tol standards that are materially less stringent. the federal reserve has made

substantial progress in building a regulatory and supervisory program that is consistent witha these principles. we have implemented key standards designed to limit the financial stability risks posed by the largest, most complex banking firms. we continue to work on some remaining standards and to assess the adequacy of this package. with respect to small and medium-sized banks, we mustt build on the steps we have already taken to ensure that they do not face undue regulatory burdens. looking forward, we mustst continue to monitor the emergence risks and look at the crisis and financial stability threats that change over time. the federal reserve's post crisis efforts to strangle her its regulations and supervision of banks is focused on promoting the safety and soundness of

these firms and on limiting thee efforts of stress or failure that can have on the system or the economy. we have aim to increase the resiliency of the largest banking organizations by establishing a broad set of enhanced standards including capital liquidity requirements. [inaudible] the introduction of capital stress testing from large banking organizations has been one of our signature regulatory and supervisor early innovations since the financial crisis. as events demonstrated during the crisis, capital capital

buffers that seem adequate in a benign environment may turn out to be far less than adequate during periods of stress. to for this reason the federal reserve conduct supervisory stress test each year on banking organizations with $50 billion or more in total assets. mor that determines whether they have sufficient capital to continue operations through periods of economic stress and market turbulence and whether the capital planning framework are adequate. st they maintain sufficient capital buffers to withstand periods of significant stress, promote the resilience of those firms and financial system more generally. our stress testing program has been successful.

that is the effectiveness of their program over time. as my colleague discussed in his speech earlier this week, we are now considering making several changes to our stress testing methodology and process. a leading idea that is emerged from the substitute in substantive review of our analysis reviewer program is to integrate secor with our regulatory capital framework. thus effectively including it in the stress test and we are considering making certain changes to the stress testst assumptions used in secor.sed in addition, we are considering exempting from the qualitative portions of secor, any bank holding company that has less

than $250 billion in total assets and that does not have significant international or non-bank activity. as well as reducing the amounts of data that these firms are required to submit for stress testing purposes. on this and other changes to secor that we are considering, we will seek public input before moving to adopt them. i know that community banks play a vital role in many of yourur districts. among the lessons of my years of experience at the federal reserve, it has reinforced that when it comes to bank regulation and supervision, one size does not fit all.rv to effectively promote safety and soundness and to ensure that institutions comply with applicable consumer protectionio laws without creating undue regulatory burden, rules and supervisory approaches should be

tailored to different types of institutions such as community banks. the federal reserve has already done a considerable amount to aa reduce regulatory burden on community banking organizations. we are looking for additional opportunities including potential simplifications of the regulatory capital framework for community banks. in conclusion, our post crisisis approach to supervision is both forward-looking and tailored to the level of risk that firms pose to financial stability in the broader economy. standards with the largest most complex banking organizationsand are now significantly more stringent than the standards for small and medium-sized banks which is appropriate given the impact that the failure or distress of those firms could have on the economy. as i have discussed, we

anticipate taking additionsed, additional actions in the near term to further tailor our regulatory and supervision by three framework. even as we finalize the major elements of pro-untran post post crisis reform, our work is not complete. we must carefully monitor the impact of the regulatory changes we have made and remain vigilant regarding the potential emergence of new risks that the financial stability. oew we must stand ready to readjust our regulatory approach with changes that are warranted. the work we do to ensure the financial system remains strong and stable is designed to protect and support the real economy, and sustain the businesses and jobs on which american households rely.tions.

