find a meeting of the minds with them and the customer and that's caused by the supervisory relationship. and so i hope as my time expires here that you all will continue to make that a top priority. >> i pledge to. >> at the federal reserve. >> i pledge to do so. absolutely. >> time of the gentleman has expired. the chair now recognizes the gentle lady from wisconsin, ms. moore, for five minutes. >> thank you very much, mr. chair. it is so nice to be able to say madam chair. and thank you for your indulgence in really sitting through a lot of questions. i don't remember the former chair indulging us this way. maybe things will change after you're here for a time or two. i have some questions. let me start out with some macro economic questions. there's a lot of criticism about quantitative easing and the positions that the fed has

taken, the fed policy, and on the other end of the street here congress has been engaging in more and more and more fiscal austerity. is it fair to say that we're kind of working across purposes here, you know, on one end we're forcing real austere cuts, the economy is slowing while you're doing quan at this at this titi economy is slowing while you're doing quan at this at this titi? it's my thought that we might be able to slow down on quantitative easing if we weren't forcing such austerity on the economy. your thoughts? >> well, i agree. i basically agree with your point. >> madam chair, i don't think your microphone is on or you need to pull it closer please. >> is that better? >> yes. >> as an example over the last year, i'm sure during 2013, the

cbo estimated that fiscal drag depressed growth by about a percentage point and a half, which is really a pretty significant -- significant drag on growth, and our policies have been trying to offset that, to boost the recovery so, yes, in that sense we have been working across purposes. >> thank you, madam chair. one of the things that we would like to think that the current high unemployment is just cyclical. can you tell us that we've reached the tipping point? are we getting to a tipping point where this is going to be structural? >> i'm sorry, where it could be structural? >> yes. >> we're very much worried about the possibility it could become structural. we have some on the order of 36% of all unemployment is in the long-term spells of 26 weeks or

greater and we know when people are unemployed for that long, they surely must get discouraged. they begin to lose their networks that enabled them to find jobs, may decide to drop out of the labor force permanently, may begin to lose the skills that are necessary to find new jobs or, as we can see, employers tend not to want to hire people who are long-term unemployed and so the notion that something that should be temporary can become a permanent -- source of permanent job loss is a huge problem for the economy and of course for the household. >> thank you, madam chair. just quickly. inequality, another thing that's controversial. people think that inequality is just something that should be left to market forces, but would

you -- is it fair to say that inequality is very harmful to our future economic growth and job creation and what tools in the tool kit does the fed have to address this threat? >> well, our tool kit, i'm afraid, is more limited than what i'm afraid is necessary to deal with these trends. the major contribution that we can make is to try to promote a strong recovery. many of the unemployed, particularly those with the most serious spells, are lower income people, and if we can get a good, strong recovery going, not only will they get jobs, firms will probably promote people faster and be more willing to engage. >> thank you, madam. just very quickly, i am very concerned about the fed continuing to work with the cross border solutions on the orderly liquidation facilities

and i am -- i've worked on this on my subcommittee and i hope that that's a priority of the fed. >> we are working very closely with foreign supervisors to try to be able to effect a cross border resolution. those are if -- god forbid it should come to that, but these are challenging issues, but we're very focused on them. >> thank you so much. >> time of the gentle lady has expired. the chair now recognizes the chairman from oklahoma, mr. lucas, chair of the agriculture committee. >> thank you, mr. chair. chairman yellen, it is a pleasure to be with you today. sitting on the ag committee and working on the 2012, 2013 and '14 farm bill now signed into law, there are several things we look at in the committee. some are directly or indirectly related to the activities of the fed. for instance, and not so much an

ag-related issue, but the observation from some of my constituents that after the financial problems in 2008, the dramatic downturn in the stock market, going from losing half its value basically back to where it was, a little bit on the positive side, not just that, but, for instance, in farm land prices we watched over the course of the last five years a rather dramatic appreciation in the value of farm land. now some might say that part of the rebound in the stock market reflected the simple fact that the equities should not have collapsed that far in value five years ago, but -- and some would also say that a big part of the takeoff in farm land values reflected the renewable fuel standard, a new government mandate consuming 40% of the crop, driving a demand in price responses that hadn't been there before, but in both cases it would seem as an observer, and your opinion of course on this,

chair, that once these effects occurred, it would seem that both land prices and maybe stock market values have continued on in a trend that would reflect more than the initial effect of either rebounding stock market or the effect of the renewable fuel standard. in your opinion, how much effect has quantitative easing, the effort of course to try and address the housing market and the federal financial obligations, how much of that extra money that, liquidity has bled over into these other areas? is part of the price in land price values attributable to things like the quantitative easing? >> so i will not profess to be an expert on land prices. >> and nobody is, but you're exactly right. >> i think land prices have been going up at a remarkable rate even before the stock market began to recover, and certainly

what caught our attention is an area where we would be concerned about valuations. we've been watching that very closely. >> but if resources become so pleasant at this full spread out into the other parts of the economy away from housing, if it distorts the decision-making process, in the farm bill this time we did away with the old direct payment program, basically taking $4 billion a year out of the farm economy in an effort part of which to address that issue, but if all of this money is churning and once these rates of return that appear to be so dramatically greater than anything else you can invest in, i guess what i'm asking you is one, of course as you noted, the fed watches all of these things, but when we undo quantitative easing, what's the effect going to be on things like farm land prices or stock market prices for that matter, equities? >> well, i would agree that one of the channels by which monetary policy works is asset

prices, and we have been trying to push down interest rates, particularly longer term interest rates. those rates do matter to the valuation of all assets, both stocks, houses, and land prices and so i think it's fair to say that our monetary policy has had an effect of boosting asset prices. we have tried to look carefully at whether or not broad classes of asset prices suggest the activity. seen that in stocks generally speaking. land prices i would say suggest a greater degree of overvaluation. >> from the perspective of a number of us, chair, the concern about the old analogy about the put your finger in the balloon and it pops out somewhere else, concern that is we would

potentially, unintentionally, of course, create a bubble similar to housing a decade ago of farm land prices or somewhere else and the consequences of that is most unnerving. your predecessor in response to a question of when will you know to undo the quantitative, his response was, we'll know. how will you know when the problem is fixed to undo? so, i appreciate the challenges you face. i certainly wouldn't want your job but then it took us two and a half years to do a farm bill too. >> we'll watch asset prices very closely and recognize they can be a sign of excesses that are developing. >> thank you, chair. >> time of the gentleman expired. chair welcomes the gentleman from connecticut mr. himes. >> thank you, mr. chairman. welcome, madame chair. >> thank you. >> it's a pleasure of a man

growing up with sisters and a mom and now wife and daughters, it is a -- >> thank you very much. much appreciated. >> i want to follow up on a line of questioning by my friend from wisconsin and just read you a portion of your report here. which reads, fiscal policy was a notable head wind in 2013 prior to relative recoveries, policy is unusually restrictive and the drag on gdp growth was particularly large and quanti quantifiquantif quantified that at 1.5%. maybe a minute or so, unusually restrictive. i wonder what you mean by that and. and number two, 1.5% of gdp growth given up to unusually restrictive fiscal policy. can you quantify that for me in terms of number of jobs? >> well, i guess it's -- i'm little reluctant to try to quantify it, but a percentage and a half less gdp growth would

probably over the course of a year raise unemployment by several tenths of a percent. so it is significant. now, the economy's succeeded in growing in 2013 at a reasonable rate. nevertheless, in creating jobs. but presumablpresumably, it wou grown faster without that drag. when you say it's unusually restrictive, i think when you look historically of periods recovering from a deep downturn and unemployment is as high as it is, the typical stance of contribution of fiscal policy to growth would be substantially larger and what it means to be an unusual drag. i mean, not only absolutely a large, negative number, but it's unusual given the economic conditions. >> thank you.

