have made that setting it at the level that it would now recommend would be highly damaging to the economic situation. and we have tried to provide some analysis in the monetary policy report we submitted about why that is, and in particular, this idea that the neutral fed funds rate, because of the damage from the financial crisis -- >> i regret i must reclaim my time. because i have one additional thing that i must say. i appreciate your commentary. i think that a good many people have the point. but i want to say this. we have some people who are visiting today. i don't want any response from them. but i want to acknowledge their presence because they're concerned about these wages. they are concerned about wages across the board, especially as they impact working people. people who are on salaries. people who make minimum wage. it's our desire to see policies that will have greater

employment, greater opportunities, but also, policies that will target those who are hurt the most. i thank you, mr. chairman. i yield back. >> the gentleman's time expired. the chair now recognizes the gentleman from pennsylvania. for fooi minute -- five minutes. >> thank you, mr. chairman. welcome chair. i want to talk briefly about custody banks, which you know follow a different business model from other financial institutions. custodians do not make consumer loans or engage in investment banking. for these reasons pose relatively little credit risk. i understand that custody banks whose customers would include pension funds with millions of beneficiaries are finding it increasingly difficult to provide their core custody services, especially accepting large cash deposits. and this could worsen under a period of stress. one of the reasons appears to be

regulatory reform such as the supplementary leverage ratio known as slr. they typically place cash received on deposit with the federal reserve. this is cash that comes from pension funds, endowments and other clients. however, the federal reserve supplementary leverage ratio does not recognize the essentially riskless nature of fed deposits or the necessity of these placements by custodians. this may cause the leading custody banks to reject customer cash deposit. my question is, is the federal reserve aware of the impact that this may be having on custody banks? if so, what do you propose to do about it? >> well, this is something that was considered, what is the appropriate treatment of central bank deposits when the supplementry leverage ratio was adopted. a decision was made at the time that the leverage ratio is not our main capital tool but backup

capital tool that is intended to in a crude kind of way base capital requirements on the overall size of a firm's balance sheet and that for that reason it should be included. we have more recently put in place capital surcharges that apply to the eight largest u.s. banking organizations, including two custody banks. and it's likely that once those are in place, that they will become the binding capital requirement but -- >> i would encourage you to take a look at that. it's an issue for the banks. >> we have heard of the problem. i will address it. >> as you know, chair yellen, the bank of japan announced it would implement a negative interest rate policy in an effort to increase spending and

spur growth. the decision follows close on the heels of the european central bank's announcement it would launch stimulus in march. economists predicted that sweden, denmark, canada and australia and china may follow suit. in a recent editorial in the "wall street journal," the former president of the federal reserve bank of st. louis argued these gimmicks will not create the intended affects and they will only serve to divert attention from the actual structural problems that have plagued growth in the u.s. and around the world over the last decades, namely regulatory burden and tax policies that serve to constrain business investment and long-term growth. what do you say in response to mr. pole? >> i agree that there are structural factors that have restrained u.s. growth and also been responsible for rising inequality in the labor market. and it's important to take steps to address those problems. they are steps in the domain of congress.

but it's important for the fed to try to achieve its mandate of having -- ensuring a state of the labor market where people who want to work are able to find jobs, where there are a sufficient number of them. given the stress situations that exist in europe where there remains very high unemployment and in japan where inflation has for well over a decade undershot their inflation objective, it's a tool that has proven useful to them. >> i want to talk a little bit. you testified earlier over the past number of years the fed kept federal rates at low levels. with that, you testified that even with this quote exceptional closed quote strategy, the economy achieved 2% growth. you added, quote, economy is being held back by headwinds.

i'm wonder if any of these head winds are man-made or to borrow a phrase anthropagenic. i could identify some. the affordable care act. a lost reform bill that missed the market. epa regulations. these headwinds have hit folks in my district like a mom who now has to pay 400 bucks for allergy medicine for her kid who she used to pay 10. the coal miner who be able to pay for his mortgage. i wonder when the history -- economic history of this decade is written, are they going to say the fed tried to do with monetary policy what should have been done with fiscal policy? >> well, i think it's also important for congress to address structural factors that are holding down growth. >> time of the gentleman has expired. the chair now recognizes the gentleman from missouri, mr. cleaver, ranking member of the housing and insurance subcommittee. >> mr. chairman, thank you for being here, madame chair.