>> thank you. the chair now recognizes himself or five minutes for questions. first, please know that i wasen encouraged by many aspects of your testimony, i believe there is hopeful growing bipartisan consensus that we need more tailoring of regulations and particularly on page 13 of your testimony, your your recommendation that congress consider carving out community banks and stead of setting composition limits, i was encouraged by your announcement today and what we heard a couple days ago regarding the qualitative, i think that is wise and a step in the right direction. before we get to the application , i want to take a step back to this selectioncess process in the first place.

as a member, dodd frank demands that there are different factors that be considered in the selection process, such items of as leverage and balance sheet x closure. in the designation process, do do you weigh each of these 11 factors equally? >> are you talking about the nonfinancial firms? >> in the case of those firms, h as required, they prepare an analysis. >> my question is of the 11 statutory factors you mustio consider, do you consider each one equally or is leverage more important to systemic risk then factor for, source of liquidity. >> when it comes to looking at an actual firm, the question they have to consider, taking

those factors into account is the firm. >> it's individual to the firm. >> it's individual, the questioi is. >> that's where i'm going with the. >> the question is what would be the systemic impact on the u.s. financial system of the distress of this firm. of the different factors that are considered, combined that leads to 2048 different ways in which the 11 criteria can be combined. the statute said you shall consider the use, but can i safely assume that you and other members cannot process 2048 different combinations of these 11 criteria. >> what the analysis presented to f stock does is looks at the specifics of the balance sheet and exposures of an individual firm under consideration andn

analyzes how those factors would come into play and impactnd financial stability. >> a guess my point is that it's hard not to conclude that ultimately this becomes a very discretionary process among members. let's move to the living wills process. eleven banking organization submitted living wills in 2014 and the gao found that the fed and the fdic had not reviewed those submissions. i understand many of these submissions are thousands ofus pages long and there was one testimony that the see car reports are tens of thousands of pages long. i heard one that was 42000 pages long. i guess my first question is,

does anybody at the fed actually read these reports and can i safely assume you don't? >> you can safely assume that many people have read these a reports.nd >> the someone really read a 42000 page report covered cover? >> do they know what to do with that? >> our staff do and i think it's fair to say that all of the governors review. >> i find that difficult to believe. the gao has said these living wills can cost up to a hundred $5 million they estimate the average small business is capitalized with 30,000 dollars so de facto, you are taking away the opportunity to capitalize 3500 small businesses with a living will that may or may not be read or be useful, do do you consider m the cost of this process?

to impose upon the financialou institution? >> we consider eliminating too big to fail to be a key objective of dodd frank so the american taxpayer will not be forced to bear the burden of a failure of a large firm and i would tell you that the full board of governors that we had around 12 board meetings to consider in great detail, all the key aspects of the living will of each of these firms. >> i see my time has expired.nit we now recognize the ranking member for five minutes. >> thank you very much mr. chairman.chairm as you know the reforms we have passed through the financial system are constantly under

attack. there are a number of republican d regulatory bills that have bis passed the floor which were not serious enough to even be able to be considered in the republican-controlled senate. however, i know that i as well as other democrats on this committee have worked very constructively with you to identify areas of improvement and use your discretion to tailor regulations when necessary. the governors announcement regarding reforms to the stress testing process are recentin examples of that cooperation. i think you just said in your testimony that you were taking a look at banks with less than

$250 billion in assets and that you are considering some changes , provided they were not involved in a lot of trading and international trading in particular. would you tell us what that is all about? that >> yes, there are two portions to the stress testing program, to the institution over $50 billion. one is a quantitative stress test, another is to see what the impact in the severely adverse scenario would be on the firm's capital position and we expect continue subjecting all of thene firms, over 50 billion to that quantitative part of the stress test, but there is also a qualitative part relating to a firm's capital planning process

and that is something that currently all of the firms above 50 billion are subject to and we are proposing eliminating that in reducing some of the reporting requirements associated with stress testing for the banks under 250 billion, as you said that don't have a lot of international activity or nonbanking business and we think our normal supervisory process where we would look at the planning processes over these firms is adequate and that many of these firms are meeting ourur expectations and this is a significant burden that we think we can relieve these firms of.hi >> i would like to thank you to paying attention to the concerns that have been addressed by members of this committee and i would like to thank you for recognizing that not only do we