thank you. so you did say that several tenths of a percentage point added to the unemployment rate. it is not unreasonable i think to assume it's equating to magnitude of hundreds of thousands of jobs. is that unusual to assume -- >> i haven't done the math but probably -- >> several hundred thousand's worth of jobs attributed by the federal reserve to the unusually restrictive fiscal policies which are generated in this institution. i appreciate you clarifying that. i've been through not carefully but i've been through all 51 pages of this report. and i don't see mention of something the chairman identified as a huge drag on the economy. regulatory costs and red tape. am i misreading this or a reason why costs and red tape are not identified as a drag on the economy? >> i mean, that probably is a

drag on the economy that there certainly are studies that suggest that regulation sometimes does depress economic growth and it's hard to quantify it but it depends. you know, it depends exactly what we're talking about. >> but in excludeing that from this report did the federal reserve make a judgment of materiality? perhaps why is it not included in the report? >> mainly focusing on macroeconomic factors. >> okay. thank you. >> i just had the opportunity to spend a little bit of time with mark zandi of moody's analytics and suggested or said he thought you might estimate the employment effects of the monetary policy carried out by your predecessor at roughly a million job that is exist in the face of that monetary policy. is that a number with which you would agree? >> so there are a number of different studies and it's hard

to quantify exactly what the effects are but that is significant study. >> okay. thank you. just in my remaining time, we had the opportunity to speak with the regulators on the topic of the volka rule, a very good idea and complex rule and i asked and i'll forward my ask to you that i think the success of the implementation of the rule will reside largely in the ability of the regulators to give timely interpretive guidance on what you know is a very complicated, internal adjustment they will have to make so i'm hopeful that the inner agency group formed will put in place a system to provide rapid interpretive guidance to financial institutions around that complicated rule and will say, again, thank you. it's privilege to have you here and yield back the balance of the time. >> thank you. >> the time of the gentleman is expired. the chair recognizes the gentleman of south carolina, mr. mull vany for five minutes.

apparently did the chair doesn't. yeah from wisconsin, mr. duffy. >> you were throwing us for a loop. thank you, mr. chairman. thank you, madame chairwoman. we appreciate your time. especially those of us low on the dias. during his last testimony before our hearing, it was in july of 2013, chairman bernanke testified that in about five years we can expect a spike in our debt to gdp ratio arising mostly from long term entitlement programs and a bunch of other things including interest rate on the debt. president obama acknowledged the major driver of the long-term liabilities is medicare, medicaid and health spending and nothing else comes close i think was his quote. i guess to you, chair yellen, do you agree that there are serious economic consequences and risks

associated with the risk to address the failure of the imbalances and agree with the president and the predecessor that the principle driver of the unsustainable national debt is long-term entitlements? do you agree with that? >> i do. >> great. we are on the same page. that's wonderful. and we also agree that we're not here to address this, you know, five years from now, one year from now. i mean, the realtime to address these entitlement issues starts today, doesn't it? >> well, it's often difficult to make adjustments in these programs and retirement programs that people count on and require if there are adjustments require planning over their lives and so yes. it's important to address them earlier. >> right. address them fairly for those who are in their retirement or near retirement. >> of course. >> but we should as a body start to address them. you would also agree it's pretty

hard from your position to address these imbalances through monetary policy. we really have to do them through the legislative process, right? >> yes. >> now, if you look at long-term entitlement spending and the cbo's report that just came out saying that the affordable care act or obamacare will cost another trillion dollars over the next ten years, you have to agree then that the affordable care act isn't bringing us closer to balances in regard to you are entitlement system but taking us further away from balance. right? >> well, so cbo was really the agency that's done the greatest, most careful assessment of the fiscal consequences. and i don't have anything to add to what they have said about the likely fiscal -- >> you don't dispute it but you're not necessarily agreeing with it? is that your position? >> that's really their domain of

expertise and not ours. >> i would have to imagine that entitlements taking us further from balance. let me move on. one of the concerns i have is the high rate of unemployment, and oftentimes after a downturn we'll see pretty aggressive growth and recovery and haven't really seen that in this recovery. i think all of us on both sides of the aisle can agree we would wish that the economy would grow faster and more jobs would be created. our concern also goes to labor participation. it's at pretty low rate. we wish more people were participating in the labor market. i know we'll disagree on this across the aisles and concerned that the president's affordable act has a full-time defined as 30 hours. the cbo said it costs 2.3 million jobs. all a stern for us. specifically my concern goes to the young in america, the youth.

age 16 to 24. the unemployment rate is i think 24%. really high and it is this time in a young person's life they learn skills to show up on time, follow directives of your boss. all life skill that is we use to probably, you know, move up the economic ladder. i don't know. i had to bag groceries at the iga. i don't know if you had a minimum wage job. i did. if we increase the minimum wage for young workers, maybe from, you know, $7.25, if we got them up to 12, 13 bucks an hour, 15 bucks an hour, would that help create jobs for them in your opinion? >> i think standard economic theory suggests that changing the minimum wage has two effects. it raises the incomes of those people who get the higher wage and have jobs and it may to some extent discourage job creation. and there are a variety of different studies on how large that effect is. some of them suggesting that it's small but others taking a

different view. >> so those that keep the jobs get a little better wage but not create jobs, may cost jobs. is that right? >> that's what a range of studies suggest. >> thank you. >> the chair recognizes gentleman from michigan, mr. peters for five minutes. >> thank you, mr. chairman. and chair yellen, first i would like to congratulate you on your historic nomination and your confirmation as the fed chair and thank you for appearing with us here today. and being so generous with your time. it is not easy to be in the so-called hot seat for as long as you are. thank you for doing that. we appreciate it. >> thank you. >> new data came out showing that two years after the korea-u.s. free trade agreement was passed we have now a record trade deficit with korea. in fact you are orks trade deficit with korea increased 56% since 2011 which was the year before the trade agreement took effect and without question this

certainly hurts american manufacturers and american workers. congress i believe can't ignore the impact of trade pacts on our free trade. i oppose fast track authority unless that agreement includes very strong enforceable mechanisms or currency manipulation. i have serious concerns that china is included while maintaining the most closed auto market. the yen recently hate five-year low against the dollar and today's monetary policy report notes that the dollar has appreciated sharply against the yen since october. it's estimated that the recent fall in the yen puts roughly a $2,000 per export vehicle into the pockets of japan's automakers. now, i don't need to tell you every country has a right to have -- conduct sound monetary policy, but it is increasingly

interconnected global policy, facilitating the direct manipulation of currency i believe cannot tolerated and white's argued the policies are not direct intervention, i believe it's unsustainable when japan can no longer continue the policies, i think you'll see a revision to direct currency, interventions, policy that they have used as late as 2011. so, madame chair, it certainly -- i think it can be argued that the fed's quantitative easing program helped manufacturers, boost exports and the ability to compete abroad. however, i'm curious to know if you believe that japanese monetary policy potentially weakened the beneficial effects of the fed's quantitative easing program for american manufacturing sector and for middle class families. >> so, i would say this is a topic that the g-7 is considered

in generally come to the conclusion one that i agree with, that countries should be allowed to use monetary policy to pursue domestic aims. certainly, not to target the value of a currency or to attempt some improvement in their competitive situation. but to address broad macroeconomic concerns. japan has had almost 20 years of deflation. mild but chronic and debilitating deflation. and i think it's natural and logical that after such a long period of deflation the government and the bank of japan should want to put in place a set of policies to end that. as you said, in a global economy, economies are

interconnected. monetary policy does have exchange rate impacts. i see the bank of japan's policy is intended and at least it looks favorable for now. seems to be moving inflation out of deflation territory. and toward their 2% objective. to the extent that the policy is designed to stimulate domestic demand and it looks like it has raised growth in the japanese economy, of course, they have continuing problems and the need for, you know, to put in place policies to address their high debt and budget deficits, but to the extent that they're successful and japan grows more quickly, i think that will be something that will read down to the benefit of japan's neighbors if japan has stronger domestic

spending, growth, there will be benefits throughout the global economy. but there are exchange rate implications of those policies, as well. >> certainly, if they have closed markets, even if you have stronger domestic markets and not allowing american autos, for example, to be sold in japan, it's a detrimental impact. my question was on the impact to the united states. might be good for japan but it's bad for the united states. >> gentleman's time. the chair now recognizes the gentleman gentleman in south carolina. >> thank you, mr. chairman. >> with the microphone on, for five years. >> chair yell b, it appears that the fomc had at least two special hearings over the course of the last several years regarding the debt ceiling. we have the minutes of the october 16th meeting. it says the staff provided an update on legislative developments baring on the debt ceiling and the funding of the federal government. markets and aspects of the

processing of federal payments. end quote. that falls on a similar meeting in august of 2011 where the notes reflect the following. quote, the staff provided an update on the debt limit status, conditions in financial markets and plans that the federal reserve and the treasury had developed regarding the processing of federal payments. both of the minutes that we have from those meetings contain similar language then on the conclusions that the committee received from the staff and amongst themselves regarding the debt ceiling status at this time. i'll read you the minutes from 2013. quote, meeting participants saw no legal or operational need to make changes to the conduct or procedures employed in desk operations such as open market operations, large scale securities processing or the operation of the discount window. they also generally agreed that the federal reserve would continue to deploy prevailing

