your mission is to promote effective global consistent supervision of the insurance industry. we are i think at a point now where -- maybe it's because of the 2008 collapse, everybody is nervous about everything and everybody is afraid that there's a new regulation that's going to come in to cause the world to collapse and allow the mets to win the world series. [ laughter ] >> i'm sorry. but, you know, there is no need for this hysteria, is there? >> there's no need for hysteria at all. we are, as i said, looking very carefully at our own firms to design an appropriate regime. and by participating in the iaies, we're trying to make sure

that we weigh in on how other countries set up their own regimes, in a manner that will be good for u.s. firms and the u.s. market. it's an attempt to influence what other countries do and thereby ensure a level playing field that works in our best interest. >> their angst is based on the fact that they believe we might end up accepting standards from the international community that might create problems for them here at home. >> nothing that's adopted internationally has any binding force in the united states. we go through our own rulemaking process and decisionmaking. it's our internal decisions now. of course, given our thoughts on what's appropriate, we're using that and collaborating, doing this collaboratively with other

u.s. insurance regulators. we're presenting positions in basel, attempted to influence the international decisions. but we decide here what's the appropriate regime. >> thank you, madam chair. >> time of the gentleman has expired. the chair recognizes the gentleman from illinois, mr. holmgren. >> thank you, mr. chairman. chairman yellen, thank you so much for being here. i've been closely following the work of the fed and other regulators during the agrip pa process. i sent a letter a couple of weeks ago when a public outreach meeting was held at the chicago fed. i'm very supportive of the agrippa process and i imagine you're hearingful of the concerns i'm hearing from the banks in my district. in addition to the report that is mandated to be provided to congress what tangible regulatory relief can we expect as a result from this process? >> we are listening very carefully to the concerns that are raised in the hearings and

in the course of taking comment in this process. and i'm very hopeful that there will be things that we can address and look to change that will reduce regulatory burden. an example of the kind of thing we're hearing, for example, has to do with appraisal requirements. that many community banks think the cutoffs are too low and make lending difficult, particularly in rural areas. i'm sure that's something we'll take a look at reporting and so forth. >> can i jump in on that. your written testimony notes the banking regulators have taken steps to reform the call report. as you're probably aware it's grown from 18 pages in 1986 to 29 pages in 2003 to nearly 80 pages today. would you support legislation requiring the banking agencies to issue regulations allowing for reduced reporting requirement for the first and third quarter, assuming they are

highly rated, specifically if they have camel's composite rating of 1 or 2? >> so i believe this is a matter the ffiec is studying carefully. i think there is a mutual desire among the supervisors to reduce burden on smaller institutions. i would suggest you let that process play out and we're all trying to do what we can to reduce burden. >> god good. we appreciate that. we continue to hear from our smaller and medium-sized institutions of feeling the weight of this and growing burden. as you know, the supplementary leverage ratio requires a banking organization to hold a minimum amount of capital against unbalanced sheet assets and off balance exposures regardless of the riskiest of the individual exposures. these capital requirements yield an economic cost to financial institutions and are a major driver of what assets they're

able to hold. why is the supplementary leverage ratio applicable to funds banks deposit at the federal reserve despite the low risk of these funds? >> the supplementary ratio is meant as a backup ratio that works as a backup to risk-based capital standards to make sure that the minimum amounts of capital held by banks are sufficient. and it's a requirement that is based on the size of the entire balance sheet of the organization including low-risk assets, such as accounts held at the federal reserve. it's reflective of the overall size and scale of a firm's balance sheet. for many organizations the supplementary leverage ratio is unlikely to be the binding

ratio, particularly for the larger organizations that face sifi surcharges, the risk-based capital requirements are likely to be what's binding going forward. >> chairman yellen, do you chair the concern that the minimum interest rate paid by the fed on these deposits is far below the yield some banks would need to generate in order to offset the economic costs of the capital requirements in the supplementary leverage ratio? and along with that, with just a few -- less than a minute left, i wonder what advice you'd give to banks which as a core function of their business model hold large cash deposits for their institutional customer base and what advice would you give to their customers? >> i'm not positive i really understood the question. you were asking about the level of interest we pay on reserve balance? >> right, that was the first part of it. then i was trying to sneak in the last question of advice -- again, where banks have a core function of holding large cash deposits for their institutional

customer base. yet because there's a cost with that and it impacts, again, the ratios that they need to hold, we're hearing concern from some important institutions, northern trust, others, that are feeling pressure from this. >> i would say with respect to interest we pay on reserves, that is our key monetary policy tool and we set that not to cover particular costs of banks but to establish a level of interest rates that's appropriate for the economy. >> my time is expired. i yield back. thank you. >> time of the gentleman has expired. the chair now recognizes the gentlelady from wisconsin. miss moor, ranking member of monetary policy and trade subcommittee. >> madam chair, thank you so much for appearing. it's always good to see you. i was wondering and hope you haven't been asked this question over and over again, i am

curious about how going through another round of living wills has informed you and other regulators implementing the orderly lick wa days facility and the cross-border liquidation of large systemic banks and of course nonbanks, sifis? >> we have learned a lot from looking and evaluating the living wills of the firms we have reviewed. we recognized cross-border issues are among the most challenging. we have made progress in working with those firms to encourage them or even require them to adopt changes in a set of financial contracts that would, under the existing rules, trigger, make it difficult to resolve a firm by

triggering early termination rights to derivatives contracts. so one of the things that we asked the firms to do in the most recent submissions is to work on that and to change the nature of those contracts. more generally, over several years of reviewing living wills, we have been able to give very detailed guidance to the firms about what the shortcomings of those living wills are and what we wanted to see in the submissions this year. we're working closely with the fdic to evaluate this latest round of submissions, and we are prepared to ask the firms for significant changes or if need be to determine that a living will is not credible. >> thank you, madam chair.

just kind of as a follow-up, there have been a lot of critics of the stress tests. and i was wondering, how has this criticism informed your regulation and has it contributed to a better focus in your oversight? >> we are currently, i think it's been five years now we have conducted the stress tests. we have learned things in every round and work with the institutions. to try to improve what we do in their understanding and the public understanding of these stress tests. i really want to say that this is one of the most significant innovations in how we conduct supervision. it is a truly forward-looking and comprehensive evaluation of how firms would fare under the very stressful conditions of the type that we experienced in 2008

and 2009. the firms themselves, i think, if you were to talk to their executives, they would tell you they have learned a lot about the risks in their organizations and how to manage those risks, because they have been required to engage in such rigorous analysis. we see some marked improvement in the capital planning processes that are going on in these firms. they're asking themselves hard questions about what capital do they need to make sure they are sufficiently resilient. so this is a very important exercise. it is a core key part of our supervision of the largest firms. and i -- we will -- we're reviewing our experience to see if there are some changes we can

make to make this more effective and where possible to reduce burden. this is a major innovation i believe has culted in much sounder supervision, especially of systemic firms. >> thank you so much. mr. chairman, i would yield back the balance of my time. >> gentlelady yields back. the chair now recognizes a gentleman from minnesota, mr. imer. >> thank you, mr. chair and thauction thank you, madam chair, for being here this morning. madam chair, i will go a different route. i don't think anybody has asked this this morning. will the federal open market committee ever rule out going to negative interest rates? >> rule out is something we tend not to do. i don't at the moment see a need for negative interest rates.

the committee is seeing a domestic economy that's been proceeding on a steady path of improvement. our focus has been another possibility that it will be appropriate to begin to raise interest rates. this is something we're actively considering although no decisions have been made. if circumstances were to change, suppose the economic outlook, which i don't expect, but if it were to deteriorate in a significant way, so that we thought we needed to provide more support to the economy, then, po -- potently including negative interest rates would be on the table. but we'd have to study carefully how they'd work here in the u.s. context -- >> let me ask you, because we've seen it in other countries. >> that's what's new, yes. >> yes. when they've had economic

difficulties, we've seen other countries use negative interest rates or go to negative interest rates. >> right. >> what impact, madam chair, would negative interest rates have on lending? and economic activity? what impact do you believe it would have? >> most loans would not have negative interest rates even if a central bank pays negative interest rates. >> i understand. but what impact would it have? on lending? >> it would be intended to spur lending and i believe would have some at least modest favorable effect on banks' incentives to lend. and it would be undertaken as a measure to support the economy and to encourage additional lending and to move down the yields on interest-bearing assets to stimulate risk-taking, investment spending. >> i want to change just a

little bit. i'd like to talk about this proposal and if you could clarify it for me. the tlag proposal that was discussed last week, was that finalized last week? >> no. it's a notice of proposed rulemaking, it's out for comment. >> because it's been around for a while, you've been discussing it for a while. >> members of the fed, the governor and others have given speeches on this. it's something that's being discussed internationally in the ffb. the united states is contemplating this. we're working jointly with the fdic. it's an important step to ensuring that the fdic's single point of entry strategy would be workable in a title ii resolution or in a bankruptcy resolution. we see it as very important.