have concerns but these aree concerns that can be addressed if we worked with you ratherdd than coming up with all of this legislation that interferes with your ability to exercise the oversight that you have. let me go on to the next question. i've been closely following the progress of the living will as the largest banks over the last five years and i must say, i've not been encouraged by that progress.year in april of this year, you finally took the important step of officially declaring five living wills as non-credible. j.p. j.p. morgan chase, bank of america, bank of new york, state bank and wells fargo. these banks are required just met their wills to you in the next week. they have had five years to identify and address problemsan within their organizations. if any of those are still insufficient in october, will

you use your additional authority under the dodd frank act to quickly and severelyckly reduce the risk they pose to our economy? >> we do stand ready to use the authority that we have to impose higher capital and otherer standards on these firms if they have not corrected the deficiencies that were identified. we've been very specific in indicating what the deficiencies are, we have released to the public, the letters that detail those deficiencies, we will carefully and quickly review the submissions that are due by october 1 to see if there are deficiencies that have been remedied, but i would say more broadly, for, for all of the firms, the fdic and the board identified a range of shortcomings, things that we did

not think rose to the level of deficiencies, but nevertheless are things that we wanted to see corrected and we will be reviewing the next rounds of submissions due in 2017 to see if they have been corrected or not and it's conceivable that if there has been no progress,, those things could later rise to the level of deficiency. >> thank you, i yield back back. >> the chair recognizes the gentleman from texas, chairman of the financial institution subcommittee. >> thank you. chair yell and it said that the fdic put out a report on bank investment activities required under section 620. there were several concerns with physical commodity activity under both a complementary authority. last week the fed issued a notice of proposed rulemaking

where it would impose commodity activities that would prohibit any of these activities. in both the document, the term environmental catastrophic risk, how does the fed define that risk and how does the fed measure it? >> the fed has been motivated in this rulemaking by looking at the enormous environmental consequences of things like oil spills, the bp disaster and other things, and the consequences that those can cause financially for firms and also reputational he. we are concerned and have done a rulemaking on physical commodity activities as you indicated that attempt to address the risks

that we think exists in that area and have recommended to congress the repeal of the merchant banking authority for essentially the same set of reasons. >> i guess the question is, whes you're analyzing a risk, when you go back and look at past activities to determine, do i hedge my risk, i guess the question is what passed environmental catastrophes have posed a problem for financial holding companies. f if that happens again, i can't think of an event that happenedt that impacted those financial holding companies. >> under the merchant banking,. >> there's two different authorities here. the merchant banking and then them being able to hold commodities. >> we look at what's permissible and see that there could be environmental risks associated with it.

it's not a question of just going back through history to see what has happened in the past, it is forward-lookingst. concerns that the permissible activities could pose risks. >> i'm a little afraid that were just trying to think of things that could happen in trying to make all of these financial institutions pay for events that we may not have happened and may never happen again. i just want to turn to the surcharge and stress test. they have stated that it effectively works as a tax on capital market activities. can you name the components that make up the surcharge and what activities tend to increase the score? >> there are a set of factors that are considered in determining the surcharge.likely

[inaudible] [inaudible] if they are liable to fail and holding more capital, that accomplishes that and it may create an incentive for these firms to restructure their activities.

>> when you look at complexity as one of those, that talks about the size of the banks the asset and it's primarily dealer to dealer trading used for hedging and market-making activity and then across jurisdiction components of dealer to dealer, trading similar to the interconnectedness. when we start to look at all of those things that you are penalizing those entities for,oo it is making markets in capital markets. i think many of us are concerned about is a message to the banks right now of just get out of the capital market area because the regulators are making it very punitive to be in those activities. >> time for the gentleman has expired. the chair now recognizes thee gentle lady from new york missed maloney. >> thank you.ber

i believe that chair yellen's performance so far has been nonpartisan, admirable and has proven that she is more than capable of navigating these difficult waters and guiding the u.s. economy back to robust economic growth. i am disturbed by anyone in a recent debate or anywhere who suggest that chair yellen is somehow acting politically. nothing could be further from the truth and i would like to thank you for the service to our country over your long career in government. i would like to begin with the? monetary policy before we get to regulation. >> you said last week at thetio. meeting that one of the reasons