processes. end quote. in light of the fact of at least two hearings where the technical aspects or the plans regarding the processing of federal payments have been raised and the conclusions of both of those that it would not materially impact the conduct or procedures of the fed, a simple question, is there a contingency plan in place, the making of federal payments in the event the debt ceiling is not raised? >> not to the best of my knowledge. >> then i'll ask you, miss yellen, thank you for that. in the 2011 minutes, which read, the staff provided an update on the debt limit status, conditions in the financial markets and most importantly plans that the federal reserve and the treasury had developed regarding the process of federal payments, what were those plans that had already been developed as of at least august 2011? >> i mean, we're discussing very technical issues connected with the payment system, for example,

would the treasury put through in the morning ach payments that they might not have sufficient balances in their account to pay. >> what would happen in such a circumstance? >> well, in such a circumstances, if they did that, banks would receive instructions in the morning to pay customers amounts that the treasury wouldn't have in their checking account to make good on and so their checks would bounce leaving those institutions in a very difficult situation rye the plans referenced in the 2011 hearing in writing? >> there are briefings that staff made to the federal open market committee when we met, when we met about what our plans

would be in terms of the responsibilities -- >> i understand that but are the briefings based upon a written document? are they based on some verbal history at the fed or the treasury or a written down plan on these payments? >> to the best of my knowledge, there is no written down -- >> given the fact of a plan to have a great deal of impact on calming the markets in the face of a debt ceiling difficulty, do you think it's a good idea to develop a contingency plan for prioritization of payments in the event the debt ceiling is not raised? >> that's a mat they are's entirely up to the treasury. that is not the domain of the federal reserve. >> but you have -- you perform the functions for the treasury through the new york fed, don't you? >> with the fed's fiscal agent. >> if they asked you to do it, could you? >> it is not up to us for a plan concerning what bills would be paid. >> if the treasury asked you to create a program to put into

place through the new york fed could you do it? >> i don't know that we could do that. >> do you think it would be a good idea to do that? >> treasury submits to us every day a set of payments to make. >> i understand. let me finish with this, plisz yellen. we have asked for the records from the fed, specifics related -- identified in the meeting from the new york fed. the new york fed told us we can have have them until they get permission to give them to us from the treasury. in light of your earlier comments regarding fed independence, are you concerned about having to ask the treasury for permission to given information to congress? >> well, the federal reserve acts as the treasury's fiscal agent and in that case we take instructions from the treasury and are merely abouting as their agent. that's one of our rules to serve as the fiscal agent of the

treasury. >> the gentleman's time -- >> it is not a monetary policy rule. >> thank you, ma'am. >> the chair recognizes the gentleman from delaware, mr. carney for five minutes. >> thank you, mr. chairman. thank you for the opportunity to ask some questions of the new chairman the fed. welcome. thank you for coming. i know it's been a very long day. we do appreciate your coming twice a year as part of the humphrey hawkins act testimony and we appreciate your report. i have found these meetings very useful with your predecessor, chairman bernanke and asked him each time this question which i'll ask you which is, when's the most important thing we can do -- we talk about our focus on creating an environment where businesses can be successful and create jobs. what's the most important thing we can do within our purview to help there? we have this debt ceiling clock that, well, it is not running right now but it's been looming

over us. a couple of things. in your mind that congress should be doing or could be doing? >> it's congress's job to put in place legislation that best advances the, you know, economic development of the country. there are broad array of -- >> what are those kinds of things? one of the thing that is frustrates me is the fact that we have been unable to reach agreement across the aisle on a meaningful fiscal plan, you know, that gets our longer term liabilities under control and makes the kind of investments in the short term that are important for future economic growth. do you have any comments there? >> i would agree with that. i think that's one of congress's most important responsibilities. and my predecessors and i have all emphasized the importance of

putting in place budgets that are responsible, not only for from a short term but particularly from a long-term perspective when we look at the cbo 75-year projections and see an unsustainable debt path. that's a great concern. >> i mean, that's the one thing your predecessor used to -- he was kind of unwilling to give us policy advice which i think is probably appropriate, but he would always say that the focus maybe ought to be on doing the things, frankly, that are harder in terms of getting particularly health care liabilities over the long term given the demographics and aging of our policy. your thoughts on that? >> i completely agreet with that. the combination of demographics and aging and a health care trend that's been in cost trend that's been outstripping other

prices in the economy is what leads to long-term deficits and debt that's unsustainable and so want to give advice on how to deal with that, but this is something -- >> deal with it, right? >> you have known about for decades and i think it's important to do so -- to deal with that. >> so one of the fed governors in here last week and talked about systemic risk and one of the pieces of unfinished business from the near financial collapse is what we have or haven't done with respect to fannie mae and freddie mac and housing, mortgage finance reform. you're buying $85 billion a month of nms. do you have any advice to us as to what to do there with respect to housing finance reform? obviously, a very important part of the economy and -- >> i think the time has come. i hope that you will deal with reform of the gses.

and there are a variety of different ways to do it. but i think the government should make its role and intended role -- >> more explicit. >> and make sure that whatever entities are set up to deal with housing finance that they don't create systemic risk to the financial system. >> all right. >> mortgage market is highly dependent on fannie and freddie at this point to provide credit and uncertainties about what will happen with them i think is probably some resolution of that's necessary to get private capital back in the sector. >> so is it your view that some more explicit federal guarantee is important for the liquidity and mortgage markets? >> i think there are an array of

the possibilities to take and the role of the federal government will be in the hard times in the housing market. and it's simply important for congress to decide what you want to do here and to do it in a way that doesn't create systemic risk. >> my time is running out. i want to again congratulate you on your new position and thank you for your time. >> thank you. >> the chair recognizes the gentleman of florida, mr. ross for five minutes. >> thank you, chairman. thank you, chair yellen, for being here and endurance in agreeing to be here to take questions from all of us. i don't envy your job because it's quite a balance. i mean, your monetary policy has to make sure we not only allow for liquidity in the markets at a affon affordable rate and make that there are those reliant upon investment income, seniors predominantly, whose savings accounts can survive in this environment. and when your predecessor was

here before, chairman bernanke, he talked about the affect on the seniors who have fixed incomes and aren't concerned about home appreciation. more concerned about cd rates, savings accounts because that's their livelihood, their income. can you comment at all of a hope or suggestions of seniors mine back home on a fixed income, dependent on not zero interest rate but a return on the investment as being able to allow them to live an affordable life? >> so i know that this is a difficult situation for seniors in that position. and i would simply say that our objective is to get the economy moving and into a state of full recovery as rapidly as we can and when we've accomplished that, rates of return will come back to more normal levels. >> do you feel that -- >> and you'll see higher returns tie reduction in the asset buying, do you have that may have a positive impact on some of the fixed income account?

>> i would say the reduction in the asset purchases in part reflect importantly reflect your stronger economy. we see an economy that's now meaningfully recovering. the labor market improving. and as that process plays itself out, i think seniors can look forward to higher interest rates is our objective. >> let me quote you something. there's a commentary in "the wall street journal" recently by e.s. browning and kritds if you don't invest in u.s. stocks, the thinking goes, where else are you going to invest? developing countries are unstable. europe is struggling. cash and high grade bonds offer the tiniest of yields. hedge funds are struggling. the fed is determined to get people investing again keeping rates down and taking risks. anyone who refuses to buy stocks in other words is fighting the fed. so, i guess my question is, it seems that the fed's policy

affecting the seniors and all investors and should we be concerned about families trying to save for college education because now they're risking or investing in morris i can options? is that what we see to come? >> well, interest rates are low. and they're low not just because the fed arbitrarily decided to set them at a low rate but because the fundamentals of the economy are generating low interest rates that normally we think of interest rates as reflecting the balance, a balance between savings and investment, the strength of those forces in the economy. and in the aftermath of the downturn, the desire to borrow money for private investment is weak. and reflection of that is low rates. if we were to try to keep interest rates above the levels called for by fundamentals, we

would have a yet weaker economy. it would be harder to get a job and the children -- >> aren't we always limiting -- >> retirees coming home even more than they already are to live with their parents and grandparents because they would find it even more difficult to get jobs. >> but haven't we already limited the investment opportunities? has not the fed policy already limited investment policies for many out there other than leaving for high risk investments? >> in an environment of low interest rates, there is an incentive to move to higher yielding investments and it is important for the recovery of the economy that people be willing to take some moderate risks. >> let's ask you about the siffis. there seems to be confusion of the process involved and constitutes or designates but there must be some methodology involved. so if a firm is hypothetically

speaking designated, is there an action to take to be removed from that designation? >> absolutely. it's an important, important for them and they have the opportunity to have very serious consideration or -- before the f-soc and to protest the status and have it reconsidered. >> time of the gentleman has expired. the chair now recognizes the gentleman from illinois, mr. foster, for five minutes. >> well, thank you, mr. chairman. congratulations again chairwoman yellen. >> thank you. >> i'd like to speak for a moment and ask you a couple of questions of cross talk between wealth intuition and offshore capital flows and not usually captures in the macroeconomic model that is you get guidance from but i believe it's an overlooked effect. it is well-known and appreciated that the middle class as a much lower propensity to consume than