it's been under discussion quite a long time -- >> picked interrupt you. in the short time i have left i'd like to ask you specific things about the tlag proposal. some of the analysis i've been provided suggests it penalizes firms for what is broadly understood to be a desirable business model, gathering deposits and making loans. in fact, some have even suggested the effect of the new rule could be interpreted as a tax on deposit funding. would the federal reserve benefit and have you done, because i know this question has been asked before, from a quantitative impact study being conducted by the fsb prior to implementing the new tlac proposal? >> so i think that's frankly a mischaracterization of this proposal. the purpose of this proposal is to ensure that if a firm becomes insolvent that there is -- >> would you benefit -- forgive

me, i've got 20 seconds left. would you benefit from a quantitative impact study being done prior to implementation? >> we have carefully analyzed this proposal, the costs and benefits -- >> have you done a quantitative impact study? >> we've done a quantitative analysis and -- >> would you share that with us? >> there is information contained in the proposal that we published. >> all right. well, the analysis -- is there any -- well, it looks like my time is expired. >> the point is that the deposits are not a liability that is capable of absorbing losses when a firm is in trouble. we've seen that in financial crises. and the point of this is to make sure -- >> thank you, my time is expired. >> -- there is enough assets at risk. >> time of the gentleman has expired. the chair now recognizes the gentleman from delaware, mr. carney. >> thank you, mr. chairman. thank you for coming in for a

hearing you wouldn't normally do and thank you for filling in for that vacant position and for listening and responding to all our questions. there's been a lot of debate on both sides of the aisle and the committee the last several days about regulatory relief, mainly for mid-sized banks and smaller community banks. and you addressed it a little bit in the answer to some of your questions of my colleagues. i'd like to ask questions about that. mr. hurt talked about these banks, particularly community banks being the lifeblood of our communities and rural communities. contradicts across the country, particularly rural districts. not so much my state, state of delaware have fairly sophisticated financial services, institutions, some of the biggest. we're not talking about regulatory relief for those firms. but there's been a lot of debate about what's the best way to do it? one side of the argument is, well, the fsoc and regulators have the next bit flexibility

under dodd frank to tailor these enhanced regulations for the size of the bank. i have a list of banks, bank holding companies, $10 billion hence subject to the ccar process, comprehensive and capital analysis review process we've been talking about. this is what we hear from our banks as to expense involved in that. that.overnor turillo said the $50 million bull cutoff -- this is $10 billion and above and you have casual regulations if you're $50 billion and above. and mr. tarullo said that is way too low. i talked to him directly in my office and he said something very far north of $100 billion. we considered a bill today in committee, i did not vote for it, that would have used a different approach.

wouldn't have a size cutoff but would apply an activities-based approach. what's your view of that? i mean, are we -- is this a better way to do it? and part of that question is, do you have the authority -- i heard you say earlier you do not have the authority to appropriately tailor these ccar processes for some of these smaller and community banks. >> by and large we have considerable ability to tailor what we do to fit the complexity and systemic footprint of an institution. >> what did you mean when you say we don't have the ability to day who are for smaller banks as necessary? i don't know if that's a direct quote but i tried to write down the words that you said. >> so banks $50 billion and

above are under dodd frank subject to stress testing requirements and resolution plan requirements. that while we can tailor to some extent we can't completely remove. what we have found for some of the smaller institutions, the costs exceed the benefits. >> time is running out. i'd certainly be interested in having a conversation what is a better way to do that and give authority, flexibility and authority to enable you to provide the appropriate tailoring that's necessary. you look at this list of banks, jp her began base, $2.5 trillion bank, it's a lot different than the bank of hawaii and some of these other, motor strom,

nordstrom, ink, which i didn't know was a bank. i suspect some of those that are much smaller than the top five or six wouldn't -- don't have any systemic risk associated with them and shouldn't be then subject to some of these more expensive -- they could do what they do, right, length money so people can build businesses and buy homes and the like. >> we have eight banks that have been designated as u.s. gsibs and those banks are subject to a heightened set of requirements with risk-based capital surcharges and enhanced leverage ratio and tlac requirements that the banks below that, those eight, are not subject to. so even among the largest banks we have been able to tailor our rules. >> i'd be interested in hearing

more about how we would day lower for some of the smaller banks. my time has run. thank you for being here. i yield back. >> the chair now recognizes the gentleman from indiana, mr. stutsman. >> thank you, mr. chairman. thank you, chair yellen, for joining us today. i'd like to talk a little bit about the comment you make in your written testimony regarding the lessons of the financial crisis that we have learned. you state, to supervise financial firms in a manner that promotes the stability of the financial system as a whole and limit the systematic -- systemic damage that would result in a large financial institution does fail -- obviously we always want to learn lessons from different situations that we have experienced. prior to the collapse in 2008 the fed was created to -- was

focused on financial stability. but we still see about one -- once per generation some sort of collapse. how do you believe that what the fed is doing now prevents us from another experience like we did in 2008? >> as i try to describe in my testimony, i think the focus of supervision has changed and is now far more focused on financial stability than it ever was prior to the crisis. we are trying to diminish the risks of another financial crisis in a number of ways, most important i would say is improve the resilience of all those

systemically important firms so that they have much greater ability to survive adverse conditions and to continue to meet the credit needs of the economy. we have much more and higher quality capital, higher liquidity requirements, stress testing procedures which i've discussed earlier this morning are providing a much more robust way of attempting to detect weaknesses in these organizations. >> okay. >> so we're doing that. and also we are working very hard to address too big to fail by making sure that if one of these firms was faced with insolvency, that we could resolve that firm in a manner that would not create systemic risk, would guard the remainder of the financial system from

systemic risk. >> thank you. so what -- can i ask you, what portion of your time each week is typically spent on regulatory matters relative to monetary policy? >> a good share of my time is spent on regulatory matters. i'm not sure i can tell you exactly and it certainly varies from week to week. but a substantial share of my time is devoted to regulatory matters. >> do you have any concern that if the focus is on regulatory matters that it becomes a politicized regulatory -- the focus becomes more political at some point when you're focused on the regulatory side rather than the monetary side? >> i have never seen the focus in regulation to be politicized at all. >> as far as the frequency of financial crises, and you would say that -- would you say that

any of them were successful as far as the regulations that were in place that kept us from some on or abo other greater collapse? >> you're talking about earlier crises? >> correct. prior to 2008 the fed was focused on -- go ahead. >> we were -- i think the united states was very fortunate from the great depression until 2008 we never suffered a major financial crisis. and i think conditions developed prior to the crisis, this was a variety of things that came together that provoked a very, very serious crisis. >> let me ask you this, why do you expect basel 3 to be more successful than basel 1 or basel 2? >> i think that we have improved capital standards by raising the quantity and quality of capital we demand particularly of the most systemic organizations and

we've designed kind of backup leverage requirements that also serve to enhance safety and soundness. >> thank you. >> time of the gentleman has expired. the chair now recognizes the gentleman from illinois, mr. foster. >> thank you, mr. chairman. as you may be aware, there is a shared enthusiasm on the part of both the chairman and myself of contingent capital instruments as a way of stabilizing the banking system. and i have got a copy of a staff memo describing the actions taken last week, the preliminary rule. and it seems to me, i haven't completely digested this, but it seems to me that you are implementing contingent capital requirements for the u.s. subsidiaries of foreign-owned ihcs. is that correct? >> what we've put in place or

what we are proposing is a long-term debt requirement. i don't think i would use -- i'm not sure precisely how you'd define contingent capital -- >> it's explained in this memo as eligible internal ltd of foreign gsibs. >> this is for foreign? >> right, but it's my reesing -- >> u.s. -- >> right, that the federal reserve board will be operating the trigger for the conversion of these, is that correct? so that -- >> you're talking about the foreign banking organizations? >> foreign, yeah yeah. >> so we're making sure that the u.s. subsidiaries of foreign banking organizations will be required to set up an intermediate holding company have enough essentially debt that has been issued to them by their parents, that if we -- it will make it easier for that to be resolved --

>> i understand. they accomplish very similar things. >> they do. >> the difference i see between cocos and just unsecured debt is one triggers an insol vaens, so there has to be determination by the regulation uryou're a growing concern and not going into debt. >> correct. >> that appears to have been chosen by u.s. companies whereas you allowed or chosen the coco mechanism on the federal reserve would say you're in violation of capital requirements, you're not insolvent, you're in violation of capital requirements, therefore converting it to equity. my question is do you have it in place and will the feds be operating that trigger mechanism in the case of foreign-owned subsidiaries? >> clearly in the case of u.s. subsidiaries what we want is in the title ii resolution and the loss absorbency, the fdic, to be able to recapitalize -- >> what i'm searching for is --

right. you know, i view this, the european solution, the coco mechanism, as superior because it warns the banks when they're in danger of being -- there's a market-based signal that warns the banks when they are in -- likely to be in violation of their capital requirements, not that they are likely to become insolvent. right? do you understand? and that i view as a major difference. i think that the political nature of that decision will be much easier and less fraught if you're talking about triggering the conversion to equity rather than to sending the firm into recess las vegas. for that reason i think it's likely to be less politicized and moreover it is much more likely to yield a going firm at the end of this. so i was wondering why you had decided then to allow for foreign subsidiaries, you know, the mechanism of cocos, and yet not included in the capital stack of u.s. firms and what the thinking was behind that.