the fed didn't raise rates wasss because more people had come back into the labor force without the unemployment rate going down which suggested to you that the economy, and i quote, quote, had a little more room to run. you also said that if thingsn, stay on the current course, you expect one increase in interest rates before the end of this year. what does that mean? >> does that mean you expect the unemployment rate to start falling again soon? in other words, does it meanan that you think the economy has a little more room to run? exactly what did you mean. >> let me try to clarify, for this entire year, job creation has been running at a pace of about 180,000 jobs. about

month and that is the pace, it's a little bit less than we saw in 2015, but nevertheless well above the pace of job creation that is sustainable over the longer run giving trends in the labor force.on now i have been pleasantly surprised to see that the unemployment rate actually hasn't fallen over that time because people have been drawn back into the labor force and that really means, with inflation running below 2%, we are really not seeing meaningful upward pressure on inflation and we haven't seen the unemployment rates fall.en monetary policy is accommodative to our creation of that pace and it would cause the economy to overheat and would push the

unemployment rate down to lower levels now so monetary policy is accommodative. we want to make sure that the expansion is one and the market is sustainable over the medium-term if we allow thesu economy to overheat we could be faced with having to raise interest rates more rapidly thar we would want which couldt conceivably jeopardize that good state of affairs that we've come close to achieving so we expect to see the unemployment rate fall further, we expect to see solid drop continue but if ifings continue on their current course we need to gradually remove the accommodation that is there. it's probably not that much, our estimate of how much accommodation there is has come down over time.

: neutral stance of policy. but nevertheless, there's accommodation, and while there's no fixed timetable for removing it, many of my colleagues indicated in their recent projections the majority that they would see it as appropriate to make a move to take a step in that direction. this year, if things continue on the now i'd like to ask you about the stress test. some people argued recently that the fed should put the economic scenarios it develops for the stress test out for normal notice and comment for the public and for interested parties in order to let industries and others weigh in i on the assumptions you use. and the fact that the fed can tweak the scenarios every year to account for new market developments is one of the main

reasons why they're useful. so, could you responsible that? >> very briefly, please. >> very briefly. we want to make sure that those scenarios are based on timely information and address the most significant risks we see. we have put out for comment both the principles underlying our stress test and informs how we construct our scenarios so firms have an idea what to expect in terms of a scenario that they'll face but all the details we don't put out for comment -- >> the time of the gentle lady from new york has expired. the chair now recognizes the gentleman from new jersey. >> thanki think the chairman. last week there was the big fomc

meeting and, surprise, to no surprise, the fed decided to continue the extraordinary accommodative monetary policy. know you've tan the position that the fed positions are purely data driven and that has absolutelying to do with some politics. unless people really believeve that, let me just give you two or three headlines out of last week regarding the meeting. from politico, yellen helps clinton dodge a bullet. from "the los angeles times" is the fed politically buy assed?on look at the interest rate decision as the election nears. market watch, a fed rate hike and other important decisions being put off until after the election. chairman yellen you have told the committee and the public that the fed is not subject to undo political pressure, but also the sagos, perception is reality. whether you like it or not the

public increasingly believes the fed independence is nothing more than a myth. the fed has an unacceptable cozy relationship with the obama administration and with higher-ups in the democratic party. i brought this up a year ago and let me run through some of the points raised then. you personally have weekly lunches with political and partisan heads over at the department of treasury. there is in fact a resolving door between the -- revolvingg door between the treasury appointees and the board of governors. your predecessor, chairman bernanke, made the decisionpo weeks before the president had to go before the voters in 2012 and looking at your record, youb speech on income inequality, something you never talked about before but which became a major political theme for the administration and you gave it n just weeks before the last election. now, let me give you a most recent one and maybe you can comment on this in a coupleeys and nos.

there's no doubt the last week's meeting that potentialust cnt implications for the markets and therefore the election it wasle reported this year the federal governor contributed the maximum amount to the hillary clinton campaign. and she did so while she was a sitting member of the fed board. and there was niumatalolo -- numerous reports that governor is angling for a top john in thn clinton administration if she wins. because of the appearance of. conflict and impropriety here, as governor brainard ever offered to recuse herself from voting? >> governor brainard like all of us is subject to restrictions of the hatch act. >> has she -- every you ever asked -- i'm sorry.