high net worth individuals and so that policies that exacerbate the concentratikonconcentration reduce comp sumpgs ansumption a relevant fact and less appreciated is what i believe is the increase propensity of high net worth individuals to move their money offshore. you can see this hurting china where the top 1% that owns the big fraction of that country is frantically moving their money to safer locations but i believe it's also true from what i've been able to dig up and also true that high net worth individuals in north america move their money offshore with, you know, roughly a third of their investments actually go offshore. this, for example, may be an important explanation of why, for example, the bush tax cuts made no jobs. it did affect the wealth distribution but instead of

reinvesting that money onshore, it was reinvesting offshore. i'm just wondering. first, when you look at macro models for guidance, do you look at the wealth distribution and the affects on consumption and offshore capital flows? >> well, in terms of consumption is very important. in terms of our forecasting. and so, we're constantly trying to understand what the forces are that determine consumption and its growth over time. we have looked to see research has been done and the fed and outside the fed to try to see if we can identify differences, systemic differences in marginal propensities to consume across different income groups and i would say the evidence on that, well, certainly aware of the hypothesis that you put forward. i'd say the evidence is not

crystal clear but certainly -- >> in the case of consumption -- >> -- have made the argument that you expressed that shifting distribution of income has reduced consumption and made it harder for the economy to grow. >> i'd like to have you look and in addition to continuing to looking into that which i believe is fairly widely accepted and look at the flows because i think it is a large effect and both -- i think both parties tend to have a one country model in their minds when they talk about changes in things like tax policy an it's more complicated than that. let's see. secondly, you'd mentioned earlier in your testimony a secular shift in the labor market. i was wondering if you think or have been considering what we may be seeing as a secular shift in the housing market and i'd also like to congratulate you on

the increasing attention paid to the housing in the report and i think we all learned that the housing market was a very big dog in this fight. but what i hear from realtors more and more is that younger kids or, well, what i think of as kids now less interested in -- you know, they grew up looking at tv screens, they know longer want a riding lawn mower and a big house in the suburbs and the fraction of the investments made in housing may be going down over time. and when you see the big what looks to me like a secular shift. i guess page 16, plot 27. the big shift in the housing starts. that we may be actually seeing a secular shift in that. and i was wondering if that's a sort of thing you track because it has big implications if that's the way things are evolving in the country. >> we are looking at that. household formation has been very low in part because of the weak economy but to the extent that this shift that you have

described exists, we're certainly seeing robust activity in multifamily sector that if people want to live more in apartments, though not single family housing so much but if they don't want to own homes, and there's a shift in that direction, it may give growth, give rise to a greater growth in rental properties than in single family housing and we are certainly seeing that pattern in the recovery. >> i just like to encourage you. despite your history and the banking business to pay a lot of attention to the real estate markets and their health. >> time of the gentleman expired. the chair advises all members there are votes currently takes place on the floor. the chair recognizes two more members and recess the hearing. the chair recognizes the gentleman of north carolina plt pettinger for five minutes.

>> thank you, mr. chairman. chair yellen, i would make reference to your testimony that you stated that the growth in consumer spending was restrained by changes in fiscal policy. given that a broad tax increase was part of that change in fiscal policy, it seems that reversing some of those tax increases would spur dwroet and consumer spending. would you agree with that? >> well, i mean, the payroll tax -- >> yes. >> -- cut was ended at the beginning of the year. and taxes went up on a hiring households. >> that's right. >> and so, that cut into the growth of consumer spending. that's what we're trying to say there. >> exactly right. so then would you believe that if we were reverse some of those tax increases that that would spur the growth in consumer spending? >> that if you were to reverse them that they would spur growth?

>> yes. reverse the tax increases. >> well, certainly. >> thank you. madame chair, the fed proposed a rule for comment in december to implement the dodd-frank act limitations and the fed's 13b emergency lending authority. chairman hensarling wrote to express his concern and i just want to ask today for your commitment to give a letter -- to give this letter your personal attention and to provide a subs instantive response to that letter before the rule making comment period closes out. and to also provide an opportunity for the other members of the board to similarly provide their individual views of this letter. would you do that on our behalf? >> we have put out a -- i want to make sure i understand what you're saying. we have put out a proposed rule to implement what's in dodd-frank on 13-3. >> 13-3.

>> we very much welcome comments on that and we'll take them into account when we come out with a revised proposal hopefully a final proposal. >> chairman hensarling wrote a letter to chairman bernanke and in the letter he wanted to give a commitment and that for a substantive response to that letter. would you look at the letter of chairman -- >> we certainly will but as i understand, it's submitted as part of the set of comments on -- during the comment period on 13-3 and we will collect all of the comments and then consider -- >> would the gentleman yield to the chairman? >> yes. >> since the chairman's name is being used here. madame chair, i have sent a letter to your predecessor. we have concerns about the 13-3 rule making. we have waited for three years and what we see now is a rule that largely parrots the language of the statute

illuminating essentially very little and so the letter goes into much greater detail about our concerns. given i wrote it to your predecessor, i would be happy to write it to you. if not, if you would give it to your personal attention. i thank the gentleman from north carolina for yielding to the chair. >> i will do so. >> madame chair, just a minute or so we have left, regarding the volcker rule, five agencies involved and talked some about this already. but in this rule, there are different positions taken by these agencies that provide for a different perspective and right now the rule that they have adopted that they have consistent point of view. what formal or public coordination can you commit to in the future where they would not agree? >> well, we tend to coordinate and plan to do so very closely with the other financial regulatory agencies. we're accustomed to working very closely with them.

and i think more broadly, we will try to cooperate and ensure that there is a similar approach to implementing this rule with the s.e.c. and cftc, as well. >> it's a burdensome challenge, i'm sure. but we did see a recent report of the cbo we lost 2.5 million jobs through obamacare. has the fed done estimates of job loss as a result of dodd-frank in the economy and could you give us a response if you anticipate that looking into that? >> i think it's very difficult to estimate in total what the implementation of dodd-frank will mean. on balance i feel that dodd-frank was passed to make the financial system safer and sounder and to avoid -- >> do you think it's worth that review to see what job losses occurred? >> well -- >> the time of the gentleman has

expired. the chair now recognizes the gentleman from michigan, mr. kildee for five minutes. >> thank you, mr. chairman. thank you, chair yellen, for being here and i know others have said this but having a daughter and a granddaughter who will now grow up in a world where the president of general motors is a woman and the president of the fed is a woman, it's something to celebrate. >> thank you very much. appreciate that. >> i wonder if you'd comment briefly. later today presumably the house will vote to extend for another year the nation's debt limit to ensure that we meet the obligation that is we have already made. i wonder if you might comment on what affect if any you think positive action by congress on the debt limit might be, and i know your staff loves it when you speculate. if you might speculate on what the affect of the failure of congress to take that action before the february 27 deadline or date set by the treasury

secretary might have on domestic and global markets. if you could just make comment on that subject. >> i think fiscal policymakers should never put our nation in a situation where there's a risk of defaulting on the federal debt. it would be an extremely destructive thing to do from the point of view of our economy, of our financial markets, of global financial markets and even in the run-up to the last debt ceiling crisis, we could see the beginnings of market participants beginning to worry and protect themselves and to take steps even in advance of that limit coming in to place that could cause us financial problems in the financial system. so, i believe, frankly, it would be catastrophic to, you know, to not raise the debt limit.