>> so i'm not sure i'm going to be able to explain this to your satisfaction. we think in the case of a foreign firm, many foreign regulators, if a firm got in trouble, would want to essentially engage in a single point of entry type of recapitalization. and the structure that we have proposed i think would make that possible. we would end up cooperating with a foreign supervisor who was trying to resolve her firm. if there were problems -- >> and the coco triggers when a firm needs resolution, right if as i understand it the coco triggers when the firm violates its capital amount but is not yet insolvent. is that right? >> if the firm were united states our supervision in the united states, to violate that requirement, we would demand i guess that it would be refilled

so that if the firm were to be in trouble and we needed to resolve it, it wouldn't operate in the manner you suggested. >> all right. so i guess -- it sounds like you have in place the trigger. the reason i brought this up before the response i've gotten is, well, the trigger is too complicated for us, really, to set up. whereas it seem like you plan to set up suffa trigger. anyway. would it be possible to get me a briefing on this whole thing? >> yes, certainly would be glad to do it. >> appreciate it. >> time of the gentleman has expired. we recognize mr. mulvaney from south carolina. >> thank you, mr. chairman. madam chair, i know it's a relatively minor issue in the greater scheme of things but since this is an oversight hearing more than it is a monetary policy hearing i want to go back to congressman duffy from wisconsin's line of questioning regarding the 2012 leak, generally your policies on those sorts of things when we're dealing with what we call information security rules. mr. duffy asked you a question, i don't know did we're able to get to the bottom of it.

you said in your cover letter to him about two weeks ago, reducing the documents, you wrote the following. "as chair i have implemented the practice of immediately referring to the inspector general all suspected material security breaches involving fomc information." i believe that's from your letter. if it's not please let me know but i think that's a fairly accurate representation. and his question was, why -- and my question still is -- you say you have implemented the practice. why hasn't that become part of the formal policy of the fed since you've been the chair? because the policy's different. the formal policy's very different from that, as a matter of fact. so help me reconcile your practice and the formal fed policy. >> the formal fed policy says that in the case of purported information, security breach, there should be a review by the fomc secretary.

>> correct. >> and general counsel to determine what the next step should be including whether it should be referred to the inspector general. of that policy, the way i understand that, is that if there is a material breach, it is appropriate to refer it to the inspector general, and i've done so. if these rules need clarification, that's how the fomc chair is tasked with handling these investigations and that is my understanding of the rules and how i intend to proceed. >> so let me see if i can cut to the chase on this. i think what you're saying is that you believe that your practice is entirely consistent with the policy and that what your letter really said was, without saying this after the

general counsel did their investigation, i would immediately refer it to the inspector general? >> i've taken the view of as as soon as we have determined that there is a material breach, i have asked the inspector general to look at it right away. >> right, and you wouldn't determine there was a material breach until after the general counsel and the secretary have done their -- >> they need to do a review. >> correct. i know this is stunning since i actually agree with you, if you want to take yes for an answer and quick move on. >> the kind of thing that happens sometimes somebody has a usb with a draft of something on it and it drops out of their pocket in a taxi, or they lose their blackberry. now, there are security procedures both in usbs in and in blackberries that should disable them and protect the information. but the fomc secretary receives reports of such things.

in general, i wouldn't refer such things to the inspector general, but something that is a material breach, i would do so and have done so routinely. >> fair enough. >> there have not been a lot of things but i have -- >> before we go back to the 2012 leak, let me simply ask you the question, have you ever actually activated this practice since you have been the chair at the fed? >> the practice of referring to the -- yes, i have. >> have you disclosed all those referrals to congress? >> i'm not -- i'm not certain. for example, i think we have -- we did disclose publicly that a portion of the fed staff's forecast was accidentally disclosed on a website, where it was included on a website. >> fine. and again -- >> and that was referred. >> i'm familiar with that

example. i'm asking you if there's ones we don't know about? have there been referrals to the inspector general that you've not notified congress of, publicly or privately, since you've been the chair? >> that have not referred -- have not told congress about it? >> yes, ma'am. >> i need to check on that. >> fair enough. let's go back. by the way, one final change. i know this is splitting hairs. i used to be a lawyer in the real world a long time ago and this is the type of stuff that catches my eye every now and then. y'all switched the policy on the security breaches somewhere about 2014, 2015. you're shaking your head no but you did, right? >> we made a small change. i know it has been alleged that was a weakening of the requirements. it absolutely was not in any way a weakening of our requirements. >> very briefly, it's your testimony, ma'am, that the small changes in language, changing an investigation from a full investigation, was not intended to change the scope of the rule at all? >> absolutely not.

there was nothing, as far as i know, about full investigation. >> thank you. >> time of the gentleman has expired. the chair wishes to inform members that chair yellen will be departing at 1:00. presently, i think we can clear the queue in the room. members who may be monitoring from their offices, you are out of luck. the chair recognizes the gentleman from washington, mr. heck. >> thank you, mr. chairman. madam chair, thank you for being here. indeed, thank you for your outstanding public service. >> thank you. i appreciate that. >> i think you probably heard something closely resembling consensus here today from both sides of the aisle about concerns regarding regulatory relief. many of us share your commitment providing for both prudential protections as well as consumer protections as well as enabling the free flow of credit but with a belief on our part that that

could be done with a bit of a lighter touch. i'm hearing that somewhat from you today. indeed, my perception is that the regulatory structure is in fact moving from what i would characterize as actively resistance to receptive. >> very receptive. we are actively looking for ways we can safely diminish burden, particularly on community banks, but also smaller institutions that are, for example, subject to the 165 rules in dodd-frank, those over $50 billion. so we are very receptive and actively engaged. >> so my encouragement would be that you would move it from reseptemberive to being proactive, and in the spirit of that recommendation, i want to -- and if this has been asked, i apologize -- follow up with your testimony where on page 11 you indicate that the reserve is giving all of these

suggestions careful consideration and will be working closely with other banking agencies in developing a report to congress at the conclusion of egrpr-a review, which is a deregulation exercise. >> yes. >> approximately when can we expect the report? >> i'm not -- do you know when that's over? egrpr? by the end of next year for sure. >> by the end of? >> by the end of next year for sure. >> by the end of 2016. then i would encourage you to see if there's any distance between the pedal and the metal on velocity of that effort. because i think it would may a very constructive part to move from receptive to proactive. i think it's important that you all be a part of this. because frankly, otherwise what i observe here is you have those who legitimately believe that we

can do a whole lot less, but that which many of us believe would compromise prudential considerations and consumer safety considerations and so we react accordingly. >> yes. >> and the positive, constructive advancement on your part i think would be very helpful to -- >> i think that's -- i think that's completely fair and i pledge that we will try to be proactive in looking for -- actively looking for ways that we can reduce burden. >> i have another question. we tend to think about the fed's monetary policy as its big lever to deal with the issue of price stability and the fed fund rate that you set. fy understand this thing correctly, and i may not, you also have the ability to set the interest rate that you pay on excess reserves that member institutions have with you. which seems to me to have potentially the same benefit as

hiking the fed funds rate because if they are incentivized to leave more money with you, it's less money that they lend out, which is tapping the brakes on inflationary pressures. why would you do one over the other? what are the comparative benefits of doing just fed funds rates versus looking at excess reserve rates? >> so the interest we pay on excess reserves will be the key tool that we use in order to raise the federal funds rate. the federal funds rate is not something we can decree. it is a market-determined rate. and when we decide it's appropriate to raise that rate, we will accomplish it by raising what we pay on excess reserves. they're intimately connected, not two separate tools. interest on excess reserves is critical. and we expect by raising it the

short-term interest rates generally on money market instruments will all rise across the board. and -- >> can i see if i can get one more in in 14 seconds? >> sure, yes. >> one of the rating agencies recently indicated that the exercise of living wills is actually working and they put it in writing. we're about to go through another roundthink this winter. what is your forecast for what the impact will be? >> we have very -- we have very detailed living wills. they are much more details than previous versions. they've responded to instructions that we carefully gave out. we are carefully evaluating them and will be making decisions in the coming months. >> time of the gentleman has expired. the chair recognizes the gentleman from north carolina, mr. pitten jer. >> thank you, mr. chairman. afternoon, chair yell len. let's see if we can answer five questions in five minutes.