>> the hatch act does not prohibit political catastrophes. >> if get that but we see the appearance of the conflict. so the basic question, has governor brainard ever offer it' toed recuse herself and the answer is no. have you asked her to recuse herself because of her close involvement with the campaignov and making contributions? have you ever asked -- >> shes acting in a way that is permitted by the rules we're subject to. and each one of us has to decide -- >> i understand that. >> for ourselves. >> the answer is, she has never offered to recuse herself. the answer is, you have never asked her to recuse herself. to your knowledge has she been in contact whiff the clintonher. campaigning regarding ato your potential job in a potential future administration?ig >> have absolutely no awareness of that. >> there have been published media reports talking about that. so you're not familiar with those media reports.

>> i -- what is important to me is whether or not? our decisionmaking or collective decisionmaking, i see politicsn being brought to bear in reasoning about our decision, and i have never seen that on the part of any of my colleagues. >> if you learned that she has had communications with clinton as far as trying to get a job would that change your opinion whether she should be asked to recuse herself? >> i don't think that there is a conflict of interest there -- >> if someone -- federal governor can be indirection negotiations with a politicall campaign, looking for a future job and that is not a conflict as far as you're concerned. >> we do have -- >> is that a conflict or not? they are having direct negotiations with either political party to ask for a job next year while they're a setting governor. is that a governor? >> will the gentleman yield?

>> i would like an answer. is that a conflict -- >> will the gentleman yield? >> asking the governors whether they're engaged in such activity. >> will the gentleman yield. >> the gentleman is not yielding. the time of the gentleman has expired. can the witness give a briefyie? answer.>> >> i would have to consult my counsel. t i'm not aware that's a conflict but i would -- >> the time of the gentleman has expired. this chair you recognizes the gentle lady from new york. le. >> thank you, mr. chairman. chair yellen. puerto rico is currently facingn a historic crisis. 46% of the population is below the poverty line. three times that of the u.s. mainland. employment in puerto rico stands at roughly 1 million, down nearly 300,000 from 2007. in the meantime, the u.s. economy has gained almost

10 million jobs in the same time frame. on top of this the island is struggling with zika virus and last week a blackout. when the u.s. mainland faced severe challenges from 2007 to 2009, congress passed and the president signed sweeping stimulus legislation that american recovery and reinvestment act. do you believe this legislation was helpful in fostering a economic recovery for the u.s.? >> well, do think puerto rico faces very serious economic andr fiscal problems, as you have described.co they have been building for a long time and the commonwealth faces very significant challenges. i think the framework that congress passed provides tools that may be enable the

commonwealth to avert some worse-case scenarios. the ability to restructure debt should make it possible to put in place a fiscal adjustment that will be one that is less uncertain and hopefully entail smaller cuts to government spending -- >> i understand all that, chair. it will take time for the fiscal control board to do it work, and the situation in port reek cove is really very -- puerto rico is real where very difficult at this time. my question to you is how can we spur investment in puerto rico, and foster economic growth and not wait for the fiscal control board. the reality is people are leaving the island. the most productive work force is leaving the island.

they're facing serious problems with a healthcare system that is broken, and my question to you is, do you believe that if puerto rico system stimulus balloon will have a similar effect on the island's economy like we did near 2008-2009. >> so, this is really something i'm not an expert on, what the appropriate programs are for puerto rico to deal with its long-standing problems, and i think that squarely is a matter for congress and the administration to consider. >> okay. thank you for that answer. we cannot forget that puertoto rico is part of the united states. that we have a responsibility, a moral obligation, after all, we don't provide priority in some of the important issues that they're facing, such as medicaid