>> thank you for that. that's good guidance and i hope that members of congress on both sides of the aisle will listen closely to your thoughts on that. i wonder if i might take a different tact for a moment and ask you, in the report that you supplied, you do make reference to labor markets. particularly in the context of the duel mandate of the federal reserve, i wonder if you would comment on two points. one, you make reference in the document to the length of time that those who have been out of work, basically the long-term unemployed, long-term unemployed have had on the economy and then you make reference also to the fact that while productivity over the long period has increased recent gains in wages and real wages have not kept up with productivity despite the fact we have not seen productivity gains recently and over the long term we have certainly seen gains far in

excess of what we have seen in real wages. why are those two factors important in terms of mandate of the federal reserve? >> well, the fact that we have very long spells of unemployment, almost 36% of those unemployed who are in very long spells of 26 weeks or more really suggests that the job market is not strong enough to be able to provide people with jobs who want to work which is roughly our -- another way of waiting what our employment goal is. and so, it's a mark that there's a great deal of slack in the labor markets still that we need to work to eliminate. the fact that wages have not kept up with productivity for the last number of years, we have seen a shift in the distribution of income where away from -- what's called labor

share and more towards capital share. and i think it's not fully understood what accounts for that trend, but it is a disturbing trend because it suggests that works aren't, even though they're more productive, their wages in real terms aren't keeping up with that and so it is a very worrisome trend from the point of view of living standards. >> i think both are important and i'm glad you included them. certainly congress and other policymakers have to consider is e i affect of long-term unemployment especially on those not employed and wages not keeping up with productivity and a minimum wage to put a family below the poverty wage is something that's not sustainable. and i wonder, just before i close, if i could follow up with you some point in time. i pursued this line of questioning with your predecessor. the effect of fiscal insolvency in the american municipalities

is a major issue and could have a real threat on the overall economy and certainly like to engage the fed in the question. i think it's something to take on. >> time of the gentleman has expired. the chair will declare a recess pending the conclusion of floor votes. the committee stands in recess.. >> let me echo the congratulation to you, chair and thank you for coming today and spending your day with us. chair yellen, we've seen the fed take a leadership roll and exercise its authority to demonstrate significantly

financial firms. we have not seen any transparency on how the process works. dug your confirmation hearing you committed to the senators that you would provide more transparency in this area. what have you done to make that process more transparent and will you commit to demanding that the fcop provide that with a clear indication of what they can do to ensure that they will not be so designated? >> let me first say that my first meeting is on thursday so i haven't been very involved to that point. but the fsoc has come out with this set of criteria, metrics that they tear using when they consider designation. when they have designated firms, i think they have provided their

web side is full of information on those firms and the analysis that was done in connection with designation. certainly if fsoc decides on additional criteria or uses other criteria, develops other metrics, i think it's completely appropriate that they should be made public so that the public understands what the criteria that are being used. and in that sense i certainly will support having fsoc provide the public with adequate analysis both of the criteria that they're using for designation and the analysis that they have done that supports the decision to designate particular firms. and i should say that those firms have many opportunities to

have hearings before fsoc. it's obviously very important to them, designation, and they are given extensive opportunities to appear before fsoc groups and question analysis. >> thank you. i want to talk a little bit about stress testing. you previously expressed your support for stress testing banks using extreme worst case scenarios. wouldn't it also be appropriate to stress test the feds exit strategy for qe to assess the exit strategies affect on the fed's ability to maintain its mandate, and how increases in the federal funds rate might impact a relationship between the government's relation with trade allegations and.

i'm looking at a commitment of what's going on with the fed and a withdrawal from the qe. >> we of course do extensive analysis of our balance sheet under both scenarios, about who exit would look like and alternative interest rates scenarios. and an update of a paper by a fed staffer by the name of seth carpenter and his colleagues came out in september and provides a great deal of that analysis. it shows, for example, what would happen if there were an increase in interest rates of a couple hundred basis points higher than what markets are assuming to be most likely. and that of course is important analysis and we've purposely put it in the public domain. but i must say that our ability you refer to our ability to

achooe our dual mandate. i see no reason why our ability to achieve our dual mandate or to conduct -- >> one of my concerns is i consider it the effect that qe has had on the bond market. have you considered, you know, the value of the securities held by the fed, what would happen in the event of an interest rate spike, you know, for example, what if the securities held by the fed dropped by 2%, the value of them dropped because of interest rates going up? >> that's exactly what we have looked at eni would urge you to have a look at the carpenter paper where we analyze what the impact would be on our balance sheet and our remittances. >> time of the gentleman has expired. chair now recognizes the gentleman from ohio, five minutes. >> thank you, mr. chairman. chairwoman yellen, thank you for being here.

congratulations on sort of your wreck breaking appointment to be the chair of the fed. i want to thank you for your time today. i want to thank you for your candor. i think your answers have been very honest and you haven't tried to pull any political punches. you've just told it like it was and i appreciate that. >> thank you. >> i want to ask you a couple of questions, one about the business of insurance. as you know since the mccarren ferguson act in the 1940s, the states have really regulated the business of insurance and the federal government has had a very limited role in insurance pap and now that we have dot frank some big insurance companies are being demonstrated as important financial institutions, they come under the fed's purview. because of the limited amount of insurance expertise at the fed,

it gives me some cause for concern. and i guess i'm curious, i want to make sure you don't impose bank capital standards on insurance companies because frankly they have a different roll, their investments are for a purpose, they focus on the maturities based on their needs. so i'm really worried about the capital standards you might impo impose. and i'm curious about your timetable of making the ruling on capital standards might be and second if you'll work with industry experts and the state based regulator to get their input because they know the industry better than folk at the fed. i have lots of respect with folk at the fed but because of the limited exposure on insurance i'm curious if you'll work with those state regulators and some state insurance experts and try to defer to some of their

opinions. >> we have consulted with others with greater insurance expertise and of course we're building or own expertise as is appropriate. but we absolutely recognize that it's important to taylor rules to the specific and different business model of insurance companies. they're not the same as banking organizations. we recognize a number of special issues, including the long term nature of most insurance company liabilities, the fact that they have asset liability, matching practices, risks associated with separate accounts and so forth. so -- >> can you update me on what you think you time line will be there or do you know yet? >> i'm not certain exactly. >> maybe you can get back with me when you know. >> i can get back with you on

what the time line is. >> that would be great. >> in spite of the fact that we understand there's special want to taylor an appropriate regime, there are some limits to what we can do. the collins amendment requires us to establish consolidated minimum risk based capital and leverage requirements for these holding companies that are no lower than those that apply to insured depository institutions. >> i understand that. if we can move on because vi a limited amount of time. >> sure. >> so you referred earlier to employment and you're concerned that there are changes in employment going on, some people are moving more to part time, there have been a lot of people that have given up. unemployment stayed steady at 6.6%. but i'm worried you're using the wrong look at unemployment. shouldn't you look at u 6 for your view of what full employment is because it takes

into account underemployed and people who have given up? >> we're absolutely looking at u 6. we see for example the extent of part-time employment for economic reasons is unusually elevated. you see that -- >> it's going to increase. so i hope you'll take a look at what's appropriate. >> absolutely. >> and consider that. and i'm running out of time but the last thing i want to ask you about, you know, and you may not be able to say this because you may not want to think, anybody to think you're trying to grab power. but if we were going to redo our regulatory framework, had another chance to look at it, wouldn't it make sense to have one systemic regulator and then functional regular later regulate what you do and one that deconflicts things? we had six regulators in here last week and it's very confusing where there could be

contradictory things that different enforcers of the same rule say. you know, don't you think that would be a better way to regulate. >> so if there were pros and cons we certainly have a complex system and i would agree that sometimes coordination is somewhat challenges. >> chair now recognizes the gentleman from florida, mr. murphy for five minutes. >> thank you for sticking it out for us. t many of us assign responsibility for low interest rates and lax capital and leverage standards to the federal reserve and then chairman green span. i do not believe the fed caused the crisis its policies certainly helped fuel the bubble. in 2009 you said that the

interest rates may have slowed the growth. would measures to slow the housing bubble have been appropriate? >> i mean certainly the collapse of housing and the bubble were devastating and at the heart of the financial crisis. so of course, yes, with the benefit of hindsight, policies to have addressed the factors that led to that bubble would certainly have been desirable. i think a major failure there was in regulation and in s supervisi supervision. and not just in monetary policy. so i would say going forward while i certainly recognize and my colleagues do that an environment of low interest rates can, we can't take

monetary policy off the table as a tool to use to address it, it's a blunt tool. and macro pru dental policies, many countries do things like impose limits on loan to value ratios, not because of safety and soundness of individual institutions but because they see a housing bubble form and they want to protect the economy from it. we can consider tools like that. and certainly supervision and regulation should play a roll in their more targeted policies. >> would you be willing and open to pushing to policy to prevent another catastrophe? are you seeing any bubbles out there now? anything you're concerned about? >> nothing is more important than avoiding another financial

crisis like the one we've just lived through. so it's a priority of the federal reserve to do what we can to identify the financial threats. one approach we're putting in place is simply to build a financial system that is much more resilient to shocks. the amount of capital in the largest banking organizations has doubled. we do have a safer and sounder system. and that's important. but detecting threats to financial stability, we are looking for those threats. i'd say my general assessment at this point is that i can't see threats to financial stability that have built to the point of flashing orange or red. >> okay. >> we don't see a broad base

rapid or credit growth, asset prices generally do not appear to be out of line with traditional metrics. but this is something we're looking at carefully. >> i've got about a minute left. wall street reform therefore enhance supervision. is asset size alone the best way to measure a bank's systemic importance? >> no. we have a whole variety of different metrics and we strive to differentiate within that category of 50 and above and the largest banking organizations. for example, we have singled out the eight largest bank holding companies for higher capital requirements, supplementary leverage ratios, those things do not apply to the $50 billion banks organization.

