have taken action, not just continued to watch. >> no, we are doing something. >> admiral michael rogers discussing the 2019 budget request. but members took the opportunity to ask him about a number of other issues. can you see the entire hearing tonight at 9:00 eastern on c-span 2. treasury yields cline immediately after after cline said his personal outlook on the economy strengthened since september. there are expectations the feds could become more aggressive about raising interest rates. we will show you the hearing where he made those comments. it is about three hours.

>> committee will come together without onbjection. this hearing is for the purpose of receiving the semi-annual testimony of the chair of board of governors of the federal reserve system on monetary policy and the state of the economy. i recognize myself for 3 1/2 minutes to give an opening statement. not with standing the greatest monetary and fiscal stimulus, the economy limp aid long for eight years averaging 1.6% gdp growth. wages remain stagnant and failing since the 2008 financial crisis. new phrase by left-leaning academics in an attempt to rationalize the phenomena namely

secular stag nation. far more descriptive phrase is high taxes and heavy-handed regulatory policy. fortunately with the election of donald trump and passage of tax cuts and jobs act that has all changed. employment is now at a 17-year low. wage growth is the fastest in companies all over america are anow ns bonuses to employees and skpap expansions in their communities. economic growth is averaging 3%. there is great volatility in equity markets. the s&p 500 is still up more than 14% since last year. there is clearly concern now whether the fed can successfully unwind a historically unbalanced balance sheet after a decade of unconventional policy and interest rates. this is not particularly an issue when the economy was stuck

in low gear but now that economic transmission has been shifted into high gear it clearly is an issue. so with that backdrop we welcome you chairman powell to your first of many humphrey hawkins hearings. please note we are all rooting for you, for much is at stake. as we begin a new era in federal reserve leadership it is a good time to reestablish congressional expectations. now more than ever, the fed must commit it a credible orderly and well-communicated normalization plan. the fed must do an even better job of communicating clearly to market participants all the variables used to conduct monetary policy in their relative waitings and interactions. next, monetary policy must remain independent and the fed

must remain accountable to congress which incidentally created it and has the responsibility of coining money and regulating its value under our constitution. furthermore it is critical that fed stays in their lane. interest on reserves especially excess reserves is not only fuelling a much more improvisational monetary policy, but it has fuelled a distortionary balance sheet that allowed the fed into credit allocation policy where it does not have business. credit policies are the purview of congress, not the fed. when congress granted the fed the power to pay interest on reserves, it was never contemplated or articulated that ioer might be used to is you plant fonc. if the fed continues to do so i fear that its independent could be eroded.fonc. if the fed continues to do so i fear that its independent could be eroded.

finally, in addition to its monetary policy responsibilities, we all know the fed has an outsize prudential regulator role. this responsibility is clearly not designed to be independent of congress and must be made subject to appropriations as are other prudential regulators. additionally, formal rule making must not be eschewed for de facto rule making. in closing, regardless of the exigencies of 2008, monetary policy is not and can never be a substitute for sound fiscal policy. chairman powell, we look forward to a prudent path to normalization where interest rates are once again market based and credit is allocated to its most efficient use. i now yield four minutes to the ranking member for an opening statements. >> thank you, mr. chairman, and welcome, chairman powell. i look forward to your testimony today on monetary policy.

recent economic development on outlook for our economy. i am concerned that the hard-earned economic recovery which came as a result of policies and reforms put in place by president obama and democrats in congress and federal reserver will undermined by the reckless policies of this president and his allies in congress. they are working every day to roll back the critical protections for consumers, investors, and the economy that democrats put in place in the dodd-frank wall street reform and consumer protection act. as a move to take an ax to dodd-frank, they seemingly have forgotten about the tremendous economic harm that resulted from the financial crisis and appear to be perfectly willing to pave the way right to another crisis. with their tax scam, republicans have engineered a massive giveaway to corporations and the ultra-rich at the expense of

hard-working americans. the tax scam balloons the national debt by $1.8 trillion, gives corporations a $1.3 trillion tax break and will eventually raise taxes on 86 million american families. despite the huge windfall for corporations, most are not raising wages. but are instead buying back their own stock to boost share prices. some corporations are giving one-time bonuses for optics but these one-time bonuses represent a tiny fraction of the windfall the corporations will pocket. on top of that, the latest trump budget request is again a cruel, senseless proposal that would be deeply harmful to millions of families, seniors, veterans, and persons with disabilities. the budget request slashes the social safety net, cutting billions of dollars in funding for supplemental nutrition assistance and health care and

housing programs. these policies show that donald trump simply has no interest in standing up for americans need a hand up. instead, he has put forth a series of harmful policies that tell families and communities that they are on their own. our majority colleagues have also launched a full-fledged legislative assault on the federal reserve. the majority is pushing damaging legislative proposals that roll back constraints on the influence of commercial banks within the federal reserve system, eliminate tools that provided critical -- that proved critical to the federal reserve's support of the economy, following the financial crisis, undermine the federal reserve's focus on employment and eliminate its independence from the broken congressional appropriations process. the majority is also using the federal reserve as a piggy bank to pay for the cost of legislation like the latest short-term spending measure and now hr-4296, which will be on the floor today. these republican efforts to

undermine the fed diminish its ability to support american workers if we face another crisis. chairman powell, i look forward to hearing your views on the economy and the path to sustaining the economic progress that was set in motion during the obama administration. i yield back the balance of my time. >> gentle lady yields back. the chair now recognizes the gentleman from kentucky, mr. bar, the chairman of the monetary policy and trade subcommittee for one and a half minutes. >> welcome, chairman powell. since the 2007 and 2009 financial crisis, the federal reserve's distortionary balance sheet has exploded from just under $1 trillion to more than $4.5 trillion, injecting new and unknown risks into the economy. clearly, whether you believe this unprecedented government intervention into our economy had merit or not, it has distorted prices of key assets like housing, stocks, bonds, and treasury. that was the intention. fortunately, the fed has begun to unwind these distortions and i hope that they stick to their

plan, enabling a more free market environment that will help foster economic growth and opportunity for all. over recent weeks, we have seen more than usual levels of market volatility. this volatility is attributable to the fact that no fed chairman has ever inherited the task you have before you. the job of unwinding the most unprecedented and unconventional monetary experiment in the history of central banking. your task is to continue to unwind the fed's asset purchases, gradually and predictably return to market based interest rates and remove monetary distortions from the economy without producing excessive market disruption. this is a serious responsibility. but at least the fed now has the backdrop of a strong economy and faster economic growth from tax cuts so that it can achieve this very difficult task. i personally want to commend you, chairman powell, for leading the way on normalization and i encourage you to continue in this pursuit. i also commend your commitment

to tailoring financial regulations for community financial institutions and right sizing our regulations. i look forward to your testimony and wish you the best. >> time of the gentleman has expired. the chair now recognizes gentle lady from wisconsin, the ranking member of the monetary policy and trade subcommittee. you have one minute. >> thank you so much, mr. chairman. thank you, chairman powell, for attending today. i look forward to your testimony and getting to know you through your tenure as chairman. you're taking over the federal reserve at a very precarious time, and your predecessor had talked about slowly tightening rates as employment has improved and thinking was a return to normalcy so i'm interested in hearing if that means an emphasis on increasing rates and/or unwinding the portfolio. your tenure comes at a time when the gop tax bill will only make your task more difficult, i believe. as changes to health care may increase inflation for coverage.

the gop tax bill is a windfall for shareholders that will untether the real economy that most of us live in, as opposed to wall street, leaving you struck between competing problems, a contracting real economy and growing asset bubbles with minimum room to lower rates if necessary. i guess we should thank dodd-frank that it's buttressed the financial system and we should hold on a for a bumpy ride. i hope your term is successful and i look forward to your testimony. and i yield back. thank one mr. chairman. >> time for the gentle lady has expired. >> today, we welcome the testimony of the honorable jerome h. powell. this is the first time that chairman powell has appeared before this committee. it will not be the last time he appears before this committee. chairman powell took office as chairman of the board of governors of the federal reserve system on february 5th, 2018, for a four-year term. he has previously served as a member of the board of governors

and took office on may 25, 2012. mr. powell also serves as chairman of the federal open market committee. prior to his appointment to the board, chairman powell was a visiting scholar at the bipartisan policy center as well as a partner of the carlisle group. he has served as an assistant secretary and undersecretary of treasury under president george h.w. bush. prior to joining the administration, he worked as an attorney and an investment banker in new york. chairman powell received an a.b. in politics from princeton university and earned a law degree from georgetown university where he was the editor in chief of the georgetown law journal. without objection, the witness's written statement will be made part of the record. chairman powell, again, welcome, and you are now recognized to give an oral presentation of your testimony. >> thank you very much. >> you're going to have to hit the microphone, though. >> thank you very much, mr.

chairman. and thank you, ranking member waters and members of the committee. pleased to present the monetary policy report to the congress. on the occasion of my first appearance before this committee as chairman of the federal reserve, i want to be begin by expressing my appreciation for my predecessor, chair janet yellen, and her important contributions. the economy continued to strengthen and federal reserve policymakers began to normalize both the level of interest rates and the size of the balance sheet. together, chair yellen and i have worked to ensure a smooth leadership transition and provide for continuity in monetary policy. i'd also like to express my appreciation for my colleagues on the federal open market committee and finally, i want to affirm my continued support for the objectives assigned to us by congress, maximum employment and price stability, and for transparency about the federal reserve's policies and programs. transparency is the foundation for our accountability and i'm

committed to clearly explaining what we are doing and why we're doing it. today, i will briefly discuss the current economic situation and outlook before turning to monetary policy. the u.s. economy grew at a solid pace over the second half of 2017 and into this year. monthly job gains and payrolls rose an additional 200,000 in january. this pace of job growth was sufficient to push the unemployment rate down to 4.1%, about 0.75% below that of a year earlier and the lowest rate since december of 2000. in addition, the labor force participation rate remained roughly unchanged and that is a sign of job market strength, given that retired baby boomers are putting downward pressure on the participation rate. strong job gains have led to

widespread reductions in unem ploumt across the income spectrum and for all major demographic groups. for example, the unemployment rate for adults without a high school education has fallen from about 15% in 2009 to 5.5% in january of this year. while the jobless rate for those with a college degree has moved down from 5% to 2% over the same period. in addition, unemployment rates for african-americans and hispanics are now at or below rates seen before the recession, although they are still significantly above the rate for whites. wages have continued to grow moderately with a modest acceleration in some measures although the extent of the pick-up in wages likely has been damped by the weak pace of productivity growth in recent years. turning from the labor market to production, inflation adjusted gdp rose at an annual rate of about 3% in the second half of 2017, a full percentage point faster than its pace in the first half of the year.

economic growth in the second half was led by solid gains in consumer spending, supported by rising household incomes and wealth and upbeat sentiment. in addition, growth in business investment stepped up sharply last year, which should support higher productivity growth in time. the housing market has continued to improve slowly. economic activity abroad has also been solid in recent quarters and the associated strengthening and demand for u.s. exports has provided considerable support for our manufacturing industry. against this backdrop of solid growth and a strong labor market, inflation has been low and stable. in fact, inflation has continued to run below the 2% rate that the fomc judges to be most consistent over the long run with our congressional mandate. overall consumer prices as measured by the price index or pce inflation as we say

increased 1.7% in the 12 months ending in december, about the same as in 2016. the core pce price index, which excludes the prices of energy and food items and is a better indicator of future inflation rose 1.5% over the same period somewhat less than in the previous year. we continue to view some of the shortfall in inflation last year as likely reflecting transitory influeest we do not expect will repeat. consistent with this view, the monthly readings were a little bit higher toward the end of the year than in earlier months. after substantially easing during 2017, financial conditions in the united states have reversed some of that easing over the past month. at this point, we do not see these developments as weighing heavily on the outlook for economic activity, the labor market, or inflation. indeed, the economic outlook remains strong. the robust job market should continue to support growth and

household incomes and consumer spending. solid economic growth among our trading partners should lead to further gains in u.s. exports and upbeat business sentiment and strong sales growth will likely continue to boost business investment. moreover, fiscal policy has become more stimulative. we anticipate that inflation will move up this year and stabilize around the committee's 2% objective over the medium term. wages should increase at a faster pace as well. the committee views the near-term risks to the economic outlook as roughly balanced but will continue to monitor inflation developments closely. turning to monetary policy. the congress has assigned us the goals of promoting maximum employment and stable prices. over the second half of 2017, the fomc continued to gradually reduce monetary policy accommodation, specifically we raised the target rate for the federal funds rate by a quarter percentage point bringing the

target to a range of 1.25% to 1.5%. in addition, in october, we initiated a balance sheet normalization program to gradually reduce our securities holdings, and that program has proceeded quite smoothly. these interest rate and balance sheet actions reflect the committee's view that gradually reducing monetary policy accommodation will sustain a strong labor market while fostering a return of inflation to 2%. engaging the appropriate path for monetary policy over the next few years, the fomc will continue to strike a balance between avoiding an overheating economy and bringing price inflation to 2% on a sustained basis. while many factors shape the economic outlook, some of the head winds have turned into tail winds, in particular fiscal policy has become more stimulative. foreign demands for u.s. exports

is on a firmer trajectory. despite the recent volatility, financial conditions remain accommodative. at the same time, inflation runs below the 2% objective. in the committee's view, further increases will best promote attainment of both of our objectives. the path of monetary policy will depend on the economic outlook. as informed by incoming data. in evaluating the stance of monetary policy, the fomc routinely conducts monetary policy rules that connect prescriptions for the policy rate with variables associated with our mandated objectives. personally, i find these rule prescriptions quite helpful. careful judgments are required about the measurement of the variables used in these rules as well as about the implication of the many issues the rules do not take into account and i'd like to note that this monetary policy report provides further discussion of policy rules and their role in our policy process, extending the analysis we introduced last july.