following through on some things that were said earlier, i have a bad knee, and i've had it operated on 11 times. but the weird thing is that whenever i go to the hospital for another surgery, they never operate on my shoulder or my fingers. for some strange reason they always operate on the same knee that's been hurt. i know that's weird. the issue is, we can't address unemployment in a certain sector by saying we can operate on the whole body and it gets better. that has never been true. i differ a little from my colleagues in that i don't think it's your responsibility. i don't think the fed has the responsibility even with the dual mandate.

i think it is to be handled legislatively. i don't think we're going to get that done. the other thing i have to say is that -- it has been set every time you come i have to say it because i have to get it off my chest. the, you know -- i do think that we're declaring minority unemployment too big to curtail. that's somewhat troublesome. but the wall street and the big six banks, you know, are too big to jail. you rob a convenience store. you go to jail. you rob 300 million americans, you get a cocktail. and i think that's what's creating all this anger around the country. i know you don't run the justice department. and i know you don't vote on legislation that could address some of these other issues. but i think we gotta say it as

much as we can because i don't think -- i don't think the world is hearing us. now, i would like to yield now the remainder of my time to the ranking member of the financial services committee. >> thank you very much, mr. cleaver. as you know, originally, i was thinking about dealing with the question of the subpoena, except if you don't mind, i am so focused on all of this money that goes to these too big to fail banks. trying to understand, number one, not only the fact that goldman sachs got $121 million, jp morgan $910 million and that with the rise in interest rates from a quarter percent to a half percent, this will double.

and this money keeps -- it's going to the big banks. it's a subsidy to keep them from lending money. and we have this big need that's been discussed by my colleagues about this high unemployment rate and the lack of creativity and thinking about how we could deal with this. and these banks too big to fail who we are finding every day because of the predatory lending et cetera, are getting support from the feds. please, please explain that. >> it's an essential tool that we need to adjust the level of short-term interest rates. from the standpoint of the taxpayer, our payment of those interest on reserves -- we have very large reserve balances. we have $2.5 trillion roughly of reserves in the banking system as compared with 20 billion or

30 billion prior to the crisis. the counterpart of that on our balance sheet is that we hold a very large stock of assets on which we are earning a substantially higher rate of return than we are paying to the banks and that differential between what we earn on our holdings of long-term treasuries and mortgage back securities and the 25 or 50 basis points we pay to the banks, that differential all shows up in the taxpayers' pocket. it is money that congress can use to address all of the problems that you have discussed. >> i have heard -- okay. >> over last year, we transferred $100 billion because of that. now, if we don't pay interest on reserves and must use another technique to adjust short-term interest rates, likely we will be forced to greatly shrink our

balance sheet in a rapid fashion and the total amount of money going from the federal reserve to congress will be significantly diminished. in addition to that, it would have very adverse affects on the economy. >> well, i want you to know that not only am i concerned -- it looks like we're about to have some bipartisan concern on this issue. >> i hear that. >> and while i understand the argument that you are making about the big banks, we cannot feel sorry for them in terms of the amount of interest rates, you know, that they are getting or not getting. et cetera. we really do have to deal with this issue. i understand what you are trying to explain by short-term interest rates. but if i may, madam, let me just say this. that we have an opportunity with the discount window to allow for loans from some of these small

community banks that they are not getting. and if that money went into the small community banks, they would be able to do job creation and to support small businesses. et cetera. and we just don't get why they are precluded from doing this and increasing the job opportunities in the community while we have given the subsidy to the big banks. we just don't get it. >> although i agree with much of what the ranking member has said, she has long spent her time. the chair now recognizes the gentle lady from utah. ms. love. >> thank you, mr. chairman. thank you, chair yellen, for being here today. chair yellen, i'm increasingly concerned about the impact of dodd-frank regulations on real economy economic growth and especially job creation. which i would like to just ask you a few questions about. if you look beyond the headlines, the headline numbers from last friday's job numbers

and include discouraged workers and the underemployment, real underemployment -- real unemployment remains high, nearly 10%. in addition, millions of people have stopped looking for jobs. they have dropped out of the workforce. it's a dynamic that is driving the nation's workforce participation rate to an all-time low at 62.7%. i want you to know that i agree with my colleague on the other side of the aisle, representative scott, when he talks about the large number of unemployment with our young black americans. meanwhile, economic growth slowed to just .7% in the fourth quarter. i'm concerned that the fed and other financial regulators may not have a firm grip on the cumulative impact on the real economy of thousands of pages of the new dodd-frank regulations, especially new capital and liquidity rules. i'm wondering if you share some

of those concerns. >> well, i recognize that some of the new concerns are burdensome and do raise banks' cost of financial intermediation. in designing those regulations, we're always trying to achieve a balance between the benefits of creating a sounder and more resilient financial system that is less likely to be subject to the kind of devastating financial crisis that we had. we're balancing that against burdens that can raise the cost of capital or diminish financial mediation. intermediation. and we have tried to strike a reasonable balance remembering . and we have tried to strike a reasonable balance rememberinin.