we are trying to ta ix lor our regulations within that category and certainly below it. >> can you touch briefly on your efforts of the examination process that you're doing with the smaller community banks to make sure that you get the right information but that you're not burdening the community banks, some of your efforts? >> first of all, we formed a new organization called -- it's a council of community banks that we meet with four times a year to understand their concerns and we have a special new committee of the board to focus on issues with community bank supervision. so we're listening and we're trying to be very sensitive and attentive to those concerns. >> time of the gentleman has expired. chair now recognizes gentleman from kentucky, mr. barr for five

minutes. >> thank you madam chair. congratulations on your appointment. thank you for your generosity with time, particularly for those of us who are at the end of the line of questioners. madam chair, you have stressed in your written and in your verbal testimony here today the feds statutory mandate of maximum employment. should the injection of fiscal policy also be to maximize employment? >> fiscal policy has many different objectives. it affects the economy in a whole variety of different ways. and so i wouldn't have stated that that's the main goal of fiscal policy. but it is a goal that fiscal policy should take into account. >> last week, as you know, the congressional budget office issued this report and that

report projected that the president's health care law will reduce the size of the u.s. labor force by 2.5 million full-time equivalent workers over the next decade. that's triple what the cbo originally projected after congress passed obama care three or four years ago. in commenting on that report, cbo director elmen door f testified that it creates a disincentive for people to work and it does this where the labor force participation rate at the loiest than it's been in 35 years. the white house responded to the bad news that claiming that americans leaving the workforce was a good thing saying that these people would no longer be trapped in a job, unquote. my question to you is, is a shrinking workforce a positive or a negative development for

the economy? >> so it has different effects. i don't think there's a simple answer to that question in the cpo analysis that they focused on this not being a matter of creating unemployment, but of people withdrawing from the labor force. and there are some good and bad aspects to that. >> well, let me ask you the question this way. it's the statutory mandate of the fed to maximize employment. so why would it be a complex question. why shouldn't be the goal be equally dedicated to maximizing employment and shouldn't this concern all of us? >> well, i think the cpo recognized when they produced this analysis that the effects of this act are extremely complex. and while it has effects on

labor supply, the act also may have effect for example on the growth of health care costs and number of different impacts on the growth of economy over time to go in different directions. >> madame chair with a declining labor force, how would that impact deficits? >> i'm not sure. >> let me move on to a different subject. just as an economist and also as fed chair, as you assess the physical health of the nation, what is a more meaningful statistic to you. why would you choose one or the other? >> well i would look at the debt to gpa issue both currently in its projected path of time under assumptions that current policies continue. i think you can't assess the debt of an economy and how if

you were looking at the debt of a house hold you would need to assess it to know what the house hold's income is, what's bearable or serviceable level of debt given the income of the house hold or the economy. what's important here is that according to any projection, particularly the cbos over a longer horizon, the u.s. debt is unsustainable. >> i appreciate your comment and your testimony there. i introduced legislation that would preplace the existing debt ceiling law with a new debt ceiling that ties debt to -- that ties to new ceiling to a declining debt of cpo ratio. one final question. i often hear the argument that quantitative easing lowers the cost of the government and market for treasures. is there a reason to be concerned that qe crosses the

line from monetary policy because it affect -- >> not many my opinion. i believe that the fed is focused on its plan date that was given to it by congress, namely maxable sustainable employment and priceability and i think you should hold this ampable to meeting those goals. >> the time of the gentleman has expired. the chair now recognizes the gentle lady from ohio for five minutes. >> thank you, mr. chairman and ranking member. first let me say to you chair, chairwoman, madam chair, that i certainly join my colleagues in congratulating you and to also say it is quite an honor on this historic day for me to have the opportunity to pose questions to you. my first question is somewhat similar to congressman meeks and clay as they talked about diversity and minority

participation. certainly as you and your staff will know in the 2013 gao report it talked about the decline of diversity representation but on a very good note, when you look at what it did to create omway, that is an avenue that will allow women in minority to be more included not only in supplier development but also in policy making. thanks to congresswoman waters, she has allowed me to opportunity to meet with the directors throughout your area. so my question as it relates to that is, how will you help to promote and to elevate omwee at all of the divisions. >> the divisions at the federal reserve? >> yes. >> we have a very active program

intended to promote diversity and bring in minority owned businesses and women-owned businesses as suppliers. we've incorporated supplier diversity language into all of our contracts. we are now requiring the contractors confirm their commitment to equal opportunity in employment and contracting fair inclusion of minorities of women in the workforce. we're ingajed both at the board and federal reserve in a number of different programs to attract an increase in employment of minority in women and we're tracking our success in the board at the officer level we've increased our staff. i believe the last year for

which we have pulled data in 2012 there are seven new officer positions and six of them were minorities. and female representation in the manager and officer ranks have also increased. we're taking many of the steps including affiliations with recruiting organizations that are heavily minority based in order to improve our networks from which we can hire. and we're trying to understand what best practices are in this area and to move, to move forward vigorously. >> thank you. let me try to quickly shift gears. 23 your confirmation hearing you indicated that your agreement that insurance has unique features that make them different from banks and you

agreed that a taylored regulatory approach for insureds would be appropriate. one of the things that my constituents are asking is how could the federal reserve develop a timetable for ruling makes of them and how would you insure that the federal reserve works with the industry and other insurance experts to develop a insurance based cap pal framework. >> we have been working very hard to understand the special cha characteristics of insurance. we're personally taking our time to develop the standards so they can be tailored to the need of the industry. we're consulting with experts in the insurance industry and building our own expertise and we're committed to devising an appropriate regime that's different than that. we apply to banks and that

recognizes their special features. i'll say again, though, that the collins amendment is constraining in terms of what we can do can capital requirements. >> let me just end by again thanking you for being so generous with your time today and having such stellar answers. i am a big fan of when women succeed america succeeds. and you are certainly setting the light for women across this nation. thank you. >> time of the general lady has not quite expired but it has now. chair now recognizes the gentleman from arkansas, mr. cotton. >> ms. yellen, thank you very much for staying all day with us today and congratulations on your recent confirmation. >> thank you. >> at a hearing with your predecessor, mr. bernanke, my mother sent me an e-mail during the meeting.

she's a retired schoolteacher and my some said tell mr. bernanke that we would like more interest on our savings. this is that i hear from my constituents in my rural arkansas district. they are prudently investing in things like cds and money market accounts and falling behind because of the low interest rates of the last five or six years and feel that it would be unwise to invest in riskier assets that are more suitable for younger people. i had some questions about that but i think maybe the best way to raise them is through this video that retired navy commander has made expressing some of the aim concerns. >> my name is joe. i served in the navy from 1960 to 1983 with three combat tours to vietnam, '68, '69, '72 and

the israeli war in '73. i developed defense electronic systems for 25 years. now semi retired i use my experience to help other companies grow and to supplement my retirement income. we have three children plus a foster daughter from vietnam and nine grandchildren. in retirement our financial obligations include ourselves as well as our son, 52 with down dre syndrome living with us. and our daughter and high school age granddaughter in another state as our daughter lost her job and apartment in 2007. i am still working at age 76 because our family savings ravaged in the stock market crash. now having recovered most of our losses there's a talk of another

bare market. at age 76 it is very stressful to endure the fed's easy money policies. our retirement savings will not be restored until i am age 83 assuming i can continue contributing to our retirement accounts. perhaps then i can retire. chair yellen, many seniors who are living on fixed incomes are suffering. when chairman bernanke was asked about these concerns, he always changed the subject to talk about younger workers or home prices. what will you do to address our concerns and will you commit today to attend a town hall meeting of retired seniors later this year to hear from folks who share these concerns? >> i can't ask it any better.

>> well, they're very well expressed. of course they are very valid concerns and i would like to see retirees earn more on their safe investments. i believe that if we get the economy back on track, after all interest comes from earning returns on investments. even in a bank the bank tends to pay more for deposits and pay higher interest when its investments are fairing better. and in a stronger economy that will be more possible. so i would very much like to see interest rates go up. he did note that he has a daughter who lost her job and i think it's also important to remember that an individual who is a retiree also has children and grandchildren, his daughter

lost a job. we're trying to make it possible for his daughter to regain employment and for the grandchildren when they graduate from school to enter a healthy job market. you also noticed -- >> can i reclaim my time which is running out. in the meantime focusing specifically on the seniors who do depend on the fixed income instruments, is the harm caused just an unnecessary air by product of the federal rereceivers policy? >> congress assigned us the objectives of maximum employment and price stability. we're not at maximum employment, inflation is running below or 2% longer run objective. so i would say that those conditions dictate an accommodative policy. >> to call up on a town hall invitation, they would love to have you in hot spring, arkansas and i would love to host you. >> thanks for the invitation.