thank you very much, and i look forward to taking your questions. >> thank you, chairman powell. the chair now yields to himself for five minutes. chairman powell, in your statement, you used the term, normalization. i'd like to explore that for a moment, in particular with respect to interest on reserves. is our expectation, should it be that ioer is the new primary monetary policy tool or will it, instead, be the fire extinguisher behind the glass that you break out in times of emergency? what should be our expectation? >> mr. chairman, interest on excess reserves is currently, as you know, the principal policy tool that we use to keep the federal funds rate in the range that we designate. and we have not made a decision in the longer are run whether that will continue to be our framework or whether we will return to something more like

what we did before the crisis and i don't have a schedule for -- i don't expect to be returning to that decision in the near term. i would just say that our current approach seems to be working very well. it gives us control over rates and the market seems to understand it. >> so, it remains an open question? >> in the long run -- the long run framework, operating framework, does remain open, yes >> as you heard in my opening statement, it still remains a concern. you would be hard pressed to find in the congressional record or any testimony from members of the federal reserve at the time congress granted this power that it would be used to supplant open market operations of the fomc, so i trust we will be having further discussions about that. with respect to normalization, i think you have said publicly that you expect the new normal with respect to the size of the balance sheet to be are roughr

to $3 trillion and get there over 3 to 4 years. do i understand that correctly, mr. chairman? >> yes. >> as i understand it, though, i've not been able to see in the public record the expectation with respect to the composition of the balance sheet, and i believe that currently, you're carrying $2.4 trillion of treasuries, 1.8 of mortgage backed securities, is our expectation, that's roughly 1/3, 2/3 ratio. is it your intention to keep the same ratio of mortgage backed securities. many of us are concerned, because right now i don't really see a glide path to a treasuries only balance sheet. >> no, sir, our intention over the long-term is that the balance sheet would be no larger than it needs to be to implement monetary policy and that it would consist primarily of treasury securities. as you know, we purchased the mortgage backed securities in the aftermath of the crisis that was an unusual practice, and it was something that we did in

unusual circumstances, and those will run off over time, and i don't expect that we would use that tool again other than in a very severe situation. >> the monetary policy report that came out days ago shows the balance sheet rolloff caps. what i'm having a little trouble with is as i look at the charts in the report, mr. chairman, i don't know -- you don't seem to have sufficient mbs redemptions that allow you to reach your $20 billion runoff pace. so, as i read the chart, i think the expectation is, by the end of the year, we're looking at a $50 billion balance sheet rolloff, but as of today, i don't think you have sufficient treasuries and mbs to do that. so how do you achieve it? >> well, in the case of mortgage backed securities, the rolloff is less predictable. with treasuries, you know when they're going to mature.

and you can see what that roleorol rolloff. will be. with mortgage backed securities, rolloff will depend on the level of interest rates and the level of people refinancing their mortgages so as rates go up, refis will go down and you'll see slower rolloff. >> should the public expect a $50 billion rolloff? >> no, i would say that the public should expect there will be a consistent, substantial rolloff this year and the next year that over the period of maybe four years will get us back to something approaching a new normal. i don't know that you can say -- >> but we don't know the exact pace. >> i don't think that the caps are not going to be binding in the case of the mbs. >> my time is starting to wind down. i'd like to explore inflation targeting. in your testimony, it appears the fed is keeping to their 2% inflation target. i'm still trying to -- i struggle with how this is commensurate with a statutory mandate for achieving price stability but i also saw from the fomc minutes the most recent

minutes that there was at least discussion about moving from the 2% target too a target range and at least 2% is a linear function. a range, obviously, is not. and so i'm really struggling with how is this commensurate with price stability and also as you know some commentators are calling for a 3%, 4% target, so two questions. number one, do we have an expectation the fed will move from its 2% target, and at some point, at 3%, 4%, 5% inflation targeting, have you violated your price stability mandate? >> our current framework says that the committee would be concerned with sustained or persistent deviations above or below 2% so we understand that inflation is going to be buffeted by various factors and may not be exactly at 2%.

it will be above and below and we see it as a symmetric objective. the framework is working. market understands it. we've been trying to get up to 2%. generally speaking, inflation's been low, and stable for 15 or 20 years now. >> my time long sense expired. the chair now raises the ranking member for five minutes. >> thank you very much. chairman powell, with a permanent voting seat on the fomc and its role in supervising some of the largest and most complex financial institutions in the country, the president of the new york federal reserve has one of the most important economic policymaking roles in the nation. as you know, bill dudley will step down this year and the search for his replacement is under way. historically, the new york fed's close proximity to wall street has led to the selection of an individual with close ties to

the financial sector. in your view, how important is it that the individual chosen is a diverse candidate with demonstrated independence from wall street and a strong commitment to the fed's maximum employment mandate and regulatory responsibilities? what steps is the board taking to ensure that candidates from diverse gender, racial, and ethnic backgrounds are given due consideration? if diverse candidates are not afforded due consideration, are you prepared to exercise your power as chair to reject such candidates to serve as the next president of the new york fed? i know you have a lot on your plate, but i have to put this question to you because we've got to do better. about diversity. and particularly at the highest levels. not only am i looking at what's happening with the new york fed, and the possibility there, we have to look at our own fed and

think about how diverse is it at the top levels, management levels. so help me out. what do you think about this? >> thank you, ranking member waters. i've been involved -- this is the seventh process to select a reserve bank president that i've been involved in since i joined the fed in 2012, so i'm very familiar with the way the process works, and so we always insist that the search committee, which is -- consists of the bnc directors of the reserve bank, hire a national search firm and we always insist and they don't need to be pushed into this, this is something they want to do, we always insist that there's a highly diverse candidate pool and that diverse candidates are given serious consideration and every chance to become the successful participant in that process. so, i can absolutely guarantee you that will continue to be the case. we will always have diverse candidates. they will always have a fair shot. i cannot in any individual case guarantee that there will be a

diverse outcome but i can guarantee that the process will always be working in that direction. >> i appreciate that. and i'm sure that you're committed to that, but the diverse candidate question is a question that many of us have, and we don't know that there has been consideration for diverse candidates with these very, very important positions. and i'm wondering, where do the recommendations come from? how is the outreach done? and how can you ensure that there are diverse candidates to be considered? >> different reserve banks have done new and different things and we've really raised our game in this area, so for example, the new york fed has done extensive outreach to community groups and, you know, of that nature, universities and all sorts of things around the new york region and around the nation. in addition, the national search firms have a very large presence in the candidate population and

know who's out there and know who would be a good candidate. they're always trying to find new candidates and we are too, so it's something we work very hard at, and are always interested in having new ideas for qualified candidates as well so we invite the general public, generally, to offer their thoughts as well as some of the interest groups. >> you know, there is an organization, maybe more than one, that's made up of minorities in financial services that include everything from those who are, you know, doing management in the financial services industry, working with hedge funds, with equity firms, et cetera. have you reached out to those -- not you, but do you know if those firms have been contacted? >> i know that our search committees and our head hunters have reached out to many, many groups of that nature. >> how can i follow up on that and is it possible that those of

us who know about these organizations can ask them if they have been contacted and if not, how can we refer them? >> well, we'll be happy to provide you with the contact person at the new york fed who's responsible for the current search and in case of any future searches, we'll be able to do the same. >> well, i will follow up on that and i thank you very much, and i yield back the balance of my time. >> the chair now recognizes the gentleman from kentucky, mr. barr, chairman of our monetary policy subcommittee, for five minutes. >> thank you, mr. chairman, and chairman powell, congratulations again on your confirmation. i appreciate your commitment and our conversations to transparency and your demonstration of that commitment to date to clearly communicate the fed's monetary policy trajectory. you have noted on numerous occasions that the remaining slack that may exist in the labor market is at least in part attributable to stagnant wage growth and in your confirmation

hearing a senator on the banking committee cited a 2016 fed research paper concluding that corporate tax cuts do not translate into higher wages. but we have seen a wave of corporate announcements of bonuses and raises since the tax cuts were enacted, specifically over 4 million workers and counting have received over $3 billion in bonuses and raises during the last 8 weeks and the labor department recently announced the largest increase in wages since the end of the recession. based on these numbers, is the senator in question and are the fed researchers that he cites, are they wrong? and have tax cuts, in fact, helped increase wages as your testimony indicates that wages should be increasing at a faster pace as a result of a more stimulative fiscal policy. >> thank you, chairman. >> it's very hard to trace through the effects of a change in tax policy to things like wage growth in the economy but

let me try. lower corporate taxes should lead to higher investment and the effect is not easy to estimate but you would think an estimate. you would think and studies find lead to higher investment. and higher investment should go to higher productivity. that it's hard to put arrange on how much that would be. but higher productivity is very welcome and will be driven which higher investment. >> and clearly the wave of bonuses and raises certainly suggest there is upward pressure on wages as a result of this tax cuts. in 2015 speech, you said monetary accommodation could fuel dangerous risk taking. specifically you said, quote, nominal rates call for high degree of vigilance, unquote. can you elaborate? what specific rates have been created that the fed now has to

watch? >> well, i do think this is a time when we need to be alert to build up of either financial imbalances or to inflation building up. we don't really see those right now. i think i also said that in my 2015 speech. but if you look at the financial stability situation broadly, we do see some high asset prices. what we don't see is the buildup of leverage among households. we see the banking system and financial system generally as being very resilient. so i think the financial stability picture shows modest. >> if i could point out something and have you react to it monetary policy. as you know, somebody in the fed for contributing 2008 financial crisis by producing inverted yield curve. where short term interest rates did out term rates. at the beginning of 2011, spread between notes was almost 3%.

but as of february this year that same spread has been down to half percent. given things that you can see calling raising the fund rates, how will the fed avoid another inverted yield curve? tan are there any plans with the balance sheet normalization strategy to roll off longer term assets more quickly to counteract that flattening yield curve? >> you know, flattening of yield curves in the past has been a sort of precursor of recessions. but largely because in many prior recessions fed had to raise rates quickly to hold inflation down. that's not the situation we have now. it's very typical for the yield curve to flt enas short term rates come up as the economy strengthens. and i don't see a particularly large -- there is always a risk of a recession at any given point in time. i don't see it at all high at the moment. >> i don't either. but it is a risk that normalization after this

unprecedented unconventional policy is created. and to dovetail off what the chairman point was roll off strategy, it would be important if there were not enough maturing mortgage backed securities that mature in order for the fed to actually hit its monetary roll off targets. so to that end, to avoid an inverted yield curve, do you anticipate that perhaps selling assets? >> no. i think i certainly feel that our balance sheet normalization plan was carefully crafted and rolled out and the markets took it without much of a reaction. and i think i would have little inclination to change the general parameters of it. >> thank you. my time has expired. >> time of the gentleman has expired. chair recognizes from new york miss ma loany. >> thank you. projection is 3 interest rate increases in 2018.

what would cause you to raise rates more than three times this year? would you have to see a material increase in inflation? faster gdp growth? higher wage growth? what would cause you to raise rates more? >> thank you. you are right, every quarter, each participant submits projection what they feel is going to happen in the economy, and also their projection for appropriate monetary policy. and at the december meeting the immediate hand called for three rate increases in 2018. now since then, we will submit another projection all of us in three weeks. but since then what we have seen is incoming data that suggests a strengthening in the economy, we have seen continuing strength in the labor market. we have seen some data that will in my case add some confidence to my view that inflation is moving up to target.

we've also seen continued strength around the globe. and we have seen fiscal policy become more stim la tive. so i think each of us is going to be taking the developments between since the december meeting into account, and writing down our new rate pass, as we go into the march meeting. and i wouldn't want to prejudge that. >> and as you negotiation the last time the fed released projections for the pace of interest rate increases was in mid-december. and since then we have had two major financial events, one was the tax reform legislation, and the other was the major budget agreement. so my question is, has your outlook for how quickly the fed should tighten monetary policy changed in light of tax reform and budget agreement? >> one would say my personal outlook for the economy has street end since december. and, again, each member them will be writing down a new set of projections and newest mate

of appropriate monetary policy as we go into the march meeting which begins three weeks from today. and so i wouldn't want to prejudge that new set of projections. but we'll be taking into account everything that's happened since december. >> thank you. and yesterday the fed governor quarrels leading the fed reserve of post crisis regulations statesed, and i quote, we are not looking to relax regulation, end quote. he also said, and i quote, we are not looking to reduce capital for banks, end quote. do you agree with the governor quarrels that your goal is not to relax regulations or to reduce banks capital requirements? and mr. chairman i ask u nam tus consent to place the comments in the record. >> without objection. >> the way i think about it is this, we have several primary pillars of post crisis financial regulation that we want to strengthen and protect. and those are high risk base capital.

high liquidity. stress testing. and resolution. and we want to mick sure thake p those strong and transparent as they pertain to our largest institutions. as we move down to smaller institutions down to the community banks, we want to make sure we have taylored regulation so we are not -- we are achieving our safety goals without creating excessive burden. that's really the way i think about what we are doing. >> and, lastly, chairman powell last week several academics published a paper that the feds quantitative easing programs was ineffective in helping the economy. they disagreed and said they thought that quantitative easing had been effective. so my question to you is, do you think the feds quantitative

easing program was effective? and do you believe the feds should keep this tool in its toolbox for future challenges? >> i do think our post crisis policies were effective. and i haven't carefully studied that report yet. but let me say what these reports try to do is they try to ieds phi the surprise element in ha particular announcement and isolate that from what was already priced into the market. so most things that happen on announcement day are already priced in. it's very hard to isolate that surprise element. and this paper takes a different way of doing that and comes up with the answer. overwhelmingly studies of the effects of eight purchase programs suggest that asset purchase programs did their job, which was to create downward pressure on longer term interest rates through the term premium. so i would say that is very likely the case. >> thank you. my time is up. >> time has expired.