and we have tried to strike a reasonable balance remembering that the financial crisis, nothing resulted in more harm for a longer period of time than the financial crisis that we lived through. and i think we now have a much safer and sounder financial system. >> okay. so another study by the american action forum found that consumer credit availability deteriorated 12% to 14% since the passage of dodd-frank. i'm concerned also that the growing number of borrowers unable to access affordable banking, bank financing, a lot of borrowers from districts -- low-income areas in my district, these are hard working americans that have -- that are turning to high-cost and unregulated online lenders to be able to get the access to the credit that they need, whether it's purchasing a car or even starting a small business. they're finding that their ability to access this type of credit is unavailable to them. so i'm wondering if you also share some of my concerns about

credit availability and the higher cost alternatives. >> i do share your concerns about credit availability. i think it's clear that credit availability has, in particular, segments been diminished. home loans, mortgages for example, for individuals without pristine credit ratings, is really difficult, remains difficult to obtain. in part, we have regulations that are meant to address harms. i think lending standards were too easy prior to the financial crisis. we don't want to go back to lending standards that are so loose that they lead to the kinds of predatory lending and harms that we had that took a toll on the economy and on low-income households in communities. we need to achieve a reasonable balance. we're searching for that. >> being on the subcommittee of

monetary policy, i wanted to ask you just a quick question on monetary policy and what's happening in europe. i don't know if you addressed this. very quickly, implications of european financial instability on the american financial system. what are the implications of the federal reserve and the ecb pursuing divergent monetary policies? >> the ecb has been addressing high unemployment and inflation that slipped very meaningfully below their 2% goal by putting in place negative interest rates in large scale asset purchase programs. the u.s. has done better. we're among advanced economies about the strongest. so we have divergent monetary policies. it put upward pressure on the dollar over a long period of

time which harmed manufacturing. and net exports. it has resulted in negative influences on a part of our economy. >> time of the gentle lady expired. the chair recognizes the gentleman from missouri. mr. clay, ranking member of the financi financial subcommittee. >> thank you, mr. chairman. thank you for being here. the federal reserve has a congressional dual mandate to seek maximum employment while limiting inflation. to limit inflation, the federal reserve raises interest rates which slows the economy by discouraging people from borrowing, to buy homes or cars, and discouraging businesses from investing. with this reduced demand, businesses will hire fewer workers, and as a result, workers will have less bargaining power, meaning they will be less likely to get pay increases. the decision to raise interest rates is based on the assessment

of the open market committee of the federal reserve about whether inflation or unemployment poses a greater threat toe american economy. unfortunately, the members of the fomc largely come from the financial industry. and as a result, tend to be more concerned about inflation than the population as a whole. less concerned about unemployment. how do we square that? madame chair. >> so, first of all, i want to say that the committee is deeply focused on unemployment. we have two objectives, not one, maximum employment and price stability, which we have interpreted as 2% inflation objective. i really take issue with the idea that we're not focused on achieving our maximum employment

objective. we are. monetary policy has been highly accommodating. the fed funds rate was at zero for seven years. we also have a large balance sheet that is provided a lot of additional accommodation. so we're not talking about tightening monetary policy or a tight monetary policy. we have an economy that now has made substantial progress, creating 13 million jobs with the unemployment rate down to 4.9%. we took one small step to raise short-term interest rates but continue to have an accommodative monetary policy which we see as consistent with further progress in the labor market. so it's not that we're trying to reverse progress.

we continue to see even with modest increases in interest rates further progress. and we want to achieve it precisely because we think that although the unemployment rate is at levels that are probably normal in the longer run, it remains slack in the labor market. and we want to see more progress. >> although, not to cut you off, we could get to 4% unemployment. but look. while we are pleased to see that new jobs are continuing to be created in our economy and to learn that the unemployment rate last month fell below 5% broadly, these positive signs may lead some to ignore the persistent economic challenges faced by african-americans in this country. the current unemployment rate for african-americans, for example, remains at nearly 9%.