and medicare. chair yellen, last friday, the federal reserve bank of philadelphia launched a research and advocacy initiative to examine the interaction between economic inequality in u.s. and its implications for macroeconomic prosperity and growth.he what is the fed hoping to learn from this initiative and how is the fed hoping its findings will further the economic inequality discussion? >> so, i don't -- >> i don't see itself as a political plot. see it as a contribution in terms of promoting economic growth among those who have been left behind. >> yes, i think the high level of poverty and inequality in the united states is a concern, should be a concern to all americans, and an important challenge that our nation

hopefully will address, and the initiative is really focused on trying to understand what some of the key factors are that are driving those outcomes and looking at practice to see based on real world experiences witht programs that are attempting to address poverty, what works word what lessons can be learned that might be of use to communities trying to deal with entrenched poverty. >> thank you. >> time of the genting lady has expired. this chair recognizes the gentleman from missouri, chairman of the housing and insurance subcommittee. >> thank you, mr. chairman, and chair yell can, welcome. we spoke about the sheer volume of rules out of the federal reserve. it's rule after rule, layer of t regulation after layer of regulation and that impacting r financial institutions, whether they serve a small community in

missouri or customers across the globe. now we have the merchant banking and fiscal involvement by the fed. as my colleague indicated. and i hope that you work with this body with regards to those rules. fed officials have made statements to the effect that the benefits of merchant bank outweigh the potential risks yet be seem intend to find a solution where there is no problem. that concerns me greatly and we intend to have a number of questions, written questions forks you responsibility to witn regard to that issue. today i want to discuss the specific designation stuff that was announced. it's important. we suddenly now recognize it should be death senated based on risk, not just on size. that's an important thing. secretary lew was here last week and made the same comment, we need to look at other factors rather than size and that's your position now. a can you tell me what

administrative costs of will be incurred be in the fed to removal -- >> i'm sorry --at >> the coalitions by the fed toe remove the requirement of being a -- the stress test? >> well, we believe that stress tests are a very important way -- >> i'm not talking about whether you do or not -- what is the cost that -- what is the savings that you're going to have or there is a cost to designate, a cost to administratively remove the requirement? >> is there a cost in terms of dollars and cents? >> yes. >> to be spent on it. >> the fed have to -- is the cost you something to administratively remove the -- designate -- >> does it cost us to implemente and run the test? and would we -- are you asking me -- i'm asking you to remove the requirement that, does it

cost you money. >> money to remove the requirement? >> yeah. the -- does it cost you money. >> does it cost us money? no. >> that's what i -- >> i think it would be a cost in terms of safety and soundness. >> i'm not talking -- i'm talking about the fed. does it cost you my to remove the requirement? you said. no that's the answer to my question. >> any costs that we incur in carrying out the stress testing is passed on to those institutions who pay for the cost of their supervision. >> okay.for the office of financial researse conducted analysis of systemic importance of 33 u.s. bank holding companies based on the ten nats oft my bill. thank you tell me what you thinb the costs would be for -- toe redesignate a financial

institution use, to what? >> to redesignate these institutions if they are no longer -- according to the bill. have a bill that says you have to look at these things and if it shows the institutions are not -- you have to redesignate them and they redesignate them if they. is there a cost to that? >> ese issue think it's clear that -- >> can you give me a figure? >> no, i cannot give you a figure. >> okay. can you give me a ball bark? 100 bucks, thousand bucks, a million bucks, $10 million? >> i can't give you an estimate. >> well, the problem is that the fsoc, which includes the federa reserve that the dee designation and potential redesignation of banks that are over 50 billion inned a it assets would have administrative costs of $60 million. you think that's reasonable?