the chair now recognizes gentleman from missouri, chairman luke mier. >> thank you. congratulations, mr. powell, and it's nice to seeing the banker chief banker instead of economy. we have different outlook of policies and perspective and i think that's healthy. so i just want to start talking about leverage lending a little bit. i want to follow up op the jao which determined that agency leverage lending guidance is a rule under the congressional review act. and is therefore intent tive because it was never submitted to congress. in the past the same would presumably true for other guidance. i've heard reports from banks many have outstanding matters that require attention based on such guidance they are still being told either by examiners to treat that as binding

regulations. so while no one seems to be disputing this, the word does not appear to be getting out. would you agree that rules are rules and guidance is guidance, and guidance is not binding? >> yes, mr. luke, i would agree, absolutely with that. and i think in the case of leverage lending guidance, we do accept and understand that that's nonbinding guidance. and since the ruling we've made it a point to go out and make sure the message is getting out to supervisors of banks. and also thinking of, we are in discussions and thinking about other ways we can underscore that, perhaps putting it out for further comment. >> well, just left another meeting before i got here of a group of bankers from one of the states around the country. and we were discussing issues similar to this with regards to the culture within agencies and the ability of change to be taking place even though we

changed the head of the agency, sometimes the message doesn't get all the way to the bottom. when i made that comment i saw a lot of heads nodding in the audience. there is concern while the leadership has changed, good intentions may be there, but, again, this needs to filter down all the way through the entire agency and understanding needs to take place by everybody that this is a new way of doing business that guidance is guidance, rules are rules, and there is a big difference between how they are adds adjudicated and enforced by the body itself. so i sure appreciate you taking that under consideration. >> it's an important point and feature of our distributed federal reserve system of which i'm a big supporter of structure of our system. and i think we know how to manage that problem and do a pretty good job at it and continue to try to the do the best we can. the heads of supervision at all the reserve banks are in close and constant conversation and discussion with vice chair

quarrels and others at the board, and i don't sense any reluctance to engage in those discussions. >> i look forward to working with you because i told the bankers when i left if you see a problem let me know because i'll have a chance to talk to mr. powell myself this morning. so we'll carry the message. thank you for that. with regard to data security h cyberthis is issue we are, would go on right now, my subcommittee has a bill we are putting together. data security cyber security threats have potential to wreck our economy, wreck havoc with it. we subject our companies to lots of these. fed remain. zero harmonization between the agencies. result is firms spend thousands of hour rather than protecting stims and customers. do you see this as a problem? >> yes, i do. i think cyber security is one of

the significant threats and we try to harmonize through the process our supervisory guidance on what we expect from firms on cyber security issues and data safety and that ipd coup of thing. i'm sure we can do a better john job and we are committed to trying. >> i know that's an issue financial institutions in particular sort of ride in the cross hairs of this because of the amount of personal data they hold and the risk that's there. they are easy target. so we want to make sure we work on that issue and work with you. you sit in a position you can harmonize those rules i think pretty easy with different groups of regulatory agencies that actually meet on regular basis discussing things. is this discussed in your meetings with the fed, the treasury, fdic, come controller, is this discussed at length? >> yes, it is tlchlt .

there is a chair, i haven't attended but as chair i'll a tends those meetings. certainly very big focus fortressry and for us. >> my time is expired. thank you. >> time has expired. chair now recognizes the gentleman from california, mr. sherman. >> chairman powell, welcome, you are required to be independent, and accountable. you are also required to be tall and short. your opening statement mentions great exports, but you don't meks that our trade deficit has gone up by $60 million in the last year. and i would point out that the entire economic establishment in this country has made it almost prohibitive to discuss the trade deficit. and that's why we elected, that's why the country elected

donald trump president. now, the chair of the subcommittee boasts that we had a good economy in 2017. he's right. we had obama fiscal policies, tax care, we had a great year. as a matter of fact, we have been on a roll since 2011. we are closing in on having high enough employment rate so we would have a labor shortage and higher wages. we were going well, and so instead of continuing to be on a roll, we have abandoned those policies and adopted approve la gat tax, throwing away the budget caps, $1.5 trillion plus interest of the debt from the tax bill. but i think we will still do well, because our scientists and entrepreneurs and workers are the best in the world and they'll make up for all the mistakes we are making here in

washington. i see behind you, sir, the green shirts that call for full employment. and it's not enough to go with the economist definition of 4%. we need real full employment that causes labor shortage and dis pirate employers bidding up the price of labor. and that is also consistent with the fact that many economists are saying you should be aiming not for 2%, but 2.5% inflation. that's the kind of ex-papansiony economy that will allow the guy to come back infancy polo shirts with the same slogan in a couple of years from now. now when we talk about some workers getting $1,000 bonus, yeah, a few have. but a family of five's share of the increase in the national debt from the tax bill is

$26,000. what greater proof do we need of the need for financial literacy in this country than that char lan tan can say, here's the deal, i'll give you $1,000, money in your pocket and slap $26,000 on your future. now, chairman, in your confirmation hearings you said that, i believe, that no bank is any longer too big to fail. i would point out that the biggest banks are bigger now than in 2008 when they came to us and said they were too big to fail. they would pull the entire economy down. we had to bail them out with $700 billion. and i'd point out that the wall street prices in to the value of the bank stock, but more importantly to unsecured debt an

assumption they will be bailed out. so i have a number of questions for the record. but i'll actually ask for one you to respond to. we have adopted these profligate fiscal policies. huge tax cuts that leading to a massive increase in the deficit number that's right behind you. then we busted the budget caps. is our monetary policy going to need to be more restrictive this year than it would have been had we not adopted these profligate fiscal and tax policies? >> thank you. so of course when we are setting monetary policy, we are focused on achieving stable prices and maximum employment. and in doing that we consider many factors. over all, the global economy, et cetera. fiscal policy changes can have an affect and changes of this size can have an affect.

and that can be seen, of course, in the path of policy. it's very hard to say in advance what that would be. but the answer to your question is generally we take all those things in account. >> so the more profligate the tax policies the higher the interest rates you need to set, all other things being equal? >> i would just say our own job is to focus not only on fiscal policy but monetary. >> thank you for evading my question. >> the time has expired. recognizes the gentleman from california, mr. royce, foreign affairs committee. >> thank you. chairman powell, thank you very much for being with us here today. and i also wanted to thank you you for another effort you undertook, and that was in 2011, you spent a considerable amount of time with members of the house trying to walk them through the debate that we had

on raising the debt ceiling. you were trying to say all the circumstance that is would occur if we did not raise the debt ceiling. and i appreciated the time and effort you put ford. now you have a new voice at the fed. and i assume your opinions on the severe consequences of failing to raise the debt ceiling remain. i know that in august it looks as though the federal government is going to have to borrow or have to roll over $500 billion of debt in august. and if we are in a quasi default situation in august, then clearly it's a real question as who would want to purchase that debt and at what cost would they purchase that debt. and, clearly, a premium on that,

a 10% premium would be $50 billion hit right there to the interest expense. but there is much more than that that would befall the impact on our markets. and frankly corporate debt. and maybe i could just give you this opportunity to explain some of the concerns about that issue. >> thank you, mr. royce. so of course we don't do fiscal policy at the fed but i'll accept your invitation and just say that its very important that the federal government and government generally be on a sustainable fiscal path, meaning as the baby boomer generation retires, we'll need to address the significant fiscal issues that are coming to us over time, over time. and i think it's important that congress do that. at the same time, the debt

ceiling should be something that we always raise in a timely fashion. there is no other country in the world has a separate vote over whether to pay bills that we've already agreed to incur. and i think the united states has never defaulted 0en a principal or interest payment and never should. and i think doing so would be, you know, something i would really hate to see and could bring significant consequences. >> well, i appreciate you articulating that. you've also said that raising the ceiling is only the first step. the job that must be attacked is deficit reduction and addressing the costs associated with mandatory spending. and we heard a similar thing from chairman greenspan, we heard that from chairman bernake, and chairman yellen. we are on an unsustainable budget path.

and there are remarks that fed chairman traditionally shared with us. as i've raised with previous chairs, i don't think the american public understands the magnitude of the problem we are facing and we haven't got the political action to address t what do you think we, and what do you think you can do to raise the alarm that the biggest and fastest growing costs in mandatory spending must be addressed? >> well, i think i'll follow the path of my pred secessors and limit myself to over arching points. >> fair enough. >> first we need to get on sustainable fiscal path. and ts too imto be doing to is now. and second thing i'll say is when fiscal changes are made, it's important that to the extend possible they be directed

athen hansing the productiveness of the economy. we can't effect productivity through keeping prices stable. and productivity is the thing that allows incomes to rise overtime. so we don't control the growth rate. you have much more authority over that t and i think extent fiscal policy can focus on ways to increase labor force, and create incentives for more skills and aptitudes among our labor force, and greater investment in r&d, and that kind of thing, that's a healthy thing. >> thank you very much. >> time has expired. chair recognizes chair from new york, mr. meeks. >> thank you, mr. chairman. mr. powell, welcome. as you know, the treasury department is currently under going going cra and will be recommending changes to the

banking agencies including the federal reserve. so my question to you, mr. powell, is do you believe that a financial firm's demonstrated pattern and practice of racial discrimination and lending should be considered during a cra examination? >> thank you, mr. meeks. so i'm familiar with that process. and i take the point of it, what i'm understanding about it, is to inquire into whether cra policies are in fact providing benefits to their intended beneficiaries. and i think we are part of that. we are providing our own input into that process. in terms of the answer to your question, i think it is currently the practice that that such considerations are considered in cra exams. >> it is currently. but i am concerned that some want to defang cra and takeaway

as part of the process history as far as discrimination practices and patterns. so that's why i'm asking you, since the fed -- since the treasury will be looking at a new, and i'm a fan, i think we need to update cra, but i bloo eve that in looking at cra you should take into consideration one's practice and pattern pf racial discrimination. and i'm asking you, sir, what is your position on that? >> you know, i haven't taken a position on that. i want to see the over all work that comes out of this. and evaluate it on that basis. i may welcome to the view that you have. but i really haven't thought carefully enough about it. >> i want to remind you, sir, that the cra was congress's response to widespread racial discrimination and in the form of red lining. that was one of the primary reasons of the implementation of cra.

if you are even thinking about stripping out patterns of discrimination, you are there by gutting the reason why congress did cra in the first place. . so it seems to me that should not even be part of the dialogue. in fact, as is given to me by the ranking member, we have an article lending discrimination red lining still plaguing st. louis that all the documents show. so we can go city by city across america. so i have concerns about your answer just now. because to even think about removing that from the cra as much as i am an advocate of renewing, because i think that when you look at where we are now, and how banking is done financial services are rendered is completely different when we initiated it. but the essence of it was to stop red lining and racial

discrimination. >> so let me say that we take a very serious view of any kind of racial discrimination in lending and we look at it through a variety of our consumer affairs tools. and something we take very seriously. >> flonow, let me also ask this question, and i have further questions to follow up on this matter particularly. but let me ask you, and we can talk about these tax cuts, how much of corporate tax savings do you think will actually go toward wages as opposed to stock buy backs, capital investments and mergers? and i say this because i want to let you no he, even before you answer, morgan stanley announced estimated that 43% of corporate tax savings will go to buybacks and dividends, which enriches just the top 1% of those major investors, 19% would go towards mergers and accusations, 17% go

toward investments, and only the crumb bes, 13% would go to one time bonuses and scant raises. in fact, nine pharmaceutical companies announced over $50 billion in buy backs since the tax law was passed. so how much of this taxes will go into salaries and wages or how much of it will really help the income disparity to increase and grow wider? >> you know, we have particular responsibilities, maximum employment, stable price, we don't have estimates of that kind of thing. there are many other estimates out there. but honestly we zrontdon't haved estimate for what that number will be. >> time for the gentleman has expired. recognize from minnesota. >> thank you. thank you for being here. good to see you again. i want to go back to something that i think was touched on when

you began. your testimony this morning. during your confirmation hearing you spoke about the importance of tailoring regulations to fit the specific cope and practices of a financial institution. i think your quote was actually even as we have worked to implement improvements to the financial system, we have also sought to taylor regulations to the size and risk profile of banks, particularly community institutions. i just want too ma make sure th your view on continuing to tailor regulations to the specific institution has remained the same. you are still committed to doing so that? >> very much so. it's at the heart of what we are doing at the moment, which is to focus on smaller institutions, and without losing any safety and soundness, try to make our regulations are no burdensome and workup the food chain.

>> right. because you would agree we need everyone in the financial services all the way from the largest banks in the world to the small family community banks, on main streets all across this country? >> indeed. small businesses create a lot of the jobs. and small banks have a disproportionate share of business lending, although the big banks lend too. we want to f that credit to flow. and we don't want regulation to inappropriately create too much burden. >> right. earlier this month, secretary mnuchin testified before this committee, and he expressed his commitment to working with congress making changes in statute to the way regulators tailor regulation based on the size and complexity of a financial institution. would you also support this type of legislative effort where necessary to put these taylored regulations in statute?

>> yes, we would, and we have. so and of course the devil is in the details. but as a general matter, i think we could see some law changes that would enable us to better and further taylor regulation to smaller and medium size institutions. >> i want to move on to another topic, but continuing the discussion on the importance of getting our regulations right to benefit main street and rural america. minnesota 6th district that i represent is home to the finest farmers and manufacture nerves the world. many of these same individuals and businesses who are making positive economic impact on my district are harmed by the current formulation of the supplemental leverage ratio that fails to recognize the exposure reducing nature of initial client margin. this bank capital rule is increasing clearance costs for farmers and manufacturers making it more expensive for them to use the cleared derivatives

market. i hope that as you as your colleagues at the fed review the slr you come to the same conclusion, that a coalition of republican and democrat members on this committee have, that we must recognize the exposure reducing nature of initial client margin in a revised bank capital rule. will you commit to working with us and our colleagues on the agalarov committee who want their constituents to have access to affordable and competitive clear derivatives markets? >> yes, i will. we think we need the ratio as high back stock to risk based capital and we think the current leverage ratio is not appropriate. we are looking at recalibration that would address that exact concern. >> thank you. i want to move on to one other topic before my time runs out. page 1 and 5 of your monetary policy report dated february 23,

refers to the labor market. there is a couple of specific entries with respect to numbers of people that are unemployment is 4.1. it's essentially full employment. but i believe it's on page 5, where it references the percentage of, and i'm going to add, ablebodied working allstates in the workforce, about 62%. this is still abnormally low. don't you have any concern about that number? well, why don't i add this. you talk about retirements being part of this, the baby boomers leaving the marketplace, the labor force. but doesn't this also have something to do with the disin ten sifs welfare program to get people opportunity to get back into the job market? >> time has expired. a very brief answer from the

witness, please. >> we focus on labor force participation all the time, it's certainly worthy of a longer discussion i'll be happy to have with zblu time to the gentleman is now expired. chairman recognizes from massachusetts. >> thank you for being here. welcome. some of my colleagues have talked about how we are where we r committee clearly seem to be getting better, we will all agree with it, we will disagree on how. i personally think the good is a result of the actions we took several years ago to stabilize, secure, and improve the economy and is now working its way through the cyst ten. but i'll leave that debate for another day. i also want to associate myself with the comments made with mr. meeks, i would encourage atto keep a close eye on the cra. i want to expabd that ha little bit more. i presume that the fed would not be interested in ha economy that just worked for wall street and did flot work for main street. i assume that the fed would not be interested in economy that

just worked for texas and didn't work for new york. therefore i presume the fed has some degree of interest, not in perfect equity, but at least some equitable distribution of the benefits of a good economy. is that a fair assumption or am i completely off? >> well, i would say, yeah, i think we want pros expeperity t be high and broadly spread. we don't have tools. >> i understand. and i respect that i understand you have limited tools for lots of things. i agree that is obviously one of the things. a good economy for three people doesn't help for the 300 million people that live here. so thank you for that. are you familiar with relatively new british law that has been enacted and just being imposed that requires companies of over 250 employees to report income and wages on the basis of gender? are you familiar with that at

all? >> knows. >> that just came out. and first company to come out was barkleys one of the largest banks in the world. and that report shows that women's at barkleys earned 26% less than men and receive bonuses 60% lower than men. now i know that some of those reasons might have reasons as to who is in which position, but certainly goes towards the idea of equitable of the benefits of the economy distribution. and are you familiar with a rule proposed by the equal employment opportunity commission in 2016 that was supposed to go into effect in march that would have required similar reporting by american companies over 100 employees not just in the basis of gender but also on the basis of race and ethnicity? >> flono, sir. >> fair enough. reason you are not familiar with it is the trump administration stopped it. it was proposed in 2016. companies were given two years to work their way in.