i'm following up on the chairman's questions regarding the role of the fed in the board room. i'm going to read a quote from the "financial times" august 2014. that said, fed officials are also involving themselves in the kinds of decisions the company management or board of directors usually make. including whether employees should be fired or disciplined. which has been surprising. miss yellen, do you support this type of activity, notwithstanding that you said it's not the policy, but do you support this type of invasive participation by the fed? would you approve of it? >> well, when there is wrongdoing as we have seen, for example, in the liber fx scandals, it is appropriate for us in addition to leveling fines to try to identify individuals who are guilty of wrongdoing -- >> as an ongoing process, do you think it should be a matter that the fed, for example, should be

opining on human resource decisions and so forth inside the board room as was quoted here in "the financial times"? >> so -- i'm sorry, what exactly did they quote? >> well, they just said that they were including whether employees should be fired or disciplined. that was one of the comments that was made. >> i'm not aware that we -- >> but would you approve of that, owe pipping whether this should be done or not? >> we should be not be managing firms, we should be making sure firms that appropriate systems -- >> should the fed then be micromanaging these board rooms and trying to dictate policy inside of a board room? >> we're not managing the firm, we shouldn't be managing the firm, but we need to make sure that the firm is managing itself properly. >> chair yellen, following up on mr. hurt regarding community banks, what reforms, if you can give some clarity on this further, would you say that the

fed could do to reduce regulatory purchaseds on community banks? and also what would you recommend that we as a committee would recommend to do to provide some type of regulatory relief or community banks to ensure that they can provide the best services and products for the consumers? >> well, there's a lot that we can do on our own and we have been doing it. we're trying to do more work off-site so that we have fewer examiners spending less time in full banks doing exams. we're trying to tailor our exams to the areas that are really high risk, either in terms of consumer compliance or safety and soundness. >> chair yellen, have you had occasion to go out and visit some small community banks? >> shull. >> how many have you seen? >> many over the years that i've been involved with the federal reserve. >> in the last two years, have

you been out to see any community banks? >> since i've been at the board, i haven't made trips to see community banks. but i meet with many community bankers. you know, we have the so-called cdac, which is -- in fact, we're meeting with the cdac on friday -- >> i think, if i could interrupt, a more in-depth awareness and understanding. i was on the board ten years. just to go visit the banks yourself it would make a major statement of your own and importance for community banks. i think you would get a sense from the staffing what they're addressing. you can hear from the ceo and the bank chairman. but i would really encourage you to do that. as you look at the imposition of the regulations on the financial industry, it's had really indirectly a major impact on industry that's left our country and moved offshore. we've seen that occur too many

times. what do you think can be done to make sure that we can provide the financial resources available and not have the regulatory impediments on the financial institutions, and frankly an impact on business froetss and their environment? they're leaving here and that's part of the problem. >> well, this is partly why we participate in international groups like the iaias or the basel committee, the europe financial stability board, to work -- >> how much success in this approach -- do you think what you're doing is working now? because we haven't seen the measured success we would like to see in terms of being able to attract companies that want to stay onshore -- >> i think we have seen success that we have a much safer and sounder financial system and other countries are also raising the standards that they apply to

their large banking -- >> thank you, my time's expired. >> time of the gentleman has expired. chair now recognizes the gentleman from minnesota, mr. ellison. >> i thank the ranking member and the chairman. thank you for being here, chairman yellen. really appreciate it. you know, we've had this big debate yesterday and the votes today on whether or not the $50 billion designation is the right metric for sifi designation. i tell you, i'm sympathetic to changing it but i didn't vote for either one of those proposals because i feel that after there's a big crash, then we regulate, and then before the ink is dry we're all trying to change it suddenly. and is it good or is it bad? and so what i want to see when a proposal comes back to change it -- so people, there may be a growing consensus that $50 billion could be different but we don't have a consensus on what it should be. and i guess my point to you is, knowing that our constituents

happy on us to do things that they want, our constituents aren't thinking about the system, they're thinking about their business and that's a generalization but i think it's generally true. i'm looking for good guidance from people like you as to if it's not $50 billion, what should it be and why? and so i'm sure that this issue's not going away. and so i just want to make that point cheer because i definitely believe that, you know, the $50 billion designation, the truth is that it is an imprecise metric. i'll agree to that. but there were some regional banks that caused some major damage in the last go-round so i'm not willing to just walk away without a real clear plan what's going forward. do you have any reaction to that? >> i agree with that and we have said modest increase. not a large increase. a modest increase. and while i think there would be some benefits to the smaller

banking organizations that are over that $50 billion threshold and would save us some supervisory resources, this isn't a must have. >> okay. well, so living wills, the very country are even larger today than they were in the financial crisis. living wills provision of dodd frank was created to make sure these banks never threaten the economy again by giving regulators additional power it is banks, living wills, are found to be not credible. the last time the fed and fdic evaluated the banks and living will, only the fdic took the official position that wills wither not credible. the fed's decision not to join the fdic has slowed both regulators' ability to take additional action. why would the fed voluntarily give up authorities to give up changes at problem banks? >> so we took the position that this was a depletely new

process. and we stated this when we put out guidance on the living will process that we expected to have to work with firms for a few und rounds in order to understand what we needed to see in a plan and to give firms reasonable guidance on our expectations. last summer that is why we declined to join the fdic last summer and did not vote to find the plans noncredible. but if we're closely and jointly with the fdic over the last year to give very clear, very detailed, and we're asking for very substantial changes on the part of these firms. they have submitted a new round of living wills. we're evaluating them with the fdic. and in the coming months we will

make important decisions. >> thank you. with my last minute i just want to know if you would be willing to offer your perspective on one of the observations of ben bernanke, as you know he came out with a memoir recently. in there he said something like this, it would have been his preference to have more investigations of individuals' actions as obviously a everything that went wrong were was illegal was done by some individual, not by an abstract firm. in that respect there should have been more accountability at the individual level. of course loretta lynch under the doj just said a month ago they're going to look into white collar prosecution a little bit more. do you have any observation on mr. bernanke's observation? what about prosecuting some of these folks who engage in fraud? >> i completely agree with his assessment. now, we can't engage in criminal prosecutions, but i would say to the extent that we can identify

individuals who have been responsible for wrong doing and significant breaches where we have leveled big civil money, money fines, we are trying to take action against individuals as well. that means barring them from working for those organizations or potentially for the banking industry. >> time for this gentleman has expired. the chair recognizes gentleman from kentucky. mr. bart. >> thank you, mr. chairman. chair yellen, welcome back to the committee. we routinely hear from president obama and senator warren that action was the principle cause of the financial. the threat to financial stability posed by too much regulation. let me take as an example the clo market collateralized loan obligations. this market provides more than $400 billion in financing for

hundreds of american companies that employ more than 5 million people. they are a crucial source of funds for many companies that cannot issue bonds. clos also performed extraordinarily well during the last 20 years with a nenlg i believe default rate. they performed better than high grade corporate bonds over that same period of time. unfortunately we are hearing from market participants that the risk retention rules promulgated by the fed will cause a contraction in the clo market and credit crunch for american companies. alternative sources of funds are available through hedge funds and the like. but they are not a stable source of funds and they will certainly demand a much higher interest rate. do you believe that american businesses are better served with expensive short-term financing from hedge funds as opposed to stable long-term financing options? >> well, we want to make sure that businesses have stable long-term financing sources.