it is a commonly accepted view that access to gainful employment is one of the most important factors in supporting economic mobility and improving health outcomes. it is also widely known that in areas with higher rates of unemployment there is a lack of consumption, increased crime rates, reduced school funding and reduced political influence. please discuss with us any specific actions that you have personally taken or directed your staff to take to identify solutions to help remedy the historical and continued racial disparity between employment opportunity for african-americans and whites. >> so our staff produces statistics that are among the most important in documenting

and highlighting disparities in the economic situations in terms of assets and income by demographic groups. and i have personally given speeches highlighting those statistics so our staff certainly looks at and does work to document those disparities. in our community development programs, in work we discussed earlier that relates to the cra, that's an area in which we have the capacity to try to identify particular programs that will be helpful in low and moderate income communities that suffer from special disadvantage in the labor market and to try to identify programs that work, that we encourage to be adopted

on a broader scale. >> the time of the gentleman has expired. >> i would like to work more with you in that area. >> the chair now recognizes the gentleman from north carolina. mr. pittinger. >> thank you, mr. chairman. i would like to just welcome those who have come today with your t-shirts on. what recovery? let our wages grow. whose recovery? very pointed and clear statements. i really commend you for being here and seeing this process. yes, the reality is that this recovery is the months dismal, slowest, tepid recovery we have ever had from a recession in recorded history. and we look at the realities of this recovery. this last report of new jobs was only 150,000 new jobs. we have a 2% dismal economic growth. we have the people who, frankly, demographic group that is the lowest recovery is the low

income minority people in this country. that demographic group has moved up the ladder less than any other group, albeit an intense effort, well intended, i'm sure, by the obama administration, by chair yellen. but through it, what we have seen is very accommodative monetary policy. we have seen a high regulatory environment. we have seen obamacare. we have seen the highest corporate tax rates in the industrialized world. all of this has achieved this dismal recovery. i would say to you the contrast is back in the '70s, we had the same type of dismal economic outlook, high inflation, high unemployment. and yet, what happened? we reduced regulatory environment, reduced the tax burden and the economy took off. we were creating 300,000, 400,000, 500,000 jobs a month. one month a million jobs.

we were growing up to 6%. it seems to me that logic may come in that perhaps well intended policies have had an adverse affect, adverse outcome of what was ever intended. chair yellen, i commend you for your work and what you have sought to do. but it seems to me that these accommodative policies have contributed to where we are today. i would say, chair yellen, i would like to thank you. in your remarks that you made reference to the fact that there are those who are available to work but not actively searching for work. you have also made reference to working -- those who are working part-time and can't get full-time jobs. now these numbers are not included in the current unemployment rate of 4.9%. so reality we're really talking

around 10%, 11%, 12% are the stats i have seen, the real unemployment. would that not be correct, chair yellen? >> broader measures of unemployment are significantly higher. for example, a definition that the bls refers to as u-6 that includes both of the groups you mentioned, involuntary -- >> the point i want to make the real numbers are higher. these policies have not contributed toward 4.9% unemployment. in reality, in the real world where people are living and we have some of them here today, it's far less. i think that should be understood and absorbed by these wonderful people who have come, that the types of policies that have been enacted, been enforced, this last seven years, have worked against your interests. what grew the american economy were small businesses who could

go get loans, that entrepreneur who has been the lifeblood of our economy, can't go to a bank today to get that new loan because of compliance requirements. they are the people who create those new jobs. on top of that, you have the burden of obligations of obamacare and small business. what are they doing? they are cutting jobs so they don't have to comply. what will grow your economy, what will create the jobs that you earnestly want, is an open market where companies can grow and not have this intense regulatory environment, whether it's through monetary accommodative policy or through onerous regulatory placed upon them. i want to encourage you with that reality. we can find that type of opportunity economy. i would say to you, chair yellen, that the regulatory rule book, it has been in a constant state of revision for last six years.

can you see the benefit then as a result of what we have discussed to pause this process to assess the community impact of the regulations that are having on the economy before we proceed further? >> well, we have several regulations that we intend to put out during this coming year. in terms of the list of what was mandated by dodd-frank, we have made substantial progress. >> considering that outcome we're seeing today, i think it needs to be done. >> time. time of the gentleman has expired. the chair wishes to remind members, we expect to excuse the witness as close to 1:00 as possible. the chair anticipates getting through perhaps four more members. the chair now recognizes the gentleman from the super bowl champion denver broncos, mr. perlmutter. >> thanks.