but as of last august, the trump administration said, no, we don't want to know how you pay women, how you pay people of racial groups, or ethnicity groups. we don't care about that. now, i personally think that's horrendous. and i would actually say that, again, if you are interested in economy that has some degree of extablt y he c equitable, you need numbers, but they don't help us address the problems. so i would ask, something like that new to britain, doesn't seem to have affected barkleys, but provides the information to go forward to argue for pay equity across the board? now i am a white male but i'm not interested in my success being at the expense of people who are not white men. and i would ask is the fed interested at all, would you be interested in pursuing?

you oversee 7,000 entities. some of them large, some small. some pretty large. would you be interested in pursuing some degree, not intrusive, but some degree of investigation as to how they pay their employees if it's equitable or not? >> first, again, i'm not at all familiar with either of the british bill or the proposed rule that was, i'm not familiar with either of those. and these are the kind of things that congress should consider. we have a job we have a really important job to do that you've assigned us to do. for now we'll stick to that. and try to achieve. >> and i respect that. and i want you to stick to that but as we talked about earlier, some degree of equitable distribution of the benefits of a good economy is your job. not perfect equity. not every aspect. but in the one aspect you can control, overseeing 7,000 financial institutions, don't you think it's a fair thing to ask how they pay their women? how they pay their african americans? how they pay the hispanics?

it's based on fantasy or some degree of discrimination? you don't think that's a fair thing for you to ask? >> i don't think it's a question for the fed. i think it's a question for other agencies. >> so you think -- boy, that's a great answer. i think we'll hear more about this. >> time of the gentleman has expired. chair now recognizes gentleman from north carolina, mr. pit engineer. >> thank you, mr. chairman. thank you, chairman powell for soming before the committee. congratulations on your confirmation. we look forward to working with you. it's my understanding that the feds have actively involved in potential alternative secure overnight the funding rate. has there been a robust cost benefit analysis conducted by the fed impact to consumers and commercial borrowers shifting from these? >> well, i would say, let me say that had the situation with

libor is such that the financial conduct authority in ln doondony will no longer have banks submit to the panel after the end of four years. and at that time the fca can no longer guarantee the continuation of libor. now, if libor was to stop being published then, there are $300 plus trillion dollars of libor in the world, so solving it is very high priority for us and other financial advisers around the world. there would be costs but they would be trivial in comparison to the failure to be ready for this change should it be necessary. >> what type of barring costs do you project for businesses as a result of the impact of this change? >> so, we are actually seeking a

lot of input from business that is will be subject to this at the moment. but honestly, though, the cost of failure to act would be potentially quite high. >> yes, sir. since repo rates go the opposite direction to libor during market stress, refi, do you see any systemic? >> i didn't catch the last part. >> do you expect any systemic risks in the banking suffer in shifting to sulfur. >> yes, i do. i think systemic risk would be decreased by moving to sigh fur. libor blew out during the crisis. and i think a risk free rate which is really used to price the vast derivative markets and not so much the bank lending markets. it's much more in derivative space now would be important to have, would be improvement to

have sigh fur over libor. >> when su fire was selected through the process of the alternative reference rates committee in 2014, were they part of that process? >> some of the regional banks were. i mean, it's principally febting the derivatives business, at least in the first instance. so it was -- we had a lot of different groups around the table. and at this point we are very much broadening that circle to include other financial institutions. >> do you anticipate any potential costs relative to the community banks in this shift? >> there shouldn't be meaningful costs and we would like to know if there are. >> if the banks continue to participate in this panel, would you say a multiple rate?

>> yes. >> or libor banking through sulfur for dur rife tifs? >> yes, sir, we always said if people want to keep using libor, that's fine, as long as it's continuing to be published. what we are doing is preparing for the risk that it wouldn't be published. and we are not saying that's what will happen. but we need to be ready just in case that does happen. >> yes, sir. on another subject. what do you anticipate will be the change you bring to the fed or federal transparency to the fed? >> well, i think we are committed to being as transparent as we possibly can about monetary policy and regulation. and i this i if i remember what it was like back when i was under secretary of the treasury in the 1990s fed didn't even publish a post meeting statement. now you look at the massive number of things we public, we are more transparent. i think we can continue. we are never done with that. with regulation i think it's important we be transparent.

in fact working across broad range of issues, including i would say stress testing. . and in general i think it's appropriate for us to be working on that. >> one last question chblt i have 50% fewer banks in north carolina then we had in 2010. do you forsee fed policies that would enhance and assist community banks, in particular? >> time to the gentleman has expired. a very brief answer from the witness, please. >> it's a long running trends and we don't like to see it and we don't want to make it any worse. >> thank you. >> time for north carolina has expired. chair now recognizes from mois, mr. clay, ranking member of the financial committee subcommittee. >> thank you for holding this hearing. and thank you, powell for your testimony today t chairman powell, do you agree that the u.s. housing is in a recovery

mode as far as transactions and housing market in general is healthy? >> yes, sir, it's been a gradual recovery, but it's on going. >> along those lines, i want to pick up where mr. meeks cap uno questioned you. i share an article from the hometown newspaper, about black home buyers being refused conventional home loans much higher than whites, even when controlling for neighborhood, and income. and in the same st. louis metropolitan area, they are 2.5 times more likely to be denied

than nonhispanic whites. and that's according to two years of recent data. and as you know, where there is loan activity, houses have a chance to sell. where houses sell, people move in. where people move in, restaurants, community centers, and grocery stores are built. and none or very little of that is happening in low to moderate incomes in st. louis or elsewhere in this country. so my question is, what can the federal reserve do to ensure that applicants for home mortgages are treated equally? and the bad actors who steer and red line communities of color are eliminated from this process or change their policies? can you give me any direction in that area? >> i would be glad to, sir.

first of all, racial discrimination in mortgage lending in any kind of lending is completely unacceptable. and wherever we have authority, we will sues we will use it to stop that from happening and punish it when it does happen. we have some authority here. we have quite a lot of authority in this as well. but where we have it for the banks we supervise, we supervise carefully and aggressively to try to find these problems and address them. >> and as you know, the fair housing act of 1968, law been on the books for 50 years, prohibited those practices of steering and red lining. now, i shared with you this article because i want ya more extensive response from you what action can we take against u.s. bank that is sided in that article, fifth largest financial

institution in this country, who have denied mortgages across the board in the community that i represent? and that stymies economic activity. it doesn't help it. so i would love to clollaborate with your office on how we stop these policies and practices that are discriminatory? let me ask you, hopefully you will be willing to work with me on that? >> yes, sir. >> while president trump recently tried to take credit for december unemployment numbers, showing african-american unemployment at its lowest recorded level, this too is part of a long-term trend that started under the obama administration, which african-american unemployment has steadily declined for the past seven years. in addition, racial disparities

continue to persist, with the unemployment rate for whites currently at 3.5%, unemployment for african americans stands at 7.7%. with the african-american unemployment more than twice as high as white unemployment, clearly more progress is needed. share with us your vision for the fair attacking persistent unemployment among african-americans. >> what we can do on that front, sir, is we can take seriously our obligation to pursue maximum employment. and we understand fully that while the national unemployment rate is low, and while in many regions the unemployment actually even lower than 4.1%, you made a lot meet a lot of pl

where unemployment is in 2s. >> i would like to explore that with you. >> time to the gentleman has expired. now recognizes oklahoma mr. lucas. >> thank you. thank you for being here. and before i ask a general question and a broader question, i do note that i do think you are my fourth chairman to be able to visit with us in this viern since i've been a member of this committee. and i'd like to discuss an issue with you today that you and i have already discussed, and my good colleague subcommittee chairman has a bill, and that is the clearing margin. and i know that blaine's bill has strong bipartisan support from this committee and in essence offset the margin amounts from slr because margin is inherently a risk management tool and legally must be kept from bank's own funds. the fed can affect this legislation, however, and your

pr predecessor showed a willing ni ness to look at this issue. and i was hoping you would do. >> thank you. so what we are doing right now is taking a kir full look at the enhanced supplemental ratio. and i think our view is that the leverage ratio is very important requirement for banks, but it should be a backstop. it sthud be a high and hard backstop to risk based capital. and i think the enhancement to this that we put into place in i guess 2013, in that range, went a little too far. and it unfortunately seems to be deterring some low risk wholesale type activities that we want financial institutions to engage in. and one of those is client clearing, and not particularly margin. but our way to address that is to be lower the calibration of the enhancement to the

supplemental ratio. and that does seem to get done what needs doing there. >> clearly, something needs to be addressed. now let me ask a more broader question. i represent the great state of oklahoma, agalarov business. so and we are kmdty economy. and commodedy is reflection of both supply and demand. and supply is not an issue for the fed to be concerned about, i represent in dusz tries where technology advancement has been used amazingly very successfully, whether it's precision agalarov, increasing output of our farms, or on the energy side of the equation, 3d si seismograph, horizontal drilling, that's supply. but my producers see since 2014,

whether oil and gas, or cattle, that literally prices were half what they were in 2014. let's discuss for a moment expand on your comments earlier where you think the fed projections would have economic growth and demand in the year or two or 3 down the road. if demand picks up, life gets better at home. >> that's tip typically the case as you know. i haven't updated my own projections but i'll just say generally that it does feel to me that the next couple of years look quite strong. and you should strong demand from con supervisorsers and businesses investments. and next two years to be good. and inflation moving up to 2%. and i would think that should create a good viern for people in your distriblgt who are the commodities business as well.

>> old adage about the arising tide raises all ships. thank you, mr. chairman. >> the gentleman yield to the chairman. >> of course, mr. chairman. >> in the minute and a half that he had remaining, i had a question, chairman powell, dealing back on the interest on excess reserves. i had asked your predecessor this question and the answer was not clear to me. i think, as you know, under statute, that the rate must be, and i'm trying to find the exact language, cannot be above the usual level of short-term market interest rates. and yet we know that the fed has

been paying a price over the fed funds rate, been paying over libor. and certainly i think currently paying 150 basis painoints. yet our constituents typically have 10 on their savings account. so i'm just curious on what does the phrase above the usual level of short-term markets interest rates mean? in your 2012 rule making that implemented ioer, it allowed the rate to get pegged to your primary credit rate but that's an admin stertd rate which means you can set it where you want to set it. so legally is there any cap to the interest rate you can pay in ioer? could you pay 300 basis paints? 400? 500 basis points? >> i think as you suggested, we are not permitted under the law

to pay above the i think the language is general level of short-term interest rates. something like that. so i would look at that and i would see commercial paper. i would see repo. i would see whole say deposits short-term money market funds things like that, less than a year. and i think where that is it set to move the interest rates around. >> but you are paying 150 basis paints. our constituents are getting 10. >> retail deposits, as you know are sticky on the way up. and they generally come up with a lag. >> time to the gentleman has expired. the chair now recognizes gentleman from massachusetts, mr. lynch. >> thank you, mr. chairman. thank you, mr. chairman. thank you for your attendance. appreciate that. a couple of weeks ago there was a story in t"wall street journa

and they are all rebounding together after tumbling in uni some earlier in the month. the article says one factor contributing to the s&p various sectors was driven exchange traded funds. i know etfes usually invest in wide swaths of the markets and it can sometimes increase ts volatility. at least that's what the data would suggest. and i'm just wondering, does the fed think that there is risks to the broader financial system associated with complex etfs? and is the fed concerned about that? any ideas? >> it's an interesting question. i saw that article and of course we looked after the volatility came and then subsided. we looked carefully to try to

understand really what did happen. and it seems that the markets were generally orderly through almost all of that time. and etfest as are a particular of fund and i don't think they are at the heart of what went on during those days. but it's something we are talking to fellow agencies particularly sec would be best position to look at this. it's a question that we are looking into. >> okay. thank you. on a completely different topic, in your remarks you talked about the historically low unemployment rate among people of color. but, again, you acknowledge that the rate of unemployment for people of color is much higher than white workers. and given the fact that the participation rate, according to your own testimony, has been fairly constant, does the fed have any suggestions to the

trump administration about if the wind is at our backs, putting more people to work, how do we close that gap? how do we get more people of color into the the workforce so that, again, we close that gap? >> as i mentioned, our part of it is to take seriously our obligation to achieve maximum employment. i think we're good at that. we don't have tools to address these disparities. >> i'm not asking you to do it. i'm asking you for suggestions to the white house they have tools to do it. >> i wouldn't presume to recommend policies away from our general mandate but generally -- >> let's say we're trying to reduce unemployment. >> i think the constructive thing in this area is to focus on -- it's a long-run problem but education and training.

we want people to schedule and part of that is reaching people in the educational system and i would point you to that. >> thank you. >> >> chairman powell, good to see you. thank you for your work. on june 22nd, you testified before the banking committee and said, quote it is posh to get risk based capital requirements right. doing so is critical to preventing distortions and money markets to safe asset markets. changes along these lines that their business model is

disproportionately disaffected. i worked with my colleagues on this committee on legislation passed out of the committee 60-0 that would provide relief for institutions primarily in the business of providing custody services. the treasury department's june 2017 report recommends changes for cash on deposit with central banks, which is in line with the legislation supported by the committee. how will you work with the occ and fdic to make those changes? >> i agree with you, sir, that the leverage ratio can deter banks from engaging in low-risk and so we've looked carefully for some time now at how to provide relief.