but we also want to make sure that when securitizations take place that the originators do have skin in the game so that we avoid the kinds of problems that happen previously, and that's with those qrm rules designed to accomplish. >> i appreciate it. i would make a distinction between securitized mortgages at the epicenter of the financial crisis as opposed to, you know, highly rated commercial -- senior secured commercial loans that never defaulted in 20 years. i do appreciate the point about skin in the game. i wanted to just is ask you about a letter that we sent to regulators. i joined a bipartisan group of members of congress who wrote to you recommending you support the concept of a qualified clo, much like a qualified mortgage, a structure that would ensure the safety of these vehicles but also ensure a continuation of financing to hundreds of companies that rely upon them.

is that something that you would be open to? >> i think it's something we could have a look at. i would have to get back to you on it. >> i appreciate that. i would love to have that discussion with you. let me move on to the issue of illiquidity president market. secretary lew denied there was a liquidity issue or post crisis regulations are contributing to illiquidity in the market. in your previous testimony you you would not rule out the possibility of it playing a role. certainly your colleague acknowledged regulations may be a factor in diminished fixed income liquidity and there's been a lot of research on this. i'm quoting from one often cited piece of research. almost every institutional investor in almost every market seems worried about liquidity even if it's here today, they fear it will be gone tomorrow. they say that e trading is contributing to volume but

little depth for those who need to trade in size. the growing frequency of flash crashes and air pockets, add weight to the fears and most frequently cited explanation is increased regulation has driven up the cost of balance sheet and hence their ability to act as a warehouser between buyers and sellers. what would lead you to doubt that increased regulation is actually creating a destabilizing impact in terms of liquidity? >> well, it's just there are a bunch of different things going on in these markets and we are trying to carefully study. the treasury market and the corporate bond market aren't the same, the conditions are quite different and the rule of the broker/dealers is different. high frequency trading has become very pref levalent in th treasury market. >> i hear that explanation. let me just yump jump to one ot

potential theory here. the more liquidity central banks add the less there is in markets. in addition to regulation central banks distortion of markets has reduced the heterogenety. are they forcing investors to fix viewed income expensive making markets more prone to sudden corrections? >> we hold significantly more assets, the federal reserve and other central banks, than we did prior to the crisis. but we have very deep and liquid markets in the treasury securities and mortgage-backed securities that we hold. so i'm not aware that our behavior is significantly influencing market functioning. i'm not aware of any evidence suggest that. >> thank you for your testimony. >> time of the gentleman has expired to accommodate the chair's schedule. the gentleman from maine will be the last member recognized. gentleman from maine, recognized

for five minutes. >> thank you, mr. chair. and thank you, chair yellen, for being here. you notice they always save the best for last, chair. that's what they say in maine anyway. i'm thrilled to have a discussion with you in the lobby before we came into the hearing chair where i asked you specifically what your thought process is now going forward about fsok and your involvement in fsok is designated asset manager, mutual funds as systematically important financial institutions and if that happens, of course, they have to succumb to other regulations with respect to dodd frank and that stifle rate of return for small savers. you mentioned something very interesting group said right now the fed is not focused on designating asset managers -- >> if,sok. what i said was that the fsok is focusing on activities. >> i stand corrected.

>> -- and studying a set of activities involved in asset management liquidity risks, redemption risks, potential risks that have to do -- >> thank you. i stand corrected. you sit on fsok. >> that is right. that is fsok's focus at the moment. it's studying these areas. the sec is actively involved in rule making in these areas and that has been the focus recently in fsok. >> thank you. you know what would be really helpful, chair yellen, if i could suggest, if we have a written set of criteria that the industry, those folks that are in this space can look at something on paper to say, you know, if i have these various business practices that revolve around my business model or i manage these sort of assets then i know the probability of me being designated to siffy is very high or low.

does that make sense? instead of our focus at fsok is not look at asset manages of siffys but maybe down the road it would? >> there were a set of criteria that fsok initially issued to indicate firms that it might look at. >> has that been updated, chair? >> i'm not certain if it has. but there was -- there was written -- >> if you don't mind we'll reach out to your staff to see if there's any updated criteria on that. do you also have a set of criteria that deals with an off-ramp, such as if an institution designated as a sify and they go down this path in your eyes, off-ramp for them. do you have that set of criteria? >> we evaluate each of these firms every i think i'vevery si

decide if it's no longer appropriate for them to be des designated? do you have the guidelines? >> we're to the trying to run these businesses. and we're not going to -- i don't think it would be appropriate for us to say you need to do x, y, and z to be dedesignated. these firms understand very well why they've been designated. and they understand what kinds of changes in their business model would change that assessment. >> if i may -- >> you know, these are firms that have decided they want to do this kind of business. and if they change that decision, of course it's possible -- >> here's what i worry about. i don't mean to be rude but i only have over a minute left. here's where i worry about. you probably seen this study that was conducted by holtz eken who is the former director of

the nonpartisan cbo. >> yes. >> and when you have pension fund managers and mu chuld fund managers that are designated as sifys he concludes the long-term rate of return, refirement nest eggs are likely to go down up to 25% if they have to succumb to these dodd frank regulations. so it is my contention that when you have a trucker in bangor or a teacher in maine, the greater teacher in the greatest state in the country, doing their best to put aside $50 or $100 a month to plan for retirement but because of the dodd frank regulations over an industry that poses no systemic risk to the economy, if that happens and these regulations prevail, then these folks have to work longer, will have less money in their nest egg. that's not fair. it is not compassionate. all i'm asking of you is if we as a member of congress, i represent 650,000 of the most honest, hardworking people you

can find in this country. i just would like to see what written criteria you have such that these pension fund managers, asset managers, know how to be dedesignated as a sify. >> none of them have been designated. >> i know. wouldn't it be great if they knew what would cause them to be designate and how they could get out of it? >> fsok is not designated any asset manager. >> and thank you for doing that. but it would be wonderful, we have criteria, so going forward we know what that looks like. >> time of the gentleman has expired. >> thank you. >> i want to thank chair yellen for her testimony today. without objection, all members will have five legislative day to submit questions for the witness to the chair which will be forwarded to the witness for her response. i would ask, chair, that you please respond as promptly as you and your team are able. without objection all members will have five legislative days

of which to submit materials to the chair for the record. we stand adjourned. the u.s. houses a approved a multiyear highway funding bill. on next washington journal associated press reporter joan lowy talks about transportation funding and the legislation. then former world chess champion garry kasparov will discuss u.s.-russian relations and his book. and erica groeshen of the bureau

of labor statistics and "wall street journal" reporter on the october employment numbers. washington journal is live every morning at 7:00 a.m. eastern. you can join the conversation by phone and on facebook and twitter. on friday a forum on ways to improve the health care system and reduce costs. we'll be live with the national institute for health care management foundation starting at 1:00 p.m. eastern here on c-span3. every weekend the c-span networks feature programs on politician, nonfiction books, and american history as the nation commemorates veterans day, saturday starting at 11:00 a.m. eastern american history will be live from the national world war ii museum in new orleans as we look back 70 years to the war's end and its legacy. we'll tour the museum exhibits

and take your calls and tweets. starting this week at 10:00 our new program "road to the white house rewind" takes a look at past presidential campaigns through archival footage. this sunday we'll feature ronald reagan's 1979 presidential campaign announcement. and on c-span saturday night at 8:30, the effect of legalized marijuana and colorado and other states around the country. and sunday especiallying at 6:30, our "road to the white house" coverage continues with former maryland governor and democratic presidential candidate martin o'malley who will speak at the town hall meeting at the university of new hampshire in durham. and saturday afternoon on c-span 2's books tv starting at 4:00 eastern it's boston book festival featuring nonfiction author presentations including jessica stern on the terrorist group isis. joe klein and his book "charlie mike" about two iraq and afghanistan war veterans who used their military discipline and values to help others. and james wood and his book "the

nearest thing to life, on the connections between fictional writing and life." and sunday night at 11:00, a book discussion with former first lady of massachusetts, ann romney on her book "in this together" about her journey with multiple sclerosis. get our weekend schedule at c-span.org. the sec they of homeland security jeh johnson spoke object his department's efforts to improve the u.s. immigration process. he was joined by the director of citizenship and immigration services, leon rodriguez at an immigration conference on thursday. this is an hour and 45 minutes. >> it is my pleasure to introduce our up buds man who brings 20 years of cross sector experience in the field of immigration law. as an ins trial attorney, as a private practitioner, as the executive director of a national

faith-based organization, and with this in-depth experience she makes sure that our work product is not only thoughtful but well thought out. she encourages us to think outside the box, to be innovative in our product and in our approach. we are very lucky to have maria odom as our om bunds man. she helps us meet our mission with efficiency and empathy. with that i would like to introduce you tou maria odom, citizenship and immigration services ombudsman. >> thank you, stacey shore. thank you. it's very kind of you. i am very proud to serve as your omomit's great to be here. it's our fifth conference. can you believe it? feels like it was just yesterday when my predecessor launched this great initiative and i'm very proud that our office continues to host this conference.