>> i honestly don't know. >> you have any idea how your staff arrived at the figure? >> this is the fsoc staff? no they did it in conjunction with the federal reserve staff which is part of fsoc. your staff came up with the ferrell. >> if not not reviewed how they came up with the figure. c >> so if we write you a letter you'll be willing to give us a response on that.he >> i can try to do that. >> okay. very quickly, you made the comment a minute ago with regards to what you have done for community banks to help them with regulatory problems, this inundation of rules and regulations.re can you give me examples. >> of what we have done? >> yes. >> we changed the small bank holding company policy statement to raise the, thehold for -- >> i think we did that in congress. >> you did but we put that into effect.>> we have -- >> i'm glad to you implemented our law.

thank you very much. >> the time of the gentleman has expired. the chair now recognizes the gentleman from california, mr. sherman. >> madam chair, good move or nonmove earlier this month at the fmoc. now, some in politics on mondayy will say that our economy is in such terrible shape that those who make economic policies are obviously incompetent. then they'll come back on wednesday and say it's urgent that we raise interest rates because our economy is -- may overheat and economic growth could get out of hand. only in this room can you juxtapose those two positions. we need to allow small business loans -- i've been told by many bankers if there's a two percent or three percent risk a business will go under they can't make the loan. jamie diamond was sitting where

you are now and said he couldn't find qualified small business borrowers under the standard so hint his money to london where it was eaten by a whale. it would do lot for the security of our financial system and also help the economy of this country if banks were able to make prime plus three, prime plus four loans to businesses that had a little risk and of course provide a reasonable reserve. instead, i'm told that if you don't qualify for prime plus two, you leave the office. i join the chair in saying that it's a good idea to tailor your regulations and the say the more you designate the lessigancely y you -- lessigantly you'll -- and it's the huge institutions that systemic risks i want to address

the elephant in the room or the stage coach. i remind you that the fsoc has the authority to break up the biggest banks i've said that before in this room. people said you must have an muss to the true global -- no study microbilology. a protest sew a retches a certain ties and divided. you think she smartest minds on wall street could as well. too big to fail is too big tohe exist. to to big to fail is not too big to bail.s that's why we bailed them out in 2008. to bill to fail is too big to jail. that's why eric holder says he couldn't indict certain institutions because it would have too big of an effect on the economy. too big to fail, to big -- is

too big to compete with. that's why some studies they get 80 basis points off the cost of capital, might be less, because of the expectation of those providing the capital if they get in trouble we'll bail them out. but wells fargo has identified two additional reasons to break these institutions up, but a they created a system where they hired good americans and turned 5300 of them into felons. two million felonies. they failed to monitor the system, when they saw that there was a -- that some individualsls has created phony accounts, they fired a thousand of them andnd didn't change the system and didn't fire the executives that created the system, that created the first thousand felons. now, from a democratic side i say too big to fail is too big to manage. from a republican site i've heard too big to fail is too big to regulate. whether the fault is the regulators who can't regulate it

or the managers who can't manage it, too big to fail is too big to exist. b so my question for you is, will you seriously consider using your authority, as i think you're required to review and consider using your authority, will you at least seriously consider breaking up wells fargo? >> well, we will hold the largest organizations to exceptionally high standards off risk management, internalceptioa controls, consumer protection. -- >> but if you broke wells fargo up and instead of trying to hold them up to high standards, people could choose which financial institution to go with, they wouldn't pose a a systemic risk by saying you're going to hold the gianto institutions up to standards, something youthful have not beep able to do, two million times.te two million phony accounts. so you're going to continue to

do a great job of regulating th. too big to fail because you won't break them up? >> well, we believe it is possible, even though it's extremely challenging, for organizations to comply -- >> 2 million phony accounts not detected by the regulators. break them up. >> time of the gentleman has expired. the chair now recognizes the gentleman from michigan, chairman of the mon temporary policy and trade subcommittee. >> thank you, mr. chairman. and madam chair, i appreciate you being here. but quite honestly no offense, were you warrant. we need to have the vice chair of supervision to be here. this is something that the administration has refused to -- a position that the administration has refused to. appoint for six years now. governor trujillo has fulfilled the function from his position as chair of the fed board's committee on supervision but not in this position and honestly by

refusing to fill this position, i believe that the president has deprived congress and the american people an opportunity to hold the fed accountable through these semi annual hearings. this is a requirement of dodd-frank. much vaunted dodd-frank. that some of my friend believe is holy script that can't be chippinged or altered but refuse the other areas. do you believe there should be a nomination? to philadelphia this -- to fill this position. >> we would certainly welcome a nomination. >> have you brought that up with secretary lew in your weekly lunches. >> this is a matter for the administration -- w >> that's not my question ofht t have you bright it up? you're having to be here in somebody else's stead.qu have you brought it up with their administration or specific live secretary lew or issue in else.er >> i'm not going to discuss what i have discussed or haven't with the secretary.