our preference is to recalibrate and custody banks would feel significant relief because they have the smallest surcharges. that is our preferred way to do that. >> following up on that, as you know, with considered changes to the ratio, they only cover the g sibs. do you believe changes are only necessary for the gsibs or would you support changes to the larger supplementary leverage ratio? >> it's not particularly binding for them, particularly as it relates to custody banks. we chose to make this enhancement and i think we got the cal abrasion a little bit wrong and so our plans are to roll that back. >> cbo recently provided a cost

estimate for implementation of hr 2121. they often rely on input from the executive branch for such estimates. i wonder if you could share that with us. would you be willing to work with us on that? >> i'm willing to work with you. i have to look into how we would do that. >> my concern about this is that banking regulators are only looking to provide relief to g sibs. northern trust is important in chicago. amazing institution. 120 some years, more than that, that they've been around. and you they're not a g sib. and, thus, not subject to the eslrs. however they're still subject to binding capital constraints. it is a concern of mine. moving on, similar to my question regarding adjustment to

leverage ratios i want to ask you about the treatment of centrally cleared options, treasury department's october 2017 report on capital market notes. current exposure method, model for example requires options, contracts to be sized in their face value rather than allowing for a risk adjustment for exposure associated with these derivitives. clchlt me does not allow adjustment. the cme may be responsible for a bank's ability and willingness to facilitate access for their clients who are the primary liquidity assets. during the volatility occurred by markets in recent months, i wonder if you agree with the treasury report's recommendation. do you believe there should be a risk adjusted approach for

valuing options for purchase of the capital rules to better reflect the sxoedure, specifically weighing options by their delta? >> i think there's a more risk-sensitive approach we're moving to but i want to check back with our experts and will follow back on you. >> my time is up but thank you again. appreciate your willingness to work with us. i yield back to the chairman. >> the chair now recognizes the gentleman from georgia, mr. scott. >> thank you very much, mr. chairman. welcome, chairman powell. you know, what's disturbing me and what's remarkable -- and i think downright disturbing to me are the policies coming out of this trump administration in three specific areas that you, as the chairman of the fed are chief economic balancing officer, shall we say, has a

direct input on. and did you know, for example, there's three areas particularly? first the tax cuts of the president. are you aware that 83% of the president's tax cuts go to benefit just 1% of the american families? if we go to his budget cuts, do you know who was affected most? it's the african-american community. let me go to his draconian, terrible proposals to cut $17.2 billion away from food stamp recipients. and then if that's not mean and

ugly enough, they want to turn out and now stop food stamp recipients from even being able to go into the grocery stores and buy groceries. just like you and i. this is mean, man. and i want you -- you seem like a very reasonable person. tax cuts going to 1%, the wealthiest people, and then on the same token, they want to send food -- we can do without a lot of things but not food. they want to send food in boxes, canned food, dried milk, powdered milk to the poor people in this country. now, mr. chairman, you've got-to-inflation, unemployment on top of that, they are

crushing the most primary group that's being crushed are african-americans and people of color. and i'm here to tell you, we are going to stand up and fight this administration. and i want to ask you to get on our side, the side of the american people because it is clear to me that this president trump is not on the side of the american people. you tell me giving the benefits of the tax cut to the 1% of the wealthiest and then turning around to cut $17.2 billion out of the thing we need the most, food for the poorest people? and then on top of that,

shipping their food in boxes to sit on their porch. dried milk for their babies. you tell me, mr. chairman, is this the way you think about america? >> thank you, sir. i can only say these are very important issues. and i take it to heart. but these are not issues that we have authority over -- >> i was waiting on you to say that, mr. chairman. there's nobody better suited. you are the chairman of the federal reserve. do you know when you knees, wall street crumbles?

i've looked at your background. you are well prepared for this. your experience, as i have read it, shows you have a deep compassion for people. all i'm asking you to do is to, every once in a while, if you could say, hold on, mr. president, this isn't right, to be shipping the food to the poorest people in this country and denying them a right to go in the grocery store just like me and you buy food. >> time of the gentleman has expired. the chair recognizes the gentleman from pennsylvania. >> thank you, mr. chairman. welcome, chairman. good to have you here. the fed supervises several insurance companies that own thrifts. an insurance company that's been designated as a nonbank siffy, congress has taken a strong interest in ensuring that fed supervision reflects the business of insurance and the privacy of state regulation of

insurance. most notably, congress passed legislation in 2014 to ensure that capital rules for insurance companies are tailored to the business of insurance. we appreciate all your work on this rule. separate from the pending capital rule i believe that more could be done to ensure that on the ground supervision of insurance companies is proportional to the risk these companies pose in terms of safety and soundness and reflect the existing system of state supervision. what are you doing to ensure this? what more could the federal reserve do here? >> thank you, sir. thank you for your comments. i think from the beginning, as i think you see, we've tried hard to look at insurance as a new area for us where we needed to develop expertise and it's different for banking and it needs to reflect the risks of the business insurance. so we really invested in that. we tried to be open, continued to do that in developing our capital requirement. we've tried to reflect that.

i think we're very open to the views of experience insurance regulators, some of whom we've hired and also people from the industry. >> by my count there were four vacancies on the board. how does it impact the fed to fulfill its mission? >> i'm glad you mentioned that. we could use more faces on the hall. i don't think we've been down to three governors, certainly not for an extended period. i'm eager to have more colleagues. as you may know, i wore an awful lot of hats before i took over my current role. i handed my hats out to my two colleagues and so we're all three quite eager to have more people on board. we don't necessarily need all seven immediately but we would sure love to get there. >> we talked a little bit about backgrounds. i would like to talk more about diversity of experiences. professor charles calamirez has

highlighted bringing in people of diversity. and describes it as academic dominated. academics need to have a voice in these highly technical debate ice can see how a nonacademic practitioner perspective could be helpful. >> i strongly believe that. i think we need great economists around the table and lots of them. we also need people from other backgrounds, experienced in business and from managing, profit and nonprofit institutions, and from the financial markets. and from the law those people bring diverse perspectives and make our discussions better. >> as you may know, our national debt exceeds $20 trillion and continues to grow rapidly. at the same time, the fed has

been engaged in an unprecedented monetary policy experiment. some have argued in carrying out this experiment the fed has stepped beyond what's necessary for the conduct. do you worry that unsustainable public debts and the fed's engagement in policy may increase political pressures on the fed? >> it's a risk, not a near-term risk i would say. i would mention we are now in the process of normalizing our balance sheet and shrinking it. we're moving back to a more normal balance sheet and think we'll be there in three, four years. >> one thing that's always puzzled me is the 2% inflation rate. as a layman and looking at this. the suggestion seems like that's benign. if you 10020 years ago and 2%

every year, the purchasing power went down. can you educate us from your perspective about this 2% target? $100, 20 years ago at 2% might cost $150 today. >> this was a big debate, which was settled around 2% as opposed to zero for central banks to aim at. it's now become a global standard all around the world. central banks are aiming at 2%. the reason that was picked over two, in essence, it gives us more room to cut real interest rates. if inflation is zero, then interest rates possible in the sort of one, two, three range. and then when a recession comes we would have very little to cut. having 2% inflation kind of, we think, oils the wheels of the economy and gives central banks a little more ammunition. it has now become the global standar

standard. >> yield back. >> mr. green, ranking member of our oversight investigation committee. >> thank you, mr. chairman. thank the ranking member. also would like to thank the persons who are here, who called themselves full employment defenders. welcome. mr. chairman, what do you consider full employment? i have the number 5.5%. if you differ, i would like to hear your number, please. >> if i had to make an estimate i'm going to say it's somewhere in the low fours. i would stress what that really means, it could be five, it could be 3.5. >> when was the last time african-american unemployment was in the low 4s or 3.5? >> i don't think it has been in the years we've been measuring it. >> quite frankly, not since

slavery. that was the last time there was full employment for black people. mr. chairman, 6.8% seems to be the lowest number that i can find since we've been keeping numbers. and for the last 47 of the last 50 years it's been twice that of white. do you agree? >> do i agree? >> that black unemployment is twice as much as white unemployment. >> that's what the numbers are, i believe. >> do you agree? >> it's a true statement. >> thank you. it's a true statement. do you also agree that discrimination still exists in the united states of america? >> i would. >> do you agree when we've had an opportunity to test banks, we have found that invidious discrimination exists in lending? >> yes.

>> do you agree that testing is an effective method to show that discrimination exists? >> i believe it is used in that way, yes. >> then, mr. chairman, would you support legislation to help us acquire the empirical evidence to show that this exists so that we can do something about it? you see, we now know the facts. the question is, what are we going to do about it? your charge is the promotion of full employment. i take that to mean full employment not just for white people. i take that to mean for everyone. and at some point, black unemployment has to be addressed because it is chronically twice that of white people. and we have to use terms like black people and white people to make the point. and we also have to ask that our friends on the other side join

black people in doing something about this. mr. chairman, that which we will tolerate, we will not change. we have learned to tolerate african-american unemployment being twice that of white unemployment. i refuse to tolerate it. that's why i use language that is clear and concise. there is no question about what i say. the question is, what are we going to do about it? we know that discrimination exists in banking in terms of lending. we know that it exists in other areas of the country as it relates to african-americans. the question is, what will we do about it? i'm not assigning all of the responsibility to you. that's why i mentioned my friends on the other side. and my friends on this side. i'm a liberated democrat. democrats and republicans have

to do more about black unemployment. unfortunately when a black person challenges the system such as i do, it becomes playing the race card. so let me say today i'm playing the race card because we have, for too long, allowed this condition to exist. mr. chairman, i'm going to send you a letter. in the letter i will request that you explain the role that covert and overt unemployment plays, the primary factors that limit african-americans employment opportunities in sectors that are protected from cyclical downturns in the economy and i'm going to ask you if allowed what testing provide beneficial empirical data. you already said you think it would.

i respect you and ask you to be of service of-to-all americans not just white americans. i yield back. >> the gentleman from colorado, mr. tipton. >> thank you, mr. chairman. i appreciate you taking the time to be here. one of the big challenges we've faced this country is the policies of the previous administration had yielded a lethargic growth. that impacted communities across the country. we're now seeing policies starting to step into place that are getting the economy moving, creating job opportunities, putting resources back into the pockets of the individuals who actually earn in it and creating that opportunity for people to be able to increase their prospects for their families, for their communities as well. which i applaud.

i want to make sure they're applied across the board in the country as well, to each community. i want to be able to highlight one of the benefits i have seen in my district from tax cut and jobs act in colorado. the bank of colorado. which has a significant presence in the four corners region that i represent. jobs act that they anticipate the passage of the reform is going to be having a positive effect on the growth of their businesses and our local economy. in fact, the bank of colorado added a special bonus for all 641 associates in colorado and new mexico. they'll be receiving $1,000 in terms of a bone sbus part-time associates will be receiving $250 to $500. mr. chairman, in my part of the country, that's real money. it's not a crumb. we pay for the mortgage, pay for the electric bill, how we provide literally for our

children. to be able to boost those opportunities for those employees, it's helping main street right now. bank of colorado's actions, i think, provide an example for us in terms of new possibilityies that exist in the current economy and looking forward. i would like to be able to speak to you on in my state of california, and i've often spoke to it as a tail of two economies. when we move into rural colorado we're just now, just now starting to see the signs of the recovery and those people who work in the community. small community banks in terms of the trickle down effect of overregulation that came out of dodd-frank. the best practices are being employed that may not have been

on paper but are implied and they're feeling those real impacts. being able to tailor some of that -- rules and regulations, to be able to meet the size, risk portfolio, risk institution. can you give us the idea of what you see as that real tailoring and when we can expect that to start to maybe take place, to open up those doors of economic opportunity for rural america? >> in the regulatory space, first of all, we're mindful that the number of banks and small banks in rural and nonurban areas has declined sharply over the years. we don't see that as a good trend and don't want to be any part of making it worse. there are other things at work there, as far as people moving to the city and that sort of thing. we dramatically reduced the

scope of the call report, exam frequency longer. so you have longer gaps between exams. we went through and in a number of areas we simplified and tried to address the shortage of appraisers in many rural areas. you could go on forever. it's a lot of small things. i'll tell you we're committed to doing more and hope you'll hold us accountable for that. >> i appreciate that. a piece of legislation to make sure we have rules and regulations that will be ready to meet the size and risk portfolio of the institution. appreciate your commitment and hopefully willingness to work with us. the objective is to be able to open up those doors for all of

our communities across the country. one issue which has been brought up to me in regards to the community reinvestment act and if you would be willing to work with that with us as well, our bank want to make those contributions back in but we have outdated rules. >> time of the gentleman has expired. chair now recognizes the gentle lady from wisconsin, ms. moore, ranking member of the monetary policy and trade subcommittee. >> thank you, mr. chairman. thank you again, mr. chairman for appearing. >> just want to appreciate the fact that you have doubled down on your commitment to look at the mandate and monetary policy. i want to appreciate you for that. given that, i guess i just want

to focus a little bit on some of the things that i think previously mr. green just talked about. and also my good friend and colleague, mr. burr, talked about, in how the fed is going to try to balance things. when we look at unemployment for the general public, i guess i'm wondering if we continue to have 2% as our inflation rate, is that, in fact, sort of discouraging toward getting some of those groups like african-americans mobilized and moved toward more full employment? do you take any guidance from some suggestions that perhaps the target, inflation target ought to maybe be 2.5%?

>> you know, i think we're pretty committed to -- we're strongly committed to our 2% inflation goal. over time the level of employment in the economy is not a function of you can't increase it by increasing the inflation rate. so, we're committed to having a symmetric 2% goal. we would be equally concerned with undershoots, persistent undershoots of 2% and persistent overshoots. >> okay. given that, i'm wondering what your thoughts are of unemployment. united states is on track for being the most unequal -- having the most inequality in the world. and given the recent tax bill where we see, despite what mr. burr has indicated about all the

bonuses and wage increases, that about 43% of these monies are being spent in buybacks, another 19% mergers and acquisitions, that's like 62%, those two together. only 17% in capital investment improvements and then the 13% that are in bonuses and raises, we know bonuses are one-time only events. which pale in comparison to the economic benefit the company gets. what concern does the fed have about increase in employment inequality? >> first is we've seen a stagnation of middle class, median incomes, closely tied to the flattening out of educational and skills attainment by our workers.

we need to have the best trained workforce and highly trained workforce, that will translate into higher productivity and higher wage. >> thank you for your patience, before my time expires. i am wondering if you think, as the chair, that we're going to have this tremendous gdp growth. additional gdp growth in the tax bill like under 1%, despite the $1.5 trillion tax cuts, which will increase the deficits by about that amount, over ten years. do you agree that gdp growth is going to be under 1%?