>> chair now recognizes the gentleman from washington. >> thank you so much for being here today. i've heard several adjectives attached to you, not very flattering unexcited. >> that's good. >> to which i would like to add possessing an extraordinary amount of stam ma. >> thank you. >> the gratitude is all ours. >> thank you. >> as has been noted your current policy is to purchase treasury and mortgage backed securities and that's been going on for a while. in your report i note that you even call out the fact that mortgage rates are probably lower than they would have otherwise been as a result of this policy. >> yes, i think so. >> so are you considering targeting other sectors of our

economy? >> i wouldn't say that we're targeting. housing is a sector of the economy. sit an important sector. in the past it has contributed a good deal to recoveries and it would be nice to see housing get back on its feet. it would contribute to the recovery. but generally i'd say our policies are designed to lower longer term interest rates on a broad range of private assets. mortgages, yes -- >> so, chair, that begs a couple of observations and questions. one, why would you call it out in your report if you weren't targeting it? secondly, are you saying that it would not have been possible to lower overall interest rates by just lowering the -- or just by purchasing treasuries? >> i would say that by purchasing treasuries we would

bring down interest rates throughout the economy, not only on treasuries, on mortgages as wellment. >> okay. then -- >> probably we have slightly bigger impact on mortgage rates by buying mortgage backed squurts. >> with all due respect, if it walks like a duck and quacks like a duck, that seems to me there's some targeting going on. here's where i'm going. >> okay. >> i have long wondered why it is that the fed couldn't target another sector of our economy that cries out for it and that's investment and infrastructure. in fact in the 1970s, as has been noted in the committee, the fed purchased the bond that helped build metro. i know there's a precedent that that occurred. true statement, madam chair. and the fact of the matter is that the evidence about our infrastructure deficit, the

evidence of what kind of increase in both short term and long term jobs would be created it seems to me is as strong a case as it is for targeting mortgage backed securities. what would you need in order for the fed to positively consider doing this again, as occurred in the 1970s? >> well our desire is to stimulate interest sensitive sectors of the economy pushing down interest rates does that. our authority, at the best of my knowledge, at the federal reserve is to buy government and agency back debt and nothing else. >> so if we had -- >> i'm not aware of any authority that we would have to buy, you know, for example i'm not sure what kind of bonds you're talking about. but we buy government and agency

debt and the evidence that is so strong in favor of the role of improved infrastructure oath short-term and long-term. why wouldn't you put one of these large number of people to work at what we have to do. what would we have to be able to purchase bonds? could you just work with banks in some kind of direct way where you backed their purchase of

infrastructure baonds? >> the time of the gentlemen has expriored. if this are members that are not presentee in the hearing room that are listening not withstanding the chair's generous offer to stay, it has been quite some time after votes on the floor, it is my intention to excuse the votes on the floor after 4:00. chair, thank you so much. i only make the point that there

are limitations to put americans back to work and improve the economy. if we could describe what we should do to lower the unemployment rate, to put our economy on the right trajectory, what would it be? >> are you asking me what more broadly could be done? >> yes. >> congress could consider any number of measures. >> like what? >> training measure s job creation measures a number of measures to deal with the skills gap and other factors that are related to stagnant real wages in the lower part of the income distribution. >> what about public investment?

>> it is a possibility that congress could consider as well. >> would that help the policy that congress can't reach? there is more that congress can do depending on what congress's priorities are. >> thank you. >> gentlemen yields back his time. i want to thank chair yellin for her generous cooperation with this committee today. we thank you for your stamina. you may have to use it on thursday as well. i understand that you will be appearing before the other body. again, we thank you for your testimony. we will excuse you at this time. the chair will declare a five

minute recess coming up next the house debate and then we hear from janet yellen. a look at the privacy and civil testifying ond government surveillance programs and data collection. that is on c-span. i think every first lady brings their unique perspective to this job. if you did not, you could not live through it. i think, to the extent that this came natural to me, at any level, i would never thought that living in the white house would feel natural, it is because i try to make it me. i tried to bring a little bit of

michelle obama into this, but at the same time, respecting and valuing the tradition that is america. >> watcher program on first lady michelle obama on our website www.c-span.org. life monday, we conclude our series with a special to our program looking at all of the first ladies from martha washington to michelle obama. the context here is that lee enjoys a reputation in the modern-day as someone who accepted resignation to the situation. as ahas always struck me sort of series that doesn't add up, and a sense. we are told that he counseled submission. but we know that the south did not simply submit to the political will of the north.

they contest at northern understanding of the meaning of the war and on plans for reconstruction. they protested by legal and if one means. that, in theis eyes of considerate, he would not assemble submission. he was a symbol of pride and measured defiance. lee,thinking grant and saturday night at 10:00 eastern on sunday morning at 11:00. that is part of the presidents' day weekend on c-span three. >> thousand voted tuesday to -201 -- 220 12 201. 201.1 -

the floor to talk about a clean debt limit increase, i did so to prove we could do better. it was an effort to implore my democrat colleagues in the house and senate to heed the warnings of the president's own fiscal commission, also known as the simpson-bowles commission, which clearly noted how our economy and hardworking taxpayers would suffer under the mountain of debt washington was racking up. my position sun changed. i remain as committed as ever to grappling with our debt, to making the tough decisions to reform, improve, strengthen, and protect our entitlement programs and most importantly, getting this economy back on track. so hardworking taxpayers start seing their pay-go up and those in need of a job can find one. in fact, that work is under way at the ways and means committee where we've posted for public comment bipartisan proposals to reform medicare and social security so that they're viable

for seniors and taxpayers, not only today but well into the future. regrettably, over the last three years, democrats have hardened their position. the president, senate democrats and house democrats, will not even entertain a discussion, let alone a negotiation over what reforms we can make along with a debt limit increase. they've become unyielding. democrats are totally adamant, extend the debt limit or default. that's the position of today's democrat party. don't negotiate, don't reach out across the aisle, ignore the past which clearly shows the debt limit typically passes with other reforms. mr. speaker, i remember serving when bill clinton was president. those were different times. despite our different opinions, we were able to find common solutions for the american people. we balanced the budget, reformed our nation's welfare laws and helped break the cycle of dependency by placing an emphasis on work.

today, democrats openly cheer that their law will lead to less work. i'm disappointed the democrats have walked away from the table. i'm disappointed we are not engaged in a more serious debate today. but for as disappointed as i am, i cannot in good conscience let democrat's refusal to engage lead to a default. for that reason and that reason alone, i will vote yes today. but today's legislation is hardly a solution to our looming debt crisis. that's why the ways and means committee will continue to carefully review an advanced policy to not only reform our entitlement programs providing greater protection for seniors and greater savings for hardworking taxpayers, but also policies to create a stronger economy, more jobs and higher wages for workers. it's only through a combination of such policies that we can truly solve the problem. i reserve the balance of my time. the speaker pro tempore: the gentleman from new york. mr. crowley: i yield myself such time as i may consume.

the speaker pro tempore: the gentleman is recognized. mr. crowley: i thank the gentleman for his responsible commitment to vote for this bill today. i wish i could say that a majority of his party would be responsible for -- and vote for this bill today but i cannot. seems ately, the -- it the republican party is shedding part of its tea party ideology and holding the nation hostage to meet the wants of a select few. i would like to explain what the house is and is not voting on today. we are voting to ensure that our country can pay the bills we have already incurred. not new bills. old bills. so that it's checks can continue to be mailed. so that doctors serving medicare patients will be reimbursed for their services.

so that veterans' pensions and compensation will be paid out. and so income tax refund checks will continue to be processed and paid out. and what we are not voting for, what we are not voting for, we are not voting for a bill to spend money. my republican colleagues will argue that this bill allows the federal government to continue to borrow and therefore spend more money. they say tax revenues come in and even more goes out in spending for government services and programs. services and programs that we all agree benefit our mutual constituents. so what is the alternative the republicans would offer instead? my republican colleagues would offer default because not supporting this bill would mean you support default. and defaulting on our nation's debt. default would mean taxpayer

dollars would still come into the government, we could still cleekt -- the i.r.s. would still collect taxes but no money would go out. there would be no services or programs to benefit our constituents. they'd be shut down. if you all remember how angry the country was during the republican shutdown of our government when military death benefits were not paid? that would only be magnified under a default led by the republican side of the aisle. not only would there be no death benefits, there would be no veterans' benefits at all, no money for hospitals, doctors and nurses and the default wouldn't just affect our military and veterans. there would be no funds for food inspectors, no pell grants, no air traffic controllers, or any other government service because of default. let's be clear. if you like the republican-engineered shutdown of our government, you'll love the default the republicans who

would vote no today would perpetuate on the american public. this is a debt that the republican caucus helped create. you own a portion of this debt. the american people are watching this vote. they're confounded once again that the majority of the majority will vote to default. the overwhelming majority of the minority will vote not to default. i ask the american people, which party is the responsible party? the answer is clear. the democratic party will be responsible today. we will vote overwhelmingly for this bill not to default on our nation's debt, not to raise interest rates on our constituents, not to raise the cost of money for the government to borrow either. with that, i will retain the balance of my time. the speaker pro tempore: the gentleman's time is reserved.