chair yellen, thank you as always for being here today. i was going to go off topic with my first question to say how about those broncos. >> way to go. >> but the chair beat me to the punch. i do want to talk about the overall conversation today. i want to thank you and i want to thank the federal reserve. i want to start with the chart that we have on the board which is really -- shows what happened at the end of the bush administration when we went to 10% unemployment and under obama we're down to less than half of that. okay? so that's your chart number two in your monetary report. the republicans don't want to let the facts get in the way of their rhetoric. because then chart number four shows that after some time -- that's on page 5, chair. wages are beginning to move up after we started getting people back into the job market. chart six, oil prices way down. chart seven, inflation even.

chart 13, wealth to income, disposable income up, quote, a robust 3.5%. chart 15, household debt service. figure one on page 37, unemployment down looking at the long-term and core price inflation, even. those are your charts. those are the facts. now, have wages gone up as much as we would like to see? no. but we had to get a lot of people back working. now we're starting to see them move. so the chair went through a whole list of economists. obviously, he didn't have a lot of questions. he wanted to list a lot of names. there were a couple guys there with the hoover institute. >> quite a number. >> so herbert hoover, president who led us into the great depression.

not the kind of economy i would like to see. all right? george bush. we go from 5% unemployment to 10% unemployment. we lose millions of jobs. under barack obama, back down to 4.9%. in colorado, we're at 3.5%. so i just want to thank you and i want to thank the administration for getting this economy back on track. can we do better? you bet. how would you suggest that we do better, how this economy can get moving so that the folks here can see some real growth in wages, which i think are beginning to appear, but what would you suggest? >> so our objective in terms of what we can do is to try to make sure that the picture that you have put up here shows continuing improvement in the labor market. i agree with you. i would say the signs of wage growth increasing, they are

tentative at this point. there are some hopeful signs. but i think if the labor market continues to progress, we are very hopeful we will see faster progress on wages. and we will try to keep that progress going. that's our objective. inflation is running under our 2% objective. i expect that will move up over time as well with appropriate policy. but i appreciate your saying that some of the burden should also be on congress and others because there are so many problems in the labor market and particular groups we have talked a lot about african-americans and the problems they face. they are not -- of course, the fed has a role to play but job training, educational programs, programs that address other barriers in the labor market, i

think this is congress' job to address. productivity growth is very low. i think congress has always had a role in supporting basic research, making sure that the infrastructure of our country is adequate and putting in place programs that make sure that training and education are widely available. >> all right. let me move to a soft spot that i think exists in the economy. you and i have talked about it before. that's on oil and gas. the fact that the saudi arabians are pumping like crazy into what appears to be an oversupplied market causing the price to drop a lot. which in some ways is very good for all of us. because it saves us 10, 15, 20 bucks a week or a month in our price at the pump. but it also is causing some job losses in the manufacturing sectors, the oil and gas obviously, transportation.

can you comment on what the fed is doing or reviewing when it comes to oil and gas production? >> so we're taking account as you said of the fact that the energy sector is very hard hit. we're losing jobs there. but with respect to employment, although there really are very severe losses, it's a pretty small sector of the workforce overall. we're seeing massive cutbacks in drilling activity. and that's rippling through to manufacturing generally where output is depressed. so it is having negative consequences. on the other hand, if you look at the difference in oil prices now relative to 2014 for the average american household, we're looking at a savings of $1,000 a year.

and that's boosting consumer spending. and we've got these two negative force, positive forces we're trying to factor all of that in -- >> the time of the gentleman has expired. the chair now recognizes the gentleman from illinois. mr. holgren. >> thank you, mr. chairman. thank you, chair yellen, so much for being with us today. as you may know the financial crimes enforcement network is in the process of finalizing some new requirements to prevent terrorism, financing and money laundering under its beneficial ownership rules. while i fully support to curb terrorism it seems like the application of the rule to certain non bank subsidiaries such as premium finance companies may not be appropriate. i understand that my staff is already talking with the fed about this issue but wondered if i could get a commitment from you today about trying to find clarification for if these rules apply to premium finance companies that are subsidiaries of banks. >> i'm sure we're happy to work with you on that.