i'm glad that we continue to hold it here at the national archives surrounded by the beauty and the complexity of our nation's history. so i pleased to welcome you. i am pleased to welcome our staff as well who i will introduce in a minute. i am pleased to introduce our friends from ucis as well and arc vis for hosting us again and for his incredible staff. they help us every year with the logistics and execution of this conference. thank you, those of you helping us live stream today and are helping us throughout the day. it's been a momentous year for immigration. i think one which warrants a special morning discussion on the implementation of the president's 2014 directive to reform our nation's broken immigration system through a series of executive actions. you will hear shortly from our secretary of homeland security jeh johnson and also from ucis director rodriguez as well as

other department leaders who have been instrumental in carrying out this very ambitious task. i know that they're looking forward to some of your questions, too. in the meantime, allow me to share a bit about the important business of the ombudsman's office. as citizenship and ver services ombudsman i lead an independent office at dhs which is charged with problem solving. i am extremely proud to be part of a team that works hard each day to do right by those who do not see and experience our immigration services at its best. for those of you who are new to our office we do two things. we assist individuals and employers in resolving their problems with ucis and we review the agency's policies and procedures as we identify problem areas and work with them to propose solutions to resolve

them. i'm often asked what does an ombudsman do. i'll borrow a very simple but very on point definition. he said, ombudsman are useful people when it comes to make mistakes -- to making mistakes right. if you complain to an organization and they don't sort things out then an ombudsman might be able to help. they are the people to whom you can turn for help when all else has failed. our work would not be possible but for the professionalism, integrity and grit of our ombudsman staff. they embrace problem solving, they embrace our mission, and they welcome open dialogue with all of you. i'd like for all the folks in the ombudsman office who are in the audience to please stand. some of them are outside working. thank you for your service.

i'm very honored to work with all of you. you are one dedicated bunch. and i'm very proud to work alongside all of you. but the but we don't do this work alone. every day we work and they work with dedicated ucis officers here in washington, d.c. and also around the country who share in our goal of pr vovidin high quality immigration services. i'd like to recognize our ucsis colleagues in the room. please stand. i know you're there. we know you're here. thank you for all of your hard work. associate director of ucis, public engagement and customer services director, i got all that backwards, welcome and thank you for your support and for your commitment to the work that you all do. ombudsman work is hard work and it's often done quietly and very effectively. sometimes even without

recognition. and while we need steadfast advocates for much needed comprehensive immigration reform we also need to keep our commitment to improving the delivery of services in the immigration system that we have today. this is critical. it is critical in part because we have seen a sharp increase in the number of request for our systems made to our office over the past year. it has more than doubled since i was appointed to this position in 2012. there is still a lot of work to do. why is our case work important? because cases not only represent a family, an employer, an individual seeking benefits or relief, but they also signal to new or continuing systemic issues that require the agency's attention. for example, recently our office noticed a spike in the number of applications for change of status to that of student. delays prevented some of these

applicants from starting classes, from accepting campus employment, some even faced losing teaching and research positions and fellowships. given the good number of cases coming to our office showing a trend, we contacted ucis and they worked to resolve these delayed cases. more importantly, they immediately started working on addressing the operational costs for the delays. in some cases our office intervenes to address a clear error or quality issue in the actual adjudication of a case. that includes monitoring the use of templated request for evidence and other notices. we do that to ensure that customers receive adequate notice of evidentiary deficiencies in their filings and an adequate opportunity to address them. other cases that we've seen this year involved individuals facing delays in renewing their employment authorization

documents. while the vast majority of employment authorization applications are adjudicated by icis within the required 90 days statutory time frame, every year, especially in the summer, thousands of individuals encounter processing delays in renewing their work permits. similarly, over the past year we received requests for case assistance from applicants seeking to renew their deferred action under the deferred action for childhood arrivals program. while some had timely filed their applications they face delays in renewing their documents and also accompanying work permits. so we continue to try to understand the operational constraints that prevent timely adjudication of employment authorize shaigs documents as well as applications. and we encouraged the agency to be true to the posted processing times and to recognize the negative impact of a lapse in having a valid employment

authorization document. it impacts individual, employers, families. on the humanitarian side next month our office will issue formal recommendations addressing trends, our case work has uncovered relating to special immigrant juvenile policies and procedures. we also continue to advance our mission through public engagement on issues that matter most to those who come to ucis for immigration benefits. this year we participated in over 100 stakeholder engagements in 20 different states and we continued our teleconference program hosting important conversations, some with ucis on important topics including provisional waivers, many revisions we've seen lately to ucis forms and longstanding problems in the employment programs. but though we are an office charge with focusing our on problems, sometimes that makes us unpopular, we we recognize ucis' many successes and efforts

to modernize our immigration system and to implement the president's executive actions. i don't want to steal director rodriguez' bragging rights later. i'm sure he will talk about some of the good work they are doing at ucis but i'd like to congratulate him on the agency's guidance and the lauchlg of two very important humanitarian programs. the haitian family reunification program and the in country refugee parole program for central american miners. and i also commend the agency for its planning and preparation to implement the president's executive action initiatives. before i close i'd like to share that in addition to my role as citizenship and immigration services ombudsman i have the privilege of serving as the chair of the dhs blue campaign. the blue campaign is the unified voice of the department to combat human trafficking. the campaign was created on the idea that we are at our best only when we are all working together to fight the crime of

modern day slavery. this year the blue campaign celebrates its fifth anniversary. that's five years of raising public awareness of human trafficking. five years of working with our government and private sector partners. five years of training law enforcement both here at dhs and also around the country. and five years of working and coordinating department policy to support investigations and, more importantly, stabilize and provide relief for victims of this terrible crime. i am grateful to secretary johnson for his support of our office and for his leadership. i also wish to thank deputy secretary for his relentless commitment to the immigration work of this department. i'd like to again thank my staff for putting together an incredible and ambitious agenda today and i'd like to thank our panelists for what i'm sure will be a day of great conversations and, again, all of yoursing once again, for joining us for this fifth conference. thank you.

now, secretary johnson has challenged us here at dhs to bring together our talents, our rich experience and department's resources into one whole of dhs effort. now, his vision for unity of effort is reflected in how we have worked together to resbond to the president's directive to do what we can to fix our broken immigration system. i am very honored to work under his leadership. please join me in welcoming secretary jeh johnson. >> thank you. thank you, maria, for all the terrific work that you do as our ombudsman. thank you, ladies and gentlemen, for being here today. i recall addressing this conference last year and

welcomed the opportunity to come back here. let me provide a few thoughts about where we are, particularly with the implementation of our executive actions. let me begin with something that i said at westminster college in missouri in september. i was honored to give the 56th annual green foundation lecture at westminster college in missouri, in fulton, missouri. the most famous green foundation lecture at westminster was given by winston churchill in 1946. the famous iron curtain speech. in 1954 former president harry truman went to westminster and gave a green foundation lecture. his lecture given during

mcor think error, the red scare, was about what hysteria does to us. i decided in my green lecture to use that as the basis for my own remarks. at westminster in september i said, all of us in public office, those who aspire to public office, and who command a microphone hold the public calm, responsible dialogue and decision making, not over heated, over simplistic rhetoric and proposals of superficial appeal, in a democracy the former leads to smart and sustainable policy. the latter can lead to fear, hate, suspicion, prejudice, and government overreach. this is especially true in

matters of homeland security and it is especially true in matters of immigration policy. at that speech i commented that i know this both as the secretary of homeland security and in a very personal way from the experience of my own grandfather. i talked about testimony that my grandfather gave before congress in 1949 to the committee on unamerican activities of the u.s. house of representatives. the lawyers here will appreciate this. this is the q and a. question, are you now or ever have been a member of the

communist party? johnson, i am not now and never have been a member of the communist party. mr. chairman, i have been asked by this committee to state my views as an educator regarding the loyalty of american negros. in one sense it is like asking if tennesseans are presbyterians or foreign born citizen or american women are persons with freckles are loyal. where there has been resentment, this is in the year 1949 -- where there has been resentment, it has been not against the form of government but against those who misinterpret or seek to abuse the purpose and power of government and cherished freedoms. all of you here know that around immigration policy there is a lot of emotion and a lot of misinformation. i like to note a poll taken by