the gentleman from michigan. mr. camp: i reserve. the speaker pro tempore: the gentleman from new york. mr. draw lee: i would yield as uch time as the -- mr. crowley: i yield such time as the gentleman, mr. neam, may - mr. neal my consume. mr. neal: i listened earlier about the gentleman speaking about debt from the years out. that's nothing to do with the argument being applied on this floor. this is about the basic arithmetic of the credit card that arrives at a family's doorstep for a variety of costs. this is about paying for the war in iraq which i was opposed to but i believe we still have an obligation to pay for, including the one million new veterans that were created that are currently strirninge v.a. system. in addition, this is a vote about paying for the tax cuts in 1 and 203 that continued

through 2010 based on the mistaken notion, the theology that was applied suggesting that in fact tax cuts pay for themselves. this is about a turn around of a projected surplus of $5 trillion that instead became ongoing deficits and debt noted for the ill-conceived policies that many of our friends on the other side embraced. under the hubris of suggesting that you can have it all. when else in american history, when else have we embraced the idea enunciated not long ago by the former majority leader of the republican party who suggested that it was patriotic in a time of war to cut taxes. lincoln and roosevelt certainly

didn't embrace that position. you can't have it all. what was desirable by the republican party during those years was essentially this -- they were going to score political points on the issue of the debt ceiling. they were going to hold the debt ceiling hostage for isolated issues that placated a minority of the majority. now i know most of the republicans who have come to this floor today and i want to tell you, my knowledge of them is they're very responsible when it comes to budge tiering but they're -- to budgeteering, but they're caught by the minority of their majority who direct where these decisions go. the result of our last standoff over the debt ceiling, our credit was downgraded. look at the strength of the american dollar today. why is it in that position? i've never been anywhere where the world doesn't say, we honor

the american dollar. the point that i offered a moment ago is the following. they were prepared to default on that debt for the purpose of isolated, strident political views outside of the mainstream. job creation? it was held hostage. fewer jobs were created than at any time since the great depression. that is not an opinion, that's a fact. now this behavior was unacceptable and the american people said so. you pay for what you spend. raising the debt ceiling ensures that we will not be a deadbeat nation in the eyes of the world, nor in the eyes of our own citizenry. not long ago, we passed an omnibus spending bill, incidentally, because it will break down in the regular order here, the idea that we used to spend according to the 12 to 13 appropriation bills that guided us every year, known as regular order, where members had a chance to amend spending bills in committee and then on the floor, i must tell you, that's a

quaint reservoir of thought these days. now we wrap it all up and the same people that could say, well i'm going to pass the omnibus spending bill to take care of favored spending and then say, i'm not going to vote to raise the debt ceiling, the argument is anachronistic. i support this measure, having voted against the bush tax cuts, having voted against the war in iraq, having voted against most of the policies that got us into this. but this is about the full faith and credit of the united states and it should be embraced by the entirele boddy. i yield back my time. the speaker pro tempore: the gentleman from michigan. mr. camp: i reserve. the speaker pro tempore: the gentleman from new york. mr. crowley: i'm pleased to yield one minute to the gentlelady, the leader of the democratic caucus in the house, nancy pelosi. the speaker pro tempore: the gentlelady is recognized. ms. pelosi: i thank the gentleman for yielding, i thank him for his leadership on this important issue, to him, to mr. levin and the member os they

have ways and means committee, thank you for making clear what the stakes are in this vote on the floor today. mr. speaker, the 14th amendment of our constitution declares, and i quote, the validity of the public debt of the united states authorized by law shall not be questioned. that -- unquote. that has always tpwheb -- been the standard upheld and advocated by house democrats. of my conversations with speaker boehner, i have conveyed the unwavering support of the house democratic caucus for a clean bill to lift the debt ceiling. that means no goodies for one side or the other. there's nothing you could add to it that would say, ok, since it's something i like, i dent mind if it isn't clean -- i don't mind if it isn't clean. i said even if you added something i cared about a grea

deal, that our caucus cared about a great deal that does not make it right. because the full faith and credit should be unquestioned and it is not negotiable. i thank the speaker for giving us this opportunity. this is really important. to bring legislation to the floor that is consistent with the intent of the constitution and with the best interests of the american people. well, i'll tell you this, we have heard from all kinds of leaders of finance, from the boardroom, to the kitchen table. the boardroom tells us, the conference table then writes to us and says, we urge you to again take the necessary steps to preserve our nation's financial standing in the world and help ensure that the american recovery continues in its current path toward restored prosperity by the uncertainty as to whether or not we will incur an historic default in raising

the debt ceiling. i wish to submit this full letter to the record with the cigna tores who -- with the signators who represent the captains of finance and industry in our country. but more important than that, as important as that is, our global standing in the world. more important to each and every person in our country, is what mr. neal spelled out. what this means to you. . if you're a consumer with a credit card, if we did not take this action today, interest rates could skyrocket, making it harder for families to get loans, for small businesses to invest, spend and hire. again, on your kitchen table, as you pay the bills each month, you would have higher interest rates for your mortgage, your car payments, your student loans and your credit card bills. higher interest rates once again on small business loans

that are useed to -- that are used to pay employees or expand business. significant blows would come to 401-k's as a result of the stock market reaction to our not lifting the debt ceiling. credit markets could freeze the value of the dollar -- could freeze, the value of the dollar would be negatively impacted. so there's a great deal at stake in this vote today. and, again, at the time when we have to lift the debt ceiling, it is appropriate to have a discussion of spending priorities, of budgets that should be a statement of our values. but there should be no question that those debates would be something that would not just be a debate, but be a barrier to lifting the debt ceiling. that's why i'm grateful to the speaker and the republican leadership for giving this house this opportunity to act in a way that is consistent

with the constitution. when this measure passes today, congress will state unequivalentically that the full faith and credit of the united states of america is not in doubt. i thank my democratic colleagues for never waivering from this position and standing firm on behalf of all americans and i thank, once again, the speaker for giving us this opportunity to associate ourselves and support the constitution and the american people. with that, mr. speaker, i yield back the balance of my time. the speaker pro tempore: the gentlelady yields back the balance of her time. without objection, the material referenced by the gentlelady will be included -- will be included in the record. the gentleman from michigan. the gentleman is recognized. >> the budget control act was signed into law on august 2. on august 5, standard & poors downgraded the u.s. credit rating. mr. camp: and did so, and i quote, did so, and i quote, the doubt downgrade reflects you

are opinion -- the downgrade reflects our opinion that the fiscal consolidation plan that congress and the administration recently agreed to falls short of what in our view would be necessary to stabilize the government's median term debt dynamics. there have been some speakers who have come to this floor that said we were downgraded because of brinksmanship, we were downgraded because there were those of us who wanted to see some approach to fiscal responsibility in our debt limit negotiations. clearly that's revisionist history and the facts bear out. standard & poors's own quote was because we didn't go far enough. not because we tried to address long-term term and debt. so this reinforces my point. we can't be satisfied with just increasing the debt limit. i realize that is where we are today and as i've said, i will vote for this legislation. but as another speaker has said, they have viewed this as

non-negotiable. and what we really need to do is reach across the aisle and work together to find long-term solutions to both our medium term and long-term debt obligations so that these programs, like medicare and social security, these valuable programs that serve many of our citizens are not only viable today but well into the future. i reserve. the speaker pro tempore: the gentleman reserves the balance of his time. the gentleman from new york. mr. crowley: i inquire the amount of time left on both sides. the chair: the gentleman from new york has -- the speaker pro tempore: the gentleman from new york has 25 minutes remaining. the gentleman from michigan has 25 1/2 minutes remaining. mr. crowley: thank you. i yield two minutes to the gentleman from michigan and the ranking member on the ways and means committee, mr. levin. the speaker pro tempore: the gentleman from michigan, mr. levin, is recognized for two minutes. without objection. mr. levin: well, we've been adamant about a clear, clean debt ceiling vote. and now it's happening.