>> thank you so much. when you testified before the committee back in november 4th of 2015, we discussed the impact of the supplementary leverage ratio on custody banks. at that time you described it as a kind of backup ratio that works as a backup to risk-based capital standards. when responding to questions from congressman rothfus earlier today you stated that when the sup elementary leverage ratio becomes effective that it will likely become the binding capital requirement for some custody banks. i understand some of these custody banks already feel they must discourage customer cash deposits. as you know these institutions have highly liquid, low risk balance sheets that support client needs. in light of this concern, will the fed consider adjusting the capital requirements for excess cash deposits held with the federal reserve? >> so i'm not sure if the supplementary leverage ratio will become the binding constraint or not. i didn't intend to say that it is the binding constraint.

there will also be so-called cifi capital surcharges that will come into effect that may make those the binding constraint. i mean, this is a matter that i understand what the issue is. we can look at it and discuss it. it was debated at the time. there were considerations on both sides. and a decision was made to include fed deposits. you know, it's something we can look at, but it was considered. >> i hope we are able to discuss that and also look and see if it's necessary for us to have congressional intervention as far as legislation to change the rule. let me move on. i'm pleased by the news that the federal reserve is engaged on capital roles appropriate for the business of insurance. what are your thoughts on how that process is proceeding and when might we suspect to see proposed rules from the federal

reserve released for public comment? >> we're working very hard on that. i don't have an exact timetable, but we are expecting to go out with for each of the firms notice of proposed rulemaking so the public can react to these rules. the staff is fairly far along in developing these, so my hope is that it won't be too much longer. we have worked hard to have the appropriate interactions with the firms and other regulators to do this right. >> well, i appreciate your work on that. from illinois insurance is important. we've got some wonderful companies there, but i know they've got questions and hopefully the resolution relatively quickly. one last question, will the federal reserve propose capital rule for all insurers it supervises and explain why or why not?

>> i'm not positive. i think for the particular cifis that have been designated designated prudentially and metlife, they're likely to be firm-specific rules, but i'm not positive. let me get back to you on that. >> that'd be great. thank you. thanks, chair yellen. mr. chairman, i have an additional minute. i'd yield that back if the chairman would want that, otherwise yield back. >> gentleman yields back. the chair now recognizes gentleman from minnesota, mr. ellison. >> thank you, mr. chair and ranking member. as we start out i also want to thank some of the folks who've joined us for the hearing today. a good friend ron harris is here from minneapolis. good to see you, ron. i just want to let you know that this active citizenship of coming to these hearings, watching these things, is exactly what is needed in order for this government to function properly. in my view this is what democracy looks like. thank you all for being here.

now, let me, chairman yellen, let me point your attention to the words of a former minneapolis fed chair, outgoing president of federal reserve bank minneapolis. on martin luther king day, he wrote a blog and here's what he said in part. there's one key source of economic difference in american life that is likely underemphasized in the fomc deliberations, race. he went onto say that for the year -- he went on to say that he searched through the transcripts of the fomc meetings for the year 2010, his first year on the committee and a dire year for african-americans in our labor market, and in that year a total unemployment rate exceeded 9.25% every quarter, but for african-americans it exceeded 15.5%. today, now white unemployment in

minnesota is 2.9% as of december 2015, but black unemployment is 14.1%. and in minneapolis, white unemployment is 4% but overall but black unemployment is a shocking 18.9%. so i say that because, i mean, this is something that i think needs the attention of the chair. and you may -- i don't know what constraints you believe are out there, but, you know, people -- race matters when it comes to how people experience our economy. if we don't discuss it and talk about it then we won't ever get to the heart of the matter to fix it to make equal justice for all. and so, i guess my question, you know, i'll quote one more time,

he said as well -- as we all know too well race matters. the average african-american's experience with the u.s. economy is different from that of the average white person's. so my question is, what do you make from the commentary of the previous minneapolis fed president? in your view, is there adequate discussion, attention of the economic situation of african-american workers within fomc deliberations? and if there's not, and i suspect you'll say there's not, what can we do about it? how can we at least focus the committee's attention on this segment of our fellow americans? >> so it's, of course, important that we look at different groups, and particularly, those who are suffering the most in the labor market. and i'm surprised that there was no specific mention of race. in 2010, unemployment rate was substantially higher than it was.