it is administration responsibility and we would certainly welcome a nomination. >> i guess we'll continue to hold you responsible for that obligation, which is something that you shouldn't be held for, but that your decision. >> i think -- >> -- i'm going on. do you believe any and all rulemaking railroad can regulatory or supervision should be suspended until the vicee chair is actually named? >> no. think the board of governors is charged with supervision and putting in place regulations, and we're carrying -- >> then who do we hold responsible for that? >> -- carrying that out. >> who do we hold responsible. >> i'm responsible and my colleagues are responsible and i'm dish. >> as long as your willing to fulfill that obligation -- >> we were -- congress has signed the board of governors that responsibility and i am certainly sharing that not responsibility with miscolleagues. >> is going fast. i want to talk about monetary

policy verse supervisory roles. the fact is that in my federal resight and modernization act and by extension the choice act, we are trying to bring some separation to your function as monetary policymakers as well an your regulatory and supervisoryn roles. former senator and bank committee chairman chris dodd as well as chairman frank at the time, had advanced legislation or the notion that that ought to be separate duties and that your regulatory and supervisory roles ought to be put on budget. and i'm curious, where they wrong in that assessment in. >> well, congress decided to -- >> no you would welcome, then,

if congress decided -- you would welcome having that separation and putting your regulatory and supervisory roles under budget and with review, just likeom everybody else, every other regulator versus the separation of your monetary policy duties.w >> well, the banking agency does not have their budgets mandated by congress. they're covered by collections from the industry. i would very much worry that we would lack the flexibility under congressional appropriations to ramp up our supervision at times when -- >> but we have an alphabet soup of regulators that are there as well, and so it seems to merome you're want tolls have your cake and eat it, too. you want to have this as super-duper regulatory role where it's fed uber on this

stuff, but you're not willing to subject you've are yourselves to the -- what the other regulators go through and it seems like -- rarely do i say that i agreeato with barney frank but i believe chairman frank did hat thist right and that there is that separate role. my last issue is quickly closing out here, some have believed that dodd-frank cannot be changed. at all. any way, shape or form you. said on page 14, a number of times there ought to be adjusts. have you spoken to this senatoru or other reps who say we cannot touch dodd-frank. >> very brief answer.ha >> question said those would be desirable changes. >> time -- >> i hope you're expressing that at the members. >> time of the gentleman has expired. the chair now recognizes the gentleman from new york, mr. meeks. >> thank you, mr. chairman. it's a pleasure to welcome you back to this committee, and let

me just say on the outset i also thank you for staying with who you are, being nonpartisan and independent, despite their being some, especially in the president cal politics -- presidential politics are trying to say your decisions are based upon a partisan way. in fact i think it's good when you are criticized from both the left and the right. that's probably means you're doing the right job because c you're not focused on either side. job and we in this committee specifically reinforce the banking supervision's powers of the federal reserve in dodd-frank, because there was clearly a need to heighten our banking examinations and regulatory framework. think that is clear from what took place back in '08. the good news is that we are seeing banks taking bolder steps to reduce risks, as you have

indicated, and to exit out of certain risky activities. we see some of that happening. even if some would say that banks are bigger today than they were before the final crises, that probably may be true from a simplistic public i -- perspective but not a complete and accurate picture because not only have banks exited riskier businesses they also boosted the capital and liquidity buffers which increases the side of their balance sheets but makes them safer and sounder institutions. so this is a complicated step which is true. and then yet we still have wells fargo, which causes to us have great concerns at to where we need to go next. we all have questions with him. greahere's been some progress but also unintended consequences, and i want to shift to that now just to -- it is well documented that one of the unintended consequences of banks derisking has been that