pew research two years ago that asked the following question in its survey. two years ago. just your best guess, compared with ten years ago do you think the number of immigrants entering the u.s. illegally today is higher, lower, or about the same? a majority surveyed, or 55%, said that they thought two years ago the number was higher than it was ten years before then. when, in fact, as i think all of you know the opposite is true. the high of apprehensions on our southern border was 1.6 million in fy 2000. in fy 2013 that number had dropped to 414,000. in fy '14 the number was 479,000. the spike in the rio grand valley of the children and

families. this past year, fy '15, the number has dropped to 331,000, which with the exception of one year is the lowest number of apprehensions we've seen on our southern border since 1972. notwithstanding these lower numbers there is more we can do on border security as a sovereign nation, we must protect our borders from illegal migration. but as all of you know, building more walls is not the answer. more technology, risk-based strategy, not more walls is the answer. one of the pieces of advice i got last summer when we were in the midst of the crisis on the southern border was from the u.s. conference of catholic bishops that you have to offer people an alternative way, hope, you can't put a padlock on a burning building. so we have established in-country processing in central america so that parents here can

petition to have their children come to the united states. we'd like to see wider use of this program. in terms of building a wall, one of the best commentaries i've ever heard from a border security expert was and is, if you think someone is motivated enough to leave their home in central america, travel north across the complete distance of mexico and climb a 10,000 foot mountain, are they really going to be deterred by a ten-footwall? or as janet napolitano used to say, show me a ten-footwall and i'll show you an even will-foot ladder. so more technology is the answer, not more walls. there are 700 miles of some form of fence across the southwest border now built pursuant to the secure fence act of 2006. longer-term we need to invest in root causes. the poverty and violence in

central america must be addressed, which is why this administration under president obama has requested $1 billion for guatemala, el salvador, and honduras in aid and investment in those three countries. today i want to review with you the progress the homeland security is making on our executive actions announced a year ago. congress has not acted awed r as all of you know on comprehensive immigration reform. we are distap poiappointed by t. the senate passed a bill in 2013 but the house has failed to act. so the president and i have acted on our own within our existing legal authority to do what we can do fix the broken immigration system. overall the president's policy are new policies, are smart, common sense uses of the resources we have to focus on

threats to public safety, felons not families, quality of our efforts over quantity, giving people an opportunity in this country to be held accountable and to be accountable if they been in this country for years and have roots here. in terms of the deferred action for adults program that we announced last november, we are disappointed that this important program is in litigation, in the courts. we are disappointed that the district judge has enjoined the program and the expansion of the docker program that we announced. but we will fight on. we will defend the program. we will defend the case in the courts on appeal. we are anxiously awaiting the decision of the fifth circuit following in the oral argument on july 10th. deferred action aside, we are

moving forward with the other nine of ten executive actions. the most significant of which is our reprioritization of how we use our resources for removal. we're focusing more on felons over families, quality over quantity, as i said, and threats to public safety. the nonpartisan migration policy institute has noted with respect to our new removal priority which we announced last year. these prosecutorial discretion changes which have received significantly less public attention than the deferred action program make it unlikely that unauthorized immigrants who would qualify for doka or dopa will be deported. the overall impact of the new memorandum is to describe dhs enforcement priorities more precisely and more narrowly than

was the case under the 2010-2011 guidance. while broadening the circumstances under which dhs personnel should exercise discretion, including reasons department personnel may choose not to deport people who generally fall within the enforcement priorities. overall the new enforcement policies and i can continue to quote, have the potential to subsubstantially transform the u.s. deportation system, particularly within the u.s. interior, end quote. so as all of you here know in fiscal year 2012 i.c.e. removed 409,000 people. fiscal year '13, the number dropped to 368. fiscal year '14, the number went down to 315,000. we're still counting but in fiscal year '15 i anticipate that that number will be

significantly less than $315,000. why is that? well, froiirst of all, simply, there are fewer people on the intake side because of the lower apprehension, fewer total attempts to cross the border illegally that we saw fy '15. second, however, i.c.e. is doing what i told them to do. in terms of reprioritization and the focus on convicted criminals. of those deported in the period march to september 2015, 83% of those deported in that period are in my pruiority one for removal, criminals, criminal gang member, those at the border. at large arrest of those convicted of felonies and misdemeanors is up 22% from last year. bottom line of all of this is

fewer deportations but a greater percentage of those are convicted criminals and threats to public safety. that is the direction we want to go. that the direction the president directed, and that's what we are doing. other reasons for the lower deportation numbers frankly was the politically and legally controversial secure communities program, which we have ended and replaced with the priority enforcement program. as all of you know, under the secure communities program, municipalities, states, counties were enacting limitations on their levels of cooperation with immigration customs enforcement, leading to a number of detainers that were not acted upon, including detainers on people who are convicted criminals and threats to public safety. we are changing that. with our new priority enforcement program we have replaced detainers with requests for notification on a defined

list of crimes and removal priorities. not simply going after people who have been arrested and arrested or convicted of minor offenses. we have received a good reception so far to our priority enforcement program. of the approximately 340 noncooperating jurisdictions that were out there, nearly two-thirds are now working with us on the priority enforcement program. and this is a work in progress. of the 25 largest which account for 83% of previously declined detainers, 15 of those 25 are now working with us again. more will be coming online soon, including big cities. and preliminary indications are that the individuals being transferred under this new program fit within my priority

one for removal to an increasing percentage. we are doing these things for public safety. so in terms of our other executive actions, let me announce and say again as i've said several weeks ago, we have issued a proposed rule to expand eligibility for provisional extreme hardship waivers of the three- and ten-year bars to all persons who statue toirlly qualify for that waiver. a comment period for this change is closed and we are now revi reviewing the 600 comments we received and are preparing to issue the final rule. second, and to encourage broader use of this waiver on october 7th we published new guidance for public comment on the extreme hardship requirement. up until now no clear guidance on what extreme hardship means

is out there. for decades, there has been confusion and inconsistent application. this guidance will provide the needed clarity for this benchmark. the comment period on this guidance is open until november 23rd. we encourage all of you to send us your comments and reaction to this proposed guidance. and help us publicize this guidance once it is final. third, on september 25th, state and dhs made changes to the bisa bull tan to enable certain families to apply for green cards sooner. fourth, we have almost completed guidance to assist the families of those defending our country in the u.s. military, to obtain work permits. on october 15th, we provided public notice of a proposed rule to strengthen the program thatañ provides optional practical training for students in stem

fields studying at u.s. universities. on may 26th we finalized a new rule that allowed spouses of highly skilled h1b workers to apply for visa. we're working on a regulation now and guidance to support high-skilled businesses and workers by enabling these businesses to hire and retain talented foreign workers while providing these workers with increased flexibility to advance with current employers or seek new opportunities elsewhere. additionally we are working on a regulation to enhance opportunities for foreign inventors, researchers, and entrepreneurs wishing to conduct research and create jobs in the u.s. we're promoting and increasing citizen access to citizenship under the leadership of director rodriguez, who will speak next, during the week of september 14-21 we launched citizenship

week and constitution day and ucis in that one week naturalized 40,000 people. and we are now permitting payment by credit card of the naturalization fee. we continue to assess a partial fee waiver of a naturalization fee. an idea championed by a number of organizations represented here today. in terms of our deferred action program, as i mentioned earlier, the dopa program is enjoined but we are defending the case on appeal, along with the enhancements and enlargements of the doka program. we are defending the case on appeal. we will continue to fight for this program. to those who say we did not have the authority to create the dopa program, without a change in law, i say, well, then, you should change the law. we must account for these

people. we must encourage them to be accountable. they are not going away. we are not going to deport a population of people the size of new york city and chicago put together in anybody's administration. there are sound and good law enforcement reasons why we should encourage deferred action. it is also in my judgment simply the right thing to do. it should be no second class people in this country. the most striking thing about this population is something like over half of them have been here for ten years. they live among us. we know them. they work among us. they study among us. there was a documentary on a couple weeks ago on pbs, "front line" and immigration reform. i suspect a lot of people here saw it.