>> the tax bill was passed a week and a half after our december meeting and the spending bill after our week and a half after our january meeting. my personal view would be there will be a meaningful increment to demand. at least for the next couple of years, from the combination of those two things. >> increased demand? >> yes. >> although wages aren't necessarily going to keep up with that given the way these monies are being spent. >> i expect wages to increase this year, too, as i mentioned. >> time of the gentle lady expires. the gentleman from texas, mr. williams is recognized. >> thank you, mr. chairman. chairman powell, thank you for being here this morning. >> 2018 i can tell you, i'm a small business owner of 47 years. booming economy, low

unemployment and americans having mormonny their pocket. i'm encouraged by the strides we made in the last year, a do acknowledge there's much work to do. i look forward to working with you to ensure our economy is fully empowered and never unnecessarily restricted. so, question, federal reserve bank presidents serve a critical role in providing local information to the fmoc. this bottom-up flow of information is one of the federal reserve system's most productive features. the voting rotation exposes an inconsistency in some of the largest strict economies, cast a vote every three years. smaller economies are represented annually for every other year. chairman, is it your opinion that each region is properly represented under the current voting structure? >> let me begin by saying i'm a very strong supporter of our fed rated system and i think what the reserve bank system does, among other things, is it guarantees we'll have diversity

of perspectives around the table. you know, i think you make mistakes when everybody agrees generally has been my experience. so, in terms of the structure, i really don't think it's broken. i'll just say when we have a meeting, you look around the table. all 12 reserve bank presidents are there. they all speak. and, honestly, i have to find a list to remember who the voters are and who aren't the voters. it's not so much about who has the vote. it's who has persuasive things to say. i really do think that the current equilibrium has served us well and wouldn't see a reason to change it. >> monetary policy would be better informed if district representative voted consistently. richmond, dallas vote every three years while new york votes every year, chicago and cleveland every other year. i figure that this underrepresents certain economies and that the needs of regions that vote more frequently could be unjustly

prioritized. presence on the fmoc helps to drive power way from washington and new york and power every economic constituency across the country. i have sbroused the representation improvement act that would provide every federal reserve bank president consistent voting rights just as new york currently enjoys. would you support a policy that would allow all districts consistent voting rights? be as detailed as you want to be. >> again, i would just say i think the current system has served us well. and i think you have a great reserve bank president in texas and his voice is certainly well heard, as it should be. >> okay. mr. chairman, i yield my time back. thank you. >> we yield to the chairman.

>> haven't we diminished the role of these regional fed presidents? it's the board of governors. >> legal matter, yes. one more reason we should attempt to normalize monetary policy to ensure that this diversity of view is represented at the table. the vulker rule that the market is not always clear cut which make makes giving greater discretion

business to intervene when markets are liquid and volatile. we've seen historic volatility and liquidity, fixed income markets since the advent of the vulker rule. do you agree or disagree with president dudley's analysis? >> i would agree. >> an alternative we have legislation to make at least the fed the lead regulator. would the fed be ready it take on that role should this be signed into law? >> we would. i think we would take it on even without law. i think we're the natural law to have the pen there.

it's a multiagency rule and someone needs to coordinate it. we would be happy to do that. >> thank you. the time for the gentleman from texas has expired. the chair now recognizes the gentleman from nevada, mr. cuwen. >> thank you, mr. chairman. thank you, chairman powell, for being here and for your testimony. couple of quick questions. as you know, i represent nevada, which had the highest unemployment rate in the country during the recession. wage growth has largely remained low and stagnant for the vast majority of americans. in fact, the average american hasn't seen a real pay increase since the early 1990s. and many working people have not seen one since the 1970s. according to the economic policy institute, middle-aged workers, hourly wage is up only 6% since

1979. and those with high wages have seen an increase 41%. piggybacking on what peggy was saying, rich are getting richer at the expense of middle class people. i say this as somebody who has g gotten unemployed before, woken up, gotten dressed up, having nowhere to go. but knowing if you keep your head up you're going to find something and everything will be okay. most of the people receiving the tax breaks today don't understand that struggle that most americans have dpon through. so with that in mind, what steps can the fed or congress take to help combat this wage inequality

to piggyback on what she was saying and ensure that further wage gains are sured by middle wage and lower wage workers? >> i think our part of this, sir, is to take seriously our obligation to achieve maximum employment. that's what we're doing. more broadly on wages over long periods of time the only way for wages to go up is for productivity to increase. it's an investment in skills and equipment by businesses and people. those are things that i think congress -- we don't have those tools. those aren't things we control. i think those are things that congress and the administration, i believe, would be well served to focus on. >> thank you, mr. chairman. do you think that the minimum wage requirements offset the

failure of the markets to provide a liveable wage? whether we've been raising the minimum wage, some people have been talking about $12 an hour, $15 an hour. >> minimum wage policy is a form of fiscal policy. it's really not for us. there's research that shows, you know, for example, that people who provide less value than the minimum wage, entry level workers and that kind of thing, can be disadvantaged and there's research that shows they aren't. these are questions that are really best left for you. >> mr. chairman, you are the chairman of the federal reserve and i know you're an expert. you probably know more about this than i do. i believe when you increase the wages on working class families, they spend more money. they go out there, stimulate the economy. businesses make more money. they hire more people. they expand. they open up a second and third store and so on and so on

whereas, you know, some of my colleagues believe that somehow you get the big tax breaks to the millionaires and billionaires and somehow it's going to trickle down to the worker workers. >> janitors, house keepers. if you increase the wages to those folks they're going to go out there and stimulate the economy and that is the reason why i believe we've had this wages, you know, inequality in this country. that being said, mr. chairman, my last question is why has the fed been so focused on preempting inflation since the 1980s when wages have been barely budged? >> i think it serves all constituencies well including people in lower income groups to have inflation low and under control.

it hits those groups the hardest. i think it's a good thing we've managed to control inflation. i think the way we get at wage again is by taking maximum employment seriously and i think at the moment we really have done that. for some years we've really done that. >> thank you, mr. chairman. >> time of the gentleman has expired. the chair now recognizes the gentleman from arkansas, mr. hill. >> i thank the chairman and chairman powell for his testimony today in listening to the discussion this morning, i think we need to be clear on the record both chairman, chairman of the committee and chairman of the fed that the biggest thief for working people across this country and the world is inflation. nothing depresses buying power more than inflation and nothing cuts into those at the hardest working part of our society than inflation.

so thank you and your colleagues for fighting for modest inflation so that people have real wage increases. and i do believe one of the benefits of the restructuring of our tax system will be to increase productivity and productivity will see wages go up. and we've certainly seen that here in the first two months as company after company have said that. mrs. moore talked about it as well. over 44% of those companies fully expect to reinvest in their companies and training and capital expenditures and both these efforts will produce higher wages. and another 30% plan to increase

capex, productivity as well as distribute more earnings. i view these things as positive for our economy. i want to follow up on the exchange you had about the vulker rule acres bill i've introduced to harmonize oversight. you noted in previous testimony president dudley has, even mr. tirillo has about the complex of this rule that we're not getting it done or doing a good job of enforcing the rule. on this harmonization bill i've had some difficulty in getting members to understand that giving relief to banks under $10 billion, safe and sound banking practices. and i would like you to respond

to what i've told them. community banks are not subject to the vulker rule but that doesn't mean they're not responsible for safe banking practices. if they were doing something that you deemed unsafe and unsound related to vulker type activities that they could be disciplined for that under the existing banking rules? >> yes, sir. it is absolutely true that we don't need vulker to go in and find unsafe and unsound practices, in addition. certainly in the bill you mentioned, you can't have anything more than a very small trading book. even if you are under $10 billion. we don't see significant safety and soundness implications at all from that.

>> i appreciate that. i think it needs to be clear that we have safe and sound rules for banks of all sizes but that the real mission here by designating the fed is the principal regulator among your colleagues, it will get better, more discreet proper guidance on how to enforce the vulker rule. do you agree with that? >> i do. the vulker rule in particular is quite complex and we could wee can certainly simplify it. >> you said some trading needs a ouija board to figure out what decision to make. and misinterpreting that rule by compliance departments. have you seen that in your

department about that exact thing where we're hurting liquid securities? >> we do they're that. it stands to reason if you provide more certainty about where the law applies and it doesn't you don't have to convene a giant meeting and break out the ouija board to find out if you're complying with the law or not you'll have more certainty and people being able to do their business better. >> i appreciate you and wish you my very best wishes as chairman of the reserve. >> the gentleman from minnesota, mr. elson. >> thank you, mr. chairman. ranking member. welcome to the committee, mr. chairman. mr. chairman, the kato institute estimates ending the deferred action for childhood arrivals program and making those young people deportable could cost the u.s. economy over $280 billion in reduced economic growth over ten years. senate for american progress puts that number at about 460

billion bigger but still a loss. commerce does say ending daca, and i quote, would be a nightmare for america's economy. so, what kind of economic impact would ending daca and making 700,000 dreamers deportable have on oureconomy? >> well, let me say that these are difficult and important issues and we, of course, don't do immigration policy at the fed. >> i'm not asking you about immigration policy. i'm asking about economic impact of taking 700,000 people, 90% of whom are employed, out of the economy suddenly. that's what i'm asking you about. >> i don't want to wade into a very hot political discussion. i will say this.

you think about economic growth. it can really come from -- only in two ways. you can simplify it. more people work iing or higher productivity. we talk about productivity. the workforce is growing at 4.5% per year. some of that has been from immigration. you care about potential growth you need to be considering that in your discussions about immigration. >> so what i hear you saying is that taking 700,000 people, 90% of whom are employed, out of the workforce, would be -- could cause problems? >> i'm just not going to comment on that particular situation. >> i hear you but i'm asking about the economics of t i'm asking you as somebody who leads an institution that has a mandate not just to keep inflation down but to pursue full employment. you have a dual mandate. i'm asking you about employment. you're declining to answer my question. would you like to just talk about what it would mean to take 700,000 people out of the

economy? let's say they all went to mars for some reason. >> in fairness, congressman, i really am not going to get into the debate over daca. i'm not going to do that. >> i'm just asking you to talk about the economics of t let me ask you this. let me see if you can answer this. what does it mean to have a group of people in their prime working years suddenly disappear from the economy? >> all things equal you would lose productivity, output from that. >> thank you very much. so there's a research group known as reveal. they did a study looking at literally millions of hamda reports. i would like to ask for a unanimous consent to have their report submitted for the record. >> without objection. >> yeah. but they looked at 31 million

hamda records in a year-long analysis and found that 61 municipal areas across the united states had unfairly -- had denied people of color, black and brown people the right to take on a mortgage compared to equally qualified whites. what is the economic impact of that discrimination in your view? when people can afford a mortgage and are told you can't have one, i mean, what sort of impacts can we expect to see when that happens on a systematic basis? >> i think it's so fundamental to our society that there should not be racial discrimination along the lines of credit availability. >> but that's a moral position. and i agree with you. but i want to know how does it affect the economy?

>> if people are denied credit they're less able to go to school, start a family, move to a new job. economic outcomes for individuals would be potentially significantly reduced. if you take that out across a broad population it would certainly hurt the growth of a country. >> i do want to get your views on whether you agree with fed chairman neil kashkari that increasing legal immigration would grow our economy. i'll probably have to get that answer another time. >> the time has expired. the gentleman from north carolina. mr. bud. >> thank you, mr. chairman. chairman powell, again, congratulations. i know you've heard it many times today, but we're glad to have you here. would it be fair to say that the current administration is willing to review and perhaps even question decisions made by

the fsb, financial stability board, in the past? could i have your thoughts on looking back at decisions that they made would you be willing to review and question those? >> sure. i mean, i think we always -- the fsb doesn't make decisions about u.s. regulation. they make recommendations and if we were to enact something in a law, in a regulation, sorry, we would put that out for comment and, you know, anything like that could be reconsidered in principle, sure. i can't think of anything that comes to mind but maybe you'll help me. >> i've got one in particular. but as much as their opinions has influence policy, here is one in particular i'm thinking about. so in 2013, fsb instructed the international association of insurance supervisors to create a new international capital standard for internationally active insurance groups. there seems to be universal concern among u.s. based ensurers that the current trajectory of these discussions we've added for the u.s. market

and u.s. policy holders. many times they question the isiaa, to hide behind the fsb. they say fsb told us to do this, they told us to do that. it's my view that these negotiations don't move in a more positive direction, we might just need to rethink how their policy affects -- how the fsb gets affected by this i wanted to have your thoughts on that and going back to review that within international capital standards. >> i served on the supervisory committee for several years. >> sure. >> but haven't been involved with it for some time now. i'm not exactly sure where that one is. i know we rolled out a capital requirement in broad form. i'll have to come back to you o where that stands if that's all right. >> sure. one of the things that may have the fsb involve new directives. just going to have you confirm or that you would be willing to

have -- willing to work through the fsb to redirect -- so many acronyms in this place. iais if needed. could you have the fsb review that? >> can i just confer with the people that do that. >> sn. >> sure. >> i'll get back to you. >> yield to the chairman? >> yield to the chairman. >> appreciate the chairman for yielding. i want to revisit an area that we had spoken about briefly during my questioning. and i'm still not sure i'm completely clear on the answer. and this has to do with the run-off of the balance sheet. again, the monthly cap on your security rolloffs, your treasury security rolloffs will rise to $30 billion in the report you just released, i guess, friday. according to data you don't have