the committee was very focused at the time on what we could do to promote a stronger labor market. and i suppose because our tools are not ones that can be targeted at particular groups in the labor market, it was clear what we needed to do and that was to support a stronger labor market more generally. >> but, chair yellen, forgive me for the interruption. i definitely think -- i get that part. but i rather talk prospectively because the past is what happened and there's no changing it. how can the fed chair get the fomc to say, wait a minute. not all americans, particularly african-americans, are experiencing this upsurge in economic activity. for black americans, we're still in the midst of a very serious depression/recession. what can we do about it?

again, i'm not here to say -- to wag my finger about what happened. we know what happened and it wasn't right. but in terms of what's happening now and what can happen, what can you tell me? >> well, i think you're right that we should pay adequate attention to how different groups are faring in the labor market. we've made clear that we don't focus on any single statistic, that the unemployment rate is only one measure of what's happening in the labor market. and it is appropriate for us to really try to do a much more detailed assessment of where things stand and what we should be aiming for. >> time of the gentleman has expired. the chair anticipates calling upon two more members, mr. barr and mr. delaney and then excusing the witness. the chair now recognizes the gentleman from kentucky, mr. barr. >> thank you, mr. chairman. and chair yellen, thanks for

being back before us. the last time you were here we talked about a qualified clo concept. and you were kind enough to respond to that question in writing. and i want to thank you for that. and i want to particularly thank you for recognizing that the qualified clo concept could be considered a positive development in the market. and i'd like to continue our discussion about the role that regulation could very well play in terms of being a source of economic instability, particularly in our capital markets. the basil committee recently held a rule against the capital against disclosures in a bank trading book by up to five times the amount already required under basel iii, as well as the final tealak rules. one study suggests u.s. trading and acid backed securities will become uneconomical if the rule

is not tailored to fit the u.s. marketplace. if it is uneconomical to act as a market maker for commercial mortgage backed securities or residential mortgage backed securities, auto loans, credit cards, collateralized loan obligations, then banks will pull out of the abs market which represents a $1.6 billion source of consumer lending or 30% of all lending to u.s. consumers. so my question to you, chair yellen, is, how will the fed ensure that the final rule will be tailored to fit the u.s. market, which is the most liquid a.b.s. market in the entire world? >> so i will have a careful look at that. i'm not familiar with all of the details of the basel proposal. but anything we implement in the united states there's nothing automatic that is implemented in the united states. and we will have a careful look at what the impact would be. >> well, i appreciate you doing that. and i continue to urge the fed

and you, in particular, as a member of fsoc to look at government regulation as a source of economic instability. to that end, we are told by many of the regulated bank holding companies that there's no updated organizational chart within the fed. and so, my question would be, can you share with us or can your staff share with us, a detailed organizational chart with the names and titles of the bank supervision and regulation divisions full professional staff? >> i think so. >> the organizational -- as i'm told whatever organizational chart you have is very dated. >> yeah. >> so we can't even get -- many of the folks can't even ask you questions. >> i don't see any reason we can't share such -- >> i appreciate you doing that. switching gears really quickly to the consumer financial protection bureau and their funding source, which as you know according to the budget overview that the bureau makes public transfers from the federal reserve system are

capped at $618 million for fy-'15 and transfer cap estimated to be $631 million for fy-'16. given that my time is scarce iff you could answer the following in yes or no responses. does the fed approve the bureau's budget? >> i mean, we fund the bureau. >> but do you approve the budget? >> i don't think -- i think the answer is no. >> right. can you veto specific allocations requested? >> i don't think so. >> and does the fed have protocols if the bureau seeks to transfer more than the cap on its transfers under the formula? do you have a protocol in place to prevent that? >> i mean, we abide by the law. i need to look at the details of what our obligations and limits

are. i need to look at that more fully. >> we would like to know. >> we have protocols to abide by what congress set out. >> see, this is the problem that we have is that we don't have appropriations -- we don't have appropriations control over the bureau. so they get their funding from you. we would hope that they would at least be accountable to you as the funding source. is there any direct oversight of the implementation of the bureau's budget by the fed? >> no. our inspector general has authority both for the fed and the bureau. but the fed does not have authority over the budget and spending -- >> thank you. and my last ten seconds, you have talked about the need for congress to address our long-term debt and deficit crisis. this seems to me a five alarm fire. why isn't the fed, given that mandatory spending is 70% of the