i'm proud that two of the people in that documentary, esther and david, now work for me as immigration and legal advisers. esther had a couple of bit parts in the documentary. one of the -- i had to watch it twris befo twice before i noticed esther sitting behind senator edward kennedy at the end of the documentary. it was kind of hard to recognize her. it was eight years ago. hair was a little darker then. but it was the speech in which senator kennedy announced the end of the effort then at immigration reform. and he said then in 2007, and i quote, this is a message of hope, hope for those of you who recognize the need for immigration reform and deferred

action. it is now clear we are not going to complete our work on immigration reform. this is enormously disappointing for congress and for the country, but we will be back and we will prevail. the american people sent us here to act on our most urgent problems and they will not accept inaction. i have seen this happen time and again, america always finds a way to solve its problems, expand its frontiers, and move closer to its ideals. it is not always easy but it is the american way. in that vein, let me tell you something that my grandfather who

voting rights act of 1965, and all the other things that have occurred since that time. he died a second class citizen in a intrastation in louisville, kentucky, in october 1956. this is what he said about the african-american's plight in the south in september 1956. very much in line with what senator kentucky had to say in 2007. it is variously expected that negro southerners as a result of their limited status in the

racial system would be bitter or hostile or patient or indifferent. bitterness grows out of hopelessness and there is no sense of hopelessness in this situation. however, uncomfortable and menacing and humiliating it may be at times, faith in the ultimate strength of the democratic philosophy and code of the nation as a whole has always been stronger than the impulse to despair. so to those of you who champion immigration reform, fixing our system, and caring for those immigrants who are in this country seeking a better way, i say that the road is long. it can be bumpy. but in the end, we always do the right thing. we always get there. the arc of history is long. so for those of you who work with maria, who want to build a

better system and build a better life here for immigrants, i say keep at it and don't give up. and don't lose hope. thank you all very much. >> thank you. thank you will appreciate it. >> i'm sorry i can't stay and take questions. i do have to get back to my palatial headquarters uptown in nebraska avenue. thank you all. and have a good conference. >> thank you. >> leon, are you ready? leo nrk rodriguez, director of ucis is a colleague who joined us here at dhs over a year ago. and he probably feels about ten years in experience to him at this point. he assumed an incredible challenge but also i think

amazing opportunity to lead ucis in executing the president's directives on executive action. it's a pleasure to work with leon. it's been a pleasure to watch you run with that incredible charge and watch your staff over the past year preimposed injunction to work to make that happen. and i appreciate ucis' partnership, i appreciate the incredible commitment of your staff who work with the ombudsman daily to help fix problems that sometimes require everyone's attention and i appreciate that we all share the same goal of making the system better. so please join me in welcoming ucis director leon rodriguez. >> good morning, everybody. it's good to see a lot of familiar faces and some new faces. so since i have a little bit of

extra time you're going to indulge me because it means i get to tell a couple of stories. and i'd like to start by talking about how i go to work every morning. i live in montgomery county, maryland, probably a handful of you here do as well. and over probably the last eight or nine months i have made a habit of passing through the corner of university boulevard and new hampshire avenue on my way to work. those of you who know the area well know that to be langley's cross roads. and the reason i go through there is because i realize that in my mind i do what i do for the people of langley's cross roads and people like them all over the united states and all over the world trying to get in to the united states. because if you look at langley's cross roads it is an amazing

melting pot of people from all over the world. you see korean supermarkets, you see salvadorian restaurant, indian restaurant, you see african clothing shops. it's really -- it's a really united nations. what you also see every morning at around the time that i go through is crowds a crowds of people going into the metro, crowds and crowds of people lining up at the bus stops all working to pursue their little piece of the american dream. this morning that route was ill advised. not because it wasn't yet again inspiring to pass through langley's cross roads but rather because the traffic was horrific on the way downtown, via nor on the new hampshire avenue and

north capital street. that gave me time to think and time to think is sometimes a little uncomfortable. and it was uncomfortable because i started thinking about the meeting when i saw all of you last year and that would have been just a few months after i had become director of ucis. maria was kind enough to facilitate my discussion with you. and you asked a number of questions about a number of matters. and what i don't know is how wom well i have done in the past year in resolving the issues that you raised. and that calls to mind really a second thought. i have been in government for most of my life and i have grown through that time to become very interested in the behavior of organizations, whether they are government organizations, whether they are companies,

whether they are non-profit organizations. and have grown interested in what makes organizations act, what makes organizations change, what makes organizations improve. and actually what we do in ucis is very interesting case study in that sort of question. what makes an organization move, improve, and change. we're a very large organization. we're 18,000 people. we have an annual operating budget of approximately $3 billion, if you take into account all the fee accounts. and so we're not necessarily the most easily movable object. i view my job as director to make wise and smart decisions about how the organization moves and changes as it moves forward

into the future. and there are a constellation of inputs that go into how those decisions are made. obviously there are a couple of fix points. one is our basic annual budget. even if we do a fee revision, the basic size of that will be the same. the basic size of our workforce will probably be about the same. so those are our in and of themselves pressure on what we can do and how we can do it. but then there are a number of other forces that act on us to make a change. two of those very important forces are in this room right now. and so as stakeholders of different type, a number of you are immigration lawyers, others are advocates, others play other roles in our system -- thank

you. i'm audible, though, right? >> yes. >> okay. so i'm going to eventually start walking around, then i'm going to walk off with the microphone. so as i hear from you, that, in fact, has a very significant influence in how i make decisions as director. and particularly when i hear something from you not just one time but when i hear things from you one, two, three, four, five, and six times. that starts being a signal that somewhere in that 24-hour day i'm going to have to find an hour to actually do something about that issue that you've raised. that means that we've now hit a certain critical mass. another critical actor is sitting right in front of me, and that is maria odom in the office of the ombudsman. they play i think a very, very critical and very special role. actually i think probably most

government organizations should have an institution like this ombudsman. and that is because they are built in resistors to inertia. so they are -- they have a very special charge. one to facilitate correct outcomes on cases to act on behalf of our customers in case where's the system may not have worked or certainly where those customers are not satisfied with the outcome. and then to also look for opportunities to systemic improvement. they have done so, i think, in a very constructive, very orderly, very thoughtful, very evidence-based way. i'm really grateful to them for playing that relation. i'm also -- being in a relationship with you as icis. i also want to congratulate them

on the work that they've done in the blue dhs blue campaign in combating human trafficking, which is something that is near and dear to my heart. so i do that all to really set the stage to say this is a very important interaction which in little strokes and little strokes and little strokes will actually, in fact, eventually has the outcome of modifying the work we do based on the reality of what is happening to immigrants out there every day. now, i want to talk for a little while longer, give you some updates that you will probably be interested in hearing. actually the secretary did a good job of sort of giving you the outline of what i will be discussing in detail. and then i'd really like to open to questions and questions for me are when i open for questions it's questions, comments,

concerns, whatever the case might be. let's dig in first to where we are with respect to executive action. and i want to -- for those of you who don't know her. she's not here today but i just want to introduce you indirectly to an individual by the name of jennifer higgins who actually was supposed to be on your panel this afternoon. she has served since the inception of the executive actions as my senior adviser on the executive actions. she was then and is now dual hatted as the deputy associate director for the refugee asylum and international operations division of ucis. in fact, her role will now be sort of multiplying geometr

geometrically because of our increased targets for refugee admissions. so i just wanted to let you -- let everybody know about her leadership role. unfortunately she's not able to participate in the panel for which she was scheduled today but i'm still hoping that all of you get the opportunity to get to know her. the way i've seen the executive actions, there are basically three key pillars to the executive actions. and they really speak to the three sort of key ways in which our immigration system has been take your pick, broken, damaged, at least susceptible to improvement as the case might be. so the first of those is, as the secretary discussed, the taking the first steps towards some sort of permanent resolution to

the condition of undocumented people in the united states. this is another one of those, you know, we're just talking about how institutions move. there will never be enough public will to remove 11 million people. nobody will want that enough. many people of course don't. and nobody will ever want to spend the kind of resources to do that that that requires. meanwhile, those 11 million people are not just 11 million people. they are husbands, they are sons and daughters, they are sisters and brothers. they are quite typically part of families, part of communities, that, in fact, con ina united states citizens, contain legal permanent residence. and so the impact were we to

actually go down that road of 11 million people is not an impact of just those individuals alone. in fact, would have a devastating impact on families, on workplaces, on communities, on institutions of faith. all of which would be terribly, terribly undermined were we to make that decision. and meanwhile at the same time whether we admit it or not, many of these folks are actually contributing quite substantially both economically and in many other ways to our society the most sort of notable, most obvious example is the doka recipients who any time you pick 20 of them to meet you will find young people who are studying, who are working, who are building families. some of them are telling us if you give us a shot, we'll join

the armed services so we can serve our country. a perfect case study of people who in many respects are actually still on the margins of our society saying, not with standing that fact, i'm ready to participate. i'm ready to come in and to make a difference. so we had taken the step of instituting the dopa, drks oka expansion programs. i think everybody has good understanding of where the legal process is with respect to those initiatives. we are now -- i would call attention to this. we are now 3 1/2 months past the oral arguments in the fifth circuit. in circumstances where two out the three judges who heard the case were the same