$30 billion of treasury securing every month. so, again, i'm trying to figure out, are you making up the shortfall shortfalls did i understand you to say these caps are flexible? i don't understand what you intend to do when you don't have enough treasuries that are actually maturing to hit the $30 billio billion. >> the purpose of the caps was to start the runoff of the cap. only the treasuries in big trshry refinancing months. think of them as not really restraining either. our production doesn't say we're going to roll off exactly $50 billion per month. that was never intended and we

don't know how fast they'll roll off. we are moving right along. significant reductions this year and next year in the balance sheet. >> as of a couple of weeks ago, the balance sheet, if i saw it right, was at 4.4 trillion. and by year's end at the current rate of rolloff, it ought to be at $4 trillion. and if you kept to the pace, 3 trillion two additional years of rolloffs. 2 trillion about four years from now. does that sound about right? is that the current expectation? >> something like that, yeah. >> that still leaves your balance sheet twice what it was precrisis era. and do you expect it, again, to stay there? and do you not expect the demand for cash to wane as interest rates rise? >> we have $2.2 trillion in

nonreserve liabilities. and when we shrink the balance sheet what goes away is the reserves. that's the liability that goes away. that $2.2 trillion liables you have to add on whatever the equilibrium demand for reserves is. so that's how i get to 2.5 to 3. >> the chair now recognizes the gentleman from illinois, mr. foster. >> thank you for appearing here. this is an important part of communication with congress. i would like to follow up on representative royce's line of questioning about the dangers of toilette. and i would like to repeat his thanks to you for being involved in educating members of congress about the necessity of taking seriously our payments on principle and interest. and they're really two different kinds of defaults, driven by fundamentals. when a country simply does not

have the ability to repay itself debt. if you think about ice land where there were debts from the banking crisis, there's just no way for people to like our voluntary failure, when a that has more than enough money to pay the debts simply for some sort of political reason refuses to. and over time both parties have been guilty of abusing and weap weaponizing the detriment. i want to encourage you that there is a bipartisan concensus that could be assembled to permanently get rid of it. s it always being accused by whichever party is in the minority. at some point i think everyone should step back -- and you're anperson part of opinion making in washington and in financial circles. anything you can do to encourage that to happen. there may be a moment when the

stars align and we can get rid of this sort of uniquely dumb thing that we do of threatening to not pay our debt. now, there is the question of, you know, is there enough money? you hear often -- there is just not enough money because of things like publicly held debt. there is not enough money and we have to cut medicare, and we have to cut all the things that you know frankly poor people depend on. i'd like to go into that. the u.s. household net worth sometime this year will go over $$100 trillion. and publicly held debt is about 16 osh 17 i would guess. >> and would you agree that there is clearly enough money in the united states to pay off our national debt? will we reach a situation where the world says they are just -- there is so much debt in the united states public or private that we simply can't do it? we can't cover our debts? >> well, i wouldn't want to run

the test pch i do think there could come a time -- not in time by a long shot -- but there could come a time where the global debt buying public could come to the view that we weren't prepared to honor or service the debts. but we're a long way from that. >> but that's different -- for example in japan where you know the debt's is 200% or more of more of gdp be with the markets aren't concerned because of the amount of private wealth in japan. the situation is different in china where there is a huge amount of often unacknowledged private sector debt. and when you think of what happens when that debt fails that will land first on regional banks and then the main banks. and would basically on the government's balance sheet. so there is a real danger in the case of china that there is not enough money in china and enough wealth in china to cover the debt. and so i think would you dwree

there is a fundamental difference? the united states that we actually do have the money to pay off our debt by a long margin because of the large public wealth in this country and that really it's a political. problem that we face rather than one of just not having enough money? >> yes we certainly have money to service debts and honor them without question. >> um-hum. >> and you know, but really the had you is servicing them gets more and more expensive as they accumulate and the numbers go up. and those bills will be borne by our children. >> i agree completely. and the wisdom of lowering taxes at a time when the economy, frankly, doesn't need to be stimulated is something that is -- well sort of elementary macroeconomics that you run a deficit when the economy is in trouble, and then when the economy recovers you pay off the debt that you have accumulated in order to smooth it out. let's -- did you have a section on page 14 and 15 of your report

that you're presenting on the low inflation in advanced economies, which is something of widespread -- do you have any thoughts on really what's -- what your main suspicion is for why that is taking place? >> you know, it's been a long-run trend. inflation has been coming down for 25, 30 years all over the world. and it probably has something to do with the aging of the population and with -- well -- dsh you know low productivity and those sorts of things. it has to do also with -- sorry -- >> time of the gentleman has expired. the chair recognizes mr. poliquin. >> thank you, chairman. and welcome chair powell it's wonderful to meet with you. i know it's the first time before us. that you thank you for being so direct and giving us the answers to the question that is we ask. sir, i represent probably the most stunningly baufl part of

the world, it's ruler maine. if you haven't been there mr. powell we are blessed with such natural beauty. we have 3,600 miles of breath taking coastline, we have thousands and thousands of lakes and ponds and hundreds of miles of rivers and streams. we're also called vacationland. now you look like a fellow that needs a vacation. i'm not sure you booked your maine vacation yet. if you have a problem you call up our office and we'll help you out. when you go on your maine vacation -- this is a great time to go if you row like to snow boebl or the summer. you'll find throughout the rural part of main mostly we have a lot of shutdown factories and mills. when i was a kid growing up we had 2 dozen paper mills. we have six left that are healthy. you look at text tiles and tanneries and shoe factories, mostly shut down. we have in many cases mr. powell done that with trade agreements that were unfair and hurt our

workers, high taxes that didn't allow us to be competitive. i know we partially fixed that problem back in december with passing the tax cuts. and then costly regulations. now i'm sure familiar with the competitive enterprise institute computation that says i surpz about $1.9 trillion a year costs is paid by employers. and threw them passed through to some of the consumers. $1.9 trillion costs just to comply with federal regulations, not state and local, just federal. so is it fair to say, mr. powell, that unnecessary and costly regulatory burdens hurt the economy's growth and hurt job creation? is that a fair thing to say. >> i think it is, yes. >> would you look at the past year, 2017, and up until now when you have the economy growing at roughly 3% or so as compared to 1.7% the last

roughly eight to ten years? is that part of that more growth and fatter paychecks part of that a result of repealing regulation. >> it's hard to pin that down. >> i think anybody with all due respect who has run a business as i have realizes that if it's less burdensome to run my business and sell products and service attention i'll be more competitive be able to hire more and do better. this morning i met with 100 folks from the credit unions in maine, wonderful people that are spending more time or fooch time dealing with compliance as compared to pushing money in the community so businesses are grow and hire more. can you commit today, mr. powell, that you will do everything humanly possible within your purview to make sure that the regulatory burden for our small financial institutions are controlled and hopefully repealed? >> i will make you that commitment. >> you will or will not. >> i will. >> thank you be, sir. have you taken a look at senate

bill 215 a which deals with part of the choice act we sent over to the senate and dealing with issues, in particular with small credit union, community banks that them deal with the regularry burden. >> i'm not good on the numbers does it have a maim. >> it isible mr. carpoa's bill. >> i'm supportive of it. >> you are supportive. >> it's a constructive enterprise and i think the aspects you're talking about -- certainly i think are something. >> perfect. thank you very much mr. powell. i appreciate that. let's talk about what mr. foster was talking about. this is wonderful talking about national debt. we have $21 million and chairman hensarling is very good to put it up. i tell you it makes my belly sick. with had other folks in the last administration that come and say this is no big deal, browse. $21 trillion in national debt. py used be to the state treasure

ner maine we knew how to balance the books abspend only what we took in. we i was there the debt clock was unwinding. now we have about $245 billion per year interest payments on the debt. mr. powell do you take a different tack the folks here earlier the last administration? dunk this is a problem. >> the $12 in debt. >> we're not on a sustainable fiscal path. >> i would agree with that. we can agree this is a problem. with that said, sir, my second day here in congress i cosponsored -- the first one i coresponsed wgs a balanced budget amendment to force washington to live within its means and pay down the debt. do you think that's a good idea. >> not at supporter balanced budget. >> i'm coming back to mr. powell at another time. >> the chair recognizes the lady judge ohio was ms. beatty. >> thank you mr. chairman, thank

you ranking member and mr. chairman. certainly as one would expect with you being the chair of the federal reserve, the questions would be centered around economic projections, economic development, financial stability, monetary policy. but i'm going to keep in my true form of asking you the same questions that i i have asked everyone who has sat in that sat. are you familiar with section 342 of dodd-frank. >> yessy, "i." >> okay, that the office of minority and women inclusion, can you tell me in your short time, which i recognize, with you you also have almost a half decade of being chairman of that board -- tell me what you are proud about that's under your leadership with omwe.

>> a couple of things. . first of all as i mentioned i've been involved with now my seventh reserve bank presidential search. and in every case we've been able to expand the universe of diverse candidates and select diverse candidates. i'm proud of that. i think the reserve banks do a good job on this. i think on the bored jerry allen started a group of us to meet regularly and try to advance diversity and agendas. >> who is your omwe person. >> sheila clarke. >> do you think you can increase your numbers as chairman yellen had worked on rising them -- while it was a f her -- i asked her the sam question. and she admitted itould be better. so while i'm saying you -- your entity has done something. i want to hear how we can do

more. because it's still not at bragging rights in my opinion. i want to you think about that. we have a lot of people in the audience today in green t-shirts who represent many of the people i represent in the third congressional district, many of them women, many of them women of color, who also are concerned, the only difference with them is they put the people face, the human resources on the same monetary policy and all the questions my colleagues on other side have been asking you about numbers. have you met with these individuals? >> yes, i have. >> okay. and can you share with me some positive progress that you have or the people who work with you are doing with them? >> so we met with a group with the green t-shirts a couple of years back. >> yes. >> they wanted to tell us what was going on in the communities. i fought it was a proud day. we sat and licensed to what was

going on in the communities. and it was respectful and useful. we also have other meetings. >> would someone on your staff be able to send me a report so i would have something in writing to know some benchmarks, because i know in meeting with enemy and their representatives they have specific questions that they wanted me -- and they're asking about interest rates. and they're asking about how we can help improve the economy for what we call working middle class americans. >> so it's -- so let me put it a different way. i'd like to get a report from your staff sharing with me, since you've had a meeting, what type of commitments or things you're going to work on. i'd like to have that. secondly let me move to another financial question. i noticed in your report there wasn't anything about the stock market. can you tell me if you think the stock market is one of the best

or better indicators of the strength of the economy or the strength of the financial conditions of -- for everyday americans? and i ask you this because a lot of my colleagues on the other side have been bragging a lot about the stock market and how the stock market is going up. >> so there was one reference in there about the recent volatility. i don't think we called that the stock market by name. but that was what we were talking about. we don't manage the stock market. we manage to stable pricings and maximize employment. the stkt market enters into our thinking, an important place for businesses to raise capital. it's an important place for investors to invest. >> is that yes or no, in your opinion. >> in my opinion, is it what is it an important indicator of the state of the economy. >> yes. >> i think the general thing the stock market is not the economy but is a factor- it plays a factor, a role. >> would you say that only 50% of americans own the stock market but the other 50% who may

be women and minorities don't. >> time of the gentle lady has expired. the chair recognizes the gentleman from georgia, mr. loudermilk. >> thank you, chairman. and chairman powell thank you for being here today and spending so much of your day with us we appreciate it. but it's important that we have this dialogue. i want to talk about something -- i don't know it's been discussed much here today -- but something important for me especially spending over 20 years in the i.t. industry dealing with securing data. and that's something that has been on the mine of most americans, and that's cybersecurity and protecting the data of americans. and one of the areas of interest of mine and -- i've stated this in almost every hearing we have had on this topic -- when i was in the military working intelligence. i worked on the technology side of it. and of course when you dealing with the nation's secrets there

is a humbling responsibility to protect that information. and we had a simple principle. the principle was you don't have to protect what you don't have. which means, if you don't absolutely need it, get rid of it. otherwise it becomes a risk. and i'm sure you know that the federal border of governors experienced more than 50 data breaches since 2011. of course that's alarming, given how much the data the government collects, not only collects but requires private sector businesses to collect which means they have to protect it as well. your predecessor chair yellen told me when i asked these type of questions that the fed follows the cybersecurity primework abo was working on minimizing access to cents owe sensitive data. i'd like to follow up. what are you working on to strengthen the fed's cybersecurity profile and to protect the data that you have? >> thank you. so i'm just getting started on

this. and so you know, i'm going to place a high priority -- i think chair yellen and others did before her too. we need to protect the sensitive information that we do have. and we don't need to collect sensitive information we don't need. that's a fair point. >> thank you. >> so i think we've done a good job can be can certainly do better. it's going to be a high priority. >> and i appreciate that. and that's one of the areas- and i'm glad to hear you say that you're looking at disposing -- are oh not keeping certain data unless you need it because that's something i think that we overlook as a government, because access to information is power. but when you have it you have to a secure it. transitioning to ather area we've been dealing with. i understand you're supportive of some of the regulatory relief proposals we have pending. increasing the thresh told to