federal budget, why isn't the fed more aggressively warning congress that it must reform mandatory entitlement spending? >> every fed chair that i can remember has come and told congress that this is a looming problem with serious economic consequences. i know my predecessor has. i have on many occasions. i certainly remember the chairman greenspan discussed with congress the importance of addressing this. >> thank you. >> time of the gentleman has expired. the chair recognizes the gentleman from maryland. >> i want to thank you, chair yellen, for not only your leadership in general but your participation and patience at this hearing. i want to welcome our visitors and guests here today and thank you for bringing your importance message. we do talk about how our unemployment rate has gone down,

which is has, below 5% now. but we all know when you get behind those numbers, there's really two types of jobs being created, high skilled, high paid skills. need advance education. and low skill low pays jobs. what we are not creating middle skill, middle class jobs, that have been the backbone of this country and allowed wages to grow. the chair touched on something very important, which is infrastructure. there's nothing we can do as a country to help address that problem more than rebuilding our country. if i could edit your t-shirts, i would say let our wages grow, rebuild our country. i think it would make a difference. my question for the chair -- thank you for your patience. in december when the decision was made to raise the federal fund rates, in your testimony you said that was in part based on a view that economic activity would continue to expand at a

moderate pace and labor market indicators would continue to strengthen. certainly, based on the top line data from 2015 and 2014 where we saw decent gdp growth, improvement in the residential market, business investments at a decent level, not where we would like them but at a decent level, increases in r and d investme investment, even when you take in consideration the negative from the oil and gas sector, outlook for economic growth was reasonably solid. the labor market data that you were looking at at the time must have been good. because the january numbers were encouraging, not only in terms of unemployment but some of the wage data as you talked about. i guess my question is, a lot has happened since that decision. in the markets. that tends to change behavior. when you look at the same kind of -- the same data you looked at when you made that decision in december, if you look at that

data now, does it change your view as to your perspective on economic activity, economic growth and general labor market trends? >> so i think the answer is maybe, but the jury is out. we have continued to see progress in the labor market over the last three months. there have been 230,000 jobs per month averaging through. gdp growth clearly slowed a lot in the fourth quarter. my expectation is that it will pick up this quarter. but on the other hand, financial conditions have tightened considerably. and that can have implications for the outlook. and with the committee said in january, we said we regarded the risks to the outlook for economic activity and the labor

market as balanced. what we said in january is that we are evaluating and assessing the impact of these developments on the outlook for both the labor market and activity for inflation and the balance of risks. and that's what we're doing at this point. >> when you look, chair yellen, at recent data that you get better than anyone about credit formation and bar rorrowing activities in the market, are you concerned there has been a significant contraction in credit availability based on recent market activities? how much does that factor into your -- >> that is an important factor. >> have you seen it? >> well, not really at this stage. but what we do see is that spreads, especially on lower graded bonds have widened

considerably. borrowing rates have widened. >> what about bank lending? >> it's not just energy. in our most recent survey of banks on their lending standards, we have seen a tightening that's reported in c and i loans, in cre loans. and that certainly those loans continue to grow. that is something that bears watching. it's really those kinds of trends that we need to evaluate. >> very quickly, as you weigh your decisions, obviously inflation and labor market participation are critical, overall view of economic activity is critical. the sub component, what's happening with credit availability, how important is that in your decision making process? >> we're trying to do is forecast spending in the economy, investment spendi inind housing are two important forms of spending and credit

availability factors into our forecast for both of those portions of the economy. they're not the only factors that matter. but they are a factor that is important. and so we will be considering those. there's a number of weeks before we meet again in march. there's quite a bit of additional data we will want to look at. but you have pinpointed exactly the kinds of considerations that will bear on our thinking. >> thank you again. >> time has expired. the ranking member is recognized for unanimous consent request. >> we would like to highlight the important work that fed reserve board is doing through their faster payment task force. >> without objection, i thank chair yellen. i thank you for your testimony today. without objection, all members will have five legislative da

additional questions. without objection, all members will have five legislative days within which to submit materials to the chair for inclusion in the record. this hearing stands adjourned.

tonight on c-span3, american history tv in prime time. next, a discussion on the presidency of oulysses s. grant. then modern war and the environment. that's followed by a talk presidents and war powers. later, north carolina state professor suzanna leon how the perception of citizenship changed after the civil war. road to the white house coverage continues wednesday from south carolina. donald trump will address supporters at a rally. we will take you there live at 5:00 p.m. eastern. then to chapin, where