250 billion. i believe that the congressman's reform bill takes a thoughtful bill to measuring and systemic risk. it's a step in the right direction. can you explain why banks under $250 billion don't pose a systemic risk to the economy. >> as a general matter, banks under $250 billion are more engaged in the traditional business of banking, less complex activities. and of course they're much smaller, have smaller footprints. the way the -- the senator's bill works is we would have the ability to create a framework to look below 250 billion down to 100 billion institutions to identified where enhanced standards might be applied. . that's the which the bill. our vow has been that that combination of raising the threshold and giving us the ability to go below it in cases where needed gives us the tools

we need. >> and from what i understand even some of the authors of dodd-frank bill are saying that $50 billion was the wrong threshold. we need to to adjust it. i appreciate that. one last question. what is the fed doing with the private sector on faster payment technologies? are you engaged in that at all. >> i'm glad you asked that. i was right in the middle of that at my prior live at the fed. this really came out of the thought we were falling behind other countries in faster can be -- widely available mobile payments and that sort of thing. we really convened a group of companies and consumer groups and regulators and customers and everything around a table and tried to make progress toward can be -- you know, toward faster mobile payments. i'm proud of what we have done. esther george at the kansas city fed has a lead on that for the self-years and has done a great job at it. it's something we're continuing to work and we think is

important. >> i thank you for leadership and looking forward to working with you over the next few years. thank you. i yield back. >> time of the gentlemen expired. the chase recognizes the gentlemen from washington mr. heck. >> thank you, mr. chairman. and chairman poil congratulations on assuming that incredible and awesome responsibility for the country. i'm going to ask you the same question i've asked each of the predecessors sieves o since i've been a member of committee. when does america get a raze? the reason i'm asking that question is because we've been through a pro tracted period of time in which wage growth has been stagnant. before you answer, sir i know you're going to make some indication in the uptick of the latest ror of the 2.9% increase. and i want to qualify your response by repipelineding you that that 2.9% was probably impacted by some transitory or one-time bonus payments. and if you disago gri get gait

the supervisorerry and non-supervisoriry, the non-supervisory didn't get near that. and the 2.9% in and of itself despite how nurming we may put in the context of the last 18 months is significantly below modern historical averages of closer to 4% oop. i'm really interested in is when is this economy going to function and grow in a fashion that enables americans to get a meaningf meaningful raise. >> over time wages should grow in keeping with basically the sum of inflation and increased productivity. if we assume inflation is around 2% it comes down to productivity. productivity since the financial crisis has averaged upward per hours increase of about half a%. and so if you think about wages have been increasing at about 2.5%. so that's which. and before the crisis wages were

increasing at full employment maybe 3.5%. that's because productivity was 1.5%. so we really need -- it we we want wages to go up on a sustainable basis over a long teert -- dsh period of time that's what we want we need more producty. and unfortunately that's the the things we have the tool for. >> is that true, mr. chair? is seems to me they're not unrelated. to the degree you keep your foot off the brake and allow unemployment to continue to fall -- and i'm returning to this issue and some things you've said on the record in the past, about whether or not we should look at unemployment rates or wage growth as a measure of full employment per se. but to the degree we keep our foot off the brake and allow you three or six -- or pick your measure continue to drop and continue to create pressures in the economy for wage growth to continue, does that not in and of itself incentivize businesses

and employers to invest in labor saving devices read here improve productivity. is if not possible that wages themselves can help lead to improved productivity which can create a virtuous cycle with wage growth over time. >> yes and that is exactly what what we hope is happening. >> so you're committing to keep your foot off the brake. >> yes. >> when i was getting ready for the hearing i read back on something you said on the ofmc committee at the first meeting. one of the bank presidents mentioned tighter labor markets. you noted you haven't seen anything in the wage data yet to support that. and it struck me as interesting. because it got me into thinking about you three and you six and my frustration with beth, and how it's been two and a half

years since we hit the supposed definition of full employment yet u 3 keeps dropping and the definition of full employment chases it. it made me wonder as what you said earlier, why don't we just use wage data to help define what full employment is? >> well we use it as a factor to look at. but, look, i think it's important to see that for a long time there was slack in the labor market. and that argued for a continuing to support lower unemployment. we have reached the point where the risks are really two-sided now. we need to to keep that into accounts. if we get behind and the market -- the economy does overheat we don't see that now -- i hayesen to add that -- but if that happens we have to raise rates faster. en and thattis raises of chance of recession. and recession hits the vulnerable pgs pos the most. and that's why we raise on a

gradual path. we try to balance the risk of getting inflation up to 2% with the risk of the economy overheating. >> fair enough, mr. chair. but i would only observe that you tap the brakes at the expense of the people who have over a long period of time not received a raise. >> time of the gentleman has expired. the chair recognizes. miss tenney. >> thank you, mr. chairman and mr. powell. i appreciate your long time. i think i'm the end of the line here for you today. i have a couple of quick questions sore of of in the he had weeds policy appear on a a and would like to you ask you about the open markets committee and on interest reserving .back in ouf they passed the financial services reserve act. which authorized them to pay

interest at federal reserve banks. however when the bill was amended the federal reserve in determining the interest rates was left to the board of governors and fallout to the entire federal open markets committee. we know this is a valuable tool using this -- the entire committee to determine monetary policy. my question for you is would you support an initiative or legislation that would give the full role of determining what the excess reserve -- excess interest on -- interest on excess to an entire expanded fm -- fomc and the federal reserve? >> i guess i would say this is less of a problem than it seems to be. >> okay. >> the full fomc deciding the raining for the federal funds rate. and the ioer is only set at the top of that raining. and so it really is the -- the voting members of the fflt omc eystading that. it's not -- would have been --

it would have been a reasonable decision for congress to do that. i am always loathe to support changes for the federal reserve act but that opens up the ac. but as a practical matter that is not a problem we need to to safl bus there is no difference between the two things. >> would you be -- would you be supportive or not supportive of legislation that would allow the district president's basically to weigh in on that decision as well. >> yeah, i -- >> and if not why not. >> i don't think we're looking for legislation. >> we obviously always like less legislation. but in this case we are looking for more stake holders to be in part of the decision process i think. >> i think that the real decision that's made is the one that the bank presidents do take part in. it's setting the raining for the federal funds rate. they make that decision with us under the law. this is just an implementing thing. if i thought it was really unfair or a problem then i would support a change. but i don't really think it is a problem. it's less so than it appears. >> it's been pressed by them

they would like input on that i was wondering if you supported that. let me go to the next thing the federal open markets committee blackout period. how you feel that about and whether we can restore transparency to the period whether it's necessary to go through that part so we know we have an ability to find out what's going on during that period, eight times a year when the committee is meeting where we don't have an opportunity to hear from the stake holders. >> i want to look at what you're proposing. >> okay. >> we -- the whole idea of that period is is that we don't speak publicly to market participants or anybody about monetary policy during that period. and that gives --

>> we're back to where every governor has one or two advisers backup we don't need legislation that. >> that's something you'd support. >> time, time of the gentle lady has exexpired. >> thank you. >> the choir recognizes the gentleman from ohio mr. davidson. >> thank you, mr. chairman. and chairman powell thank you for are your testimony today. before i get to a my prepared questions pb owe, i have two follow ups to previous questions. one chairman barr asked you about intervention in terms of

selling assets. in a particular scenario where the yield curve may become inverted. whether monetary policy might be appropriate up to and including selling assets in order to prevent a yield curve inversion. and just for clarity, if yield curve inversions are generally seen as bad why wouldn't intervention to prevent a yield curve inversion be seen as good? >> well -- so in terms of yield curve inversions i think the history is what it is. but it really is a history of times when the fed to some extent has gotten behind and had to raise rates fast. that's not where we are right now. i think most observers of this environment don't see that problem. if you look at, you know, projections of the likelihood of a recession in the next year or so, they are very low. they are as low as they normally are. i don't look at the current

yield curve situation as a pr problem needing solution. i also go for the solution of selling assets. i really like our current plan of allowing these mbs and resignry securities to roll off passively. the market accepted it. i'd had have a high bar wanting to change that is working well. we'll be back to some kind of normal in four years. my strong priority would be to let the successfully announced and created programs just run its course. >> thank you, chairman. also, chairman hensarling asked but the oier impairments. and i think your answer was they are constrained by commercially -- skmergs rates. things available in the marketplace. but i would note that an interest consists of generally of two parts. one is time value of money and the other is default risk. and presumably ioers doesn't have a default risk. i'm not sure that's the right

metric would you care to comment >> the law says we shouldn't pay interest on reserves greater than the general level of short term interests rates. >> but the short term interest rates -- i see prapgs a need for clarification on the law bus the short term interests rates contain time value of money risk but also zeflt risk. whereas ioer does not contain default risk. so the real alternative for a financialnstitution in the market isn't -- isn't -- one for one rate. if they make loans outs in the marketplace they hirntly have default risk the ioer does not have. >> you know -- we're trying to -- we're trying to use that tool to do is to set set short term interest rates for the public. so -- and those a lot of those will have a credit risk component. the short term interest rates doens have a big one

particularly repo secured by treasure. >> i do a question about the two roles of the fed, as a regulator and monetary policy entity. would that be consistent with how you sigh the structure of the fed. >> yes. >> okay. and so to understand the internal operations do you actually track the budget between the two activities separately? i mean are there people generally involved in regulatory activity and then a different body of people that are generally involved in monetary policy. >> you know, each different divisions do have different budgets and we do look at it from a functional basis. but it's pretty intertwined as a matter of fact. we do call upon what with he learn in the supervisory and regulatory inbase. the board briefed on that all the time and informs monetary policy. our nong of the transmission mechanism informs supervision. there is a lot of intertwining there it's not a clean

separation. >> internally there is some level of separate budget for you know the activities vod involving regulators. and i guess my particular curiously involves a bill we have put together called hr 475 a, the federal reserve regulatory oversight act. this puts the regulatory xenoof the federal reserve on apprehensions. which would be to me a compromise position because we could propose putting the entire federal reserve on apprehensions. this would be the -- the purpose would be to focus on the regulatory side so all the standard strings attached to an executive agency that's engaged in rule making apply to the regulatory side of the federal reserve. and the same way that others do. and so i hope that we can enact that later in the year. my time is expired. >> the time of the gentleman has expired. the chair recognizes the gentleman from indiana mr. hollingsworth and informs all

members that a vote is currently pending op the floor. the gentleman is recognized. >> i appreciate you being hear and have heard great things about the testimony you've given so far. looking forward to the opportunity to work with you and interact and enact the fed's stated goals. i want to ask questions i hear about in district. as we see unkbpt tick lower and lower. once of the questions is why aren't we seeing more wage growth and what's contraining era strange the wage growth that may be happening as we push down unemployment whether that reflects on the whether the phillips curve theory is incorrect and whether it's a kinked. >> you need higher productivity for wages to go unsustainable. we have had low productivity. frmg aing about.5% a year. we need that up. more relevant to your question,

as you et this close to full employment you would think there will be tightness in the labor market. you would think wages would be a bit up. we're looking at that as one of mm indicators of where the natural rate of unemployment is. >> yes. >> and i wouldn't say it's a great mystery. but i would expected to see more increases in wages and frankly i do expect to see more increases in wages in the next year or so. >> one of the theories i think the fed put out quite a bit is there a shadow labor market. a great number of people that aren't currently participating in the labor market looking for employed or employed that might be tempted to come back in or lured back in? do you think that's the case, higher wijs or just more employment opportunities might lead to more in the work force. >> or is there a decay in the skill sit that might lead to them not being alk to participate and need help getting back into it. >> you know, we have seen -- we have seen the labor force participation rate go sideways

four straight years. that's a big gain against a downward trend dug o due to aging and some of that. we have seen people not leaving or come back in the labor force as it's gotten tighter. how much more of that can there be? i hope there is a lot more. but. >> the thinking about working age population individuals that are less employed or less likely looking for employment than they were maybe 20 or 30 or 40 years ago. i certainly heard the demographic argument made a bit you made it in one of the private meetings before, holding to currently labor force participation is a gain once you look at those falling out. but it seems like working age population individuals are somewhat challenged to get back into the work force? have you seen some of that or anecdotal or statistical evidence what that might be leading to it what the cause be? >> labor force participation by prime age workers is still more

than a full percentage point below where it was before the crisis. there may be more slack in wages or prime labor force participation. there are others suggesting we are at at or above full employment. it may be the people -- that there are some portion of the people can come back fl. it may be it's mostly structural. >> right. >> the only way to know is to find out. i think with relatively low employment we are close to full employment. we should be finding out whether we can keep the people a get them back in the laborforce. >> does that imply -- i read in other comments i made -- please don't let me misconstrue. -- there might be a tolerance to continuing to see more and more tightening in the labor market and maybe run above historical average inflation in a goal to drive more wage growth and get more people back into the workforce? is that a fair characteristic of what you said before? or. >> you know, i think we're engaged in a process of

discovering the natural rate. >> um-hum. >> you know, i think the median sep says in about the mid-fours. that sounds about right to me. in terms of inflation we haven't said we are seeking inflation to owe above target. . what we see is that we would look at persistent deefrgss from inflation, above and below target, as being unzierl and we will conduct policy to move -- policy to move inflation back to target. >> when you think about -- one last question, when you think about the economy today and think about monetary policy today and maybe its future as well, what keeps you up at night? what are you most worried about with regard to the key like you mentioned productivity, monetary policy. >> i think right now, the economy is in the best shape it's been in a while- true around the globe. we're having a moment of global growth. it's great to see. we have the problems associated with strong growth. and that's a great relief.

and my hope is we sustain that for as long as possible. >> with that i yield back. >> the time of the gentleman has expired. no further members in the queue i like to thank the witness for testimony today without objection all members will have five legislative days within which to submit additional written questions for the witness to the chair. chairman powell, i would ask that you respond to this as soon as you able. this hearing now stands adjourned.

attorney general jeff sessions announced the establishment of a task force that would target opioid manufacturers and distributors. the attorney general also said the justice department would make an announcement on so-called bump stocks, which is a gun accessory that enables a rifle to shoot hundreds of rounds a minute. >> today i'm announcing our next steps. first, the department has hired an experienced federal prosecutor to lead our anti-opioid efforts, mary daley.

she previously served as an assistant u.s. attorney in the eastern district of new york and in the eastern district of virginia where she supervised the narcotics unit and was the opioid coordinator. over her 13 years as a federal prosecutor, mary has fused on the prosecution of transnational drug trafficking organizations. mary will serve as director of our opioid enforcement and prevention efforts. she will help us formulate and implement initiatives, policies, federal grants, and programs related to opioids and coordinate these efforts with law enforcement. second, we are attacking this crisis at its root, the diversion and overprescription of opioid pain killers. today i am announcing the prescription interdiction and litigation unit, p.i.l.l. wsh ago we call it.

task force. it focus z on targeting opioid manufacturers and distributors who contributed to epidemic. we will use criminal penalties and civil penalties. we will use whatever laws and tools we have to hold people accountable if they break our laws. the task force will work enclosely with the department of health and human services and will coordinate with law enforcement at all levels. a task force will examine potential legislative and regulatory changes in existing laws. i'm also ordering the task force to examine existing state and local government lawsuits against opioid manufacturers to determine where we can be of assistance. we have worked on this and talked about it before. and in fact we are already getting involved in these case. i am announcing today that the department will file a statement

of interest in a lawsuit against a number of op oid manufacturers and distributors for allegedly using false, did he secht oive and unfair marketing of opioid drugs. the federal government has borne substantial cost as a result of this crisis. a medicare prescription drug program, for example, paid out more than $4 billion for opioids in 2016 alone. the hard working taxpayers of this country deserve to be compensated by any whose illegal activity contributed to the costs. we will go to court to ensure the american people receive the compensation they deserve. the day after the tragedy the president made a commitment to take action, not just talk, to do some things. he pointed out that we need results. he ordered us at the department

of justice to begin to deal with the bump stock issue. the ability of the device to allow a semiautomatic rifle to fire on virtually an automatic system. we have been working on that for some time. well will have an announcement on that soon. we believe in that. and we have had to deal with previous a.t.f. legal opinions. but our top people in the department of justice have believed for some time that we can through regulatory process not allow the bump stock to convert a weapon from semiautomatic to fully automatic. at the white house press secretary sarah sanders talked about a raining of issues including gun policy and the status of white house security clearances. the briefing is