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. it should have happened the

last time. and because of the republican position, a high price was paid. jobs were lost, 120,000. the stock market plunged nearly 20%. economic growth was slowed. significantly. so this time around we're going to do the right thing. the gentleman from michigan, my colleague, the chairman of the committee, talked about working together and i want to close by suggesting now with this vote in terms of the debt ceiling, we've cleared the deck. let us now take up the other issues of major importance to the people of this country. and one of them is unemployment insurance.

as we stand here today, isolated maybe by the walls around this chamber, but i hope not, 1.7 million people have lost every dime of their unemployment insurance, long-term unemployed. all right, we're clearing the decks. now let's pay attention to the business of the american people, in addition to full faith and credit. we should not be leaving here with 1.7 million americans out the cold because too many people in this institution haven't been willing to listen to their stories. listen and act. i yield back. the speaker pro tempore: the gentleman yields back the balance of his time. the gentleman from michigan. mr. camp: i reserve. the speaker pro tempore: the gentleman reserves. the gentleman from new york. mr. crowley: at this time i

yield three minutes to the gentleman from maryland, the minority whip, on the democratic side, mr. hoyer. the speaker pro tempore: the gentleman from maryland is recognized for three minutes. three minutes. mr. hoyer: i thank the speaker. and i thank the gentleman from new york and i thank the gentleman from michigan. let me start by saying, this issue ought not to be subject to a debate. america, the greatest land on the face of the earth, and one of the most economic -- economically successful countries in history, won't pay its bills. i can't believe there's any american that thinks america should or would welch on that which it owes. that's not a very sophisticated

argument. i can make a more sophisticated argument. but when it comes down to it, that's the issue. will america pay its bills? will it give confidence to the investor community? will it give confidence to the business community? will it give confidence to our own citizens? indeed, will we give confidence to the world? that the world's leader can manage its own affairs responsibly. i want to join leader pelosi in congratulating the speaker for bringing this bill to the floor. he brings it to the floor because he knows, as i've just said, there is no alternative for america but to pay its bills. he brings it to the floor because he knows if he doesn't, the business community is going to think that the majority party in this house cannot manage the affairs of the

united states of america in a responsible fashion. he brings it to the floor apparently with some doubts as to whether or not those who have elected him speaker will follow him in taking the responsible path. my presumption is, although i don't know, is that the gentleman who chairs the ways and means committee will vote for this. my presumption is mr. cantor, the majority leader, will vote for this. my presumption is that speaker boehner will vote for this. my presums is based upon the pact -- presumption is based on upon the fact that they've represented that there's not an alternative that's a responsible one. i doubt that there are many people on this floor who have urged us to pursue a big deal more than i have. i voted against the last budget agreement otherwise known as ryan-murray because i thought it was too small and did not

move us towards fiscal responsibility and sustainability in the magnitude that it should have. having said that, however, there is no alternative to pay the bills that we have incurred , that the house, the senate and the president on behalf of the american people have incurred. and because we are a great nation, we will certainly not welch on our debts. will the gentleman yield me three additional minutes? the speaker pro tempore: the gentleman is recognized for an additional three minutes. mr. hoyer: i thank the gentleman. the speaker pro tempore: the gentleman is recognized for an dditional three minutes. mr. hoyer: i knew he was going to yield me three minutes. so we come to this time with not many people on the floor. although we have demagogued this issue in the past. we, both sides, let's be clear.

on our side we said that the republicans cut revenues, therefore they were responsible for the debt. on their side they say democrats spent money and invested money and therefore they're responsible for the debt. the fact of the matter is, we were all responsible for the debt. the fact of the matter is, under the reagan administration, when i came to congress, we substantially increased the national debt and we could only do so with ronald reagan's signature. and then under george bush the first, we substantially increased the debt, we could only do so with george bush's signature. and under bill clinton we brought the debt down for four years running, and we ran surpluses for the next four. and of course republicans were in the house and in charge for

six years. so it was a team effort, if you will. and we had a budget surplus. and then in the second bush administration, we substantially increased the budget deficit. we had two wars that we paid for none. $1 trillion-plus in additional deficit. many trillions over time. and so, my friends, we come to the floor today to do the only responsible alternative available to us. but that does not mean that anybody who votes for this believes that it is not critically important for us to have america on a fiscally sustainable path. the business round table has urged us to pass this bill. as leader pelosi quoted, the chamber of commerce said not to do so will put our country and our economy at risk. and yet i fear there are going

to be apparently a significant amount of people who will come and vote no. vote no on paying america's bills. vote no on giving confidence to the international community that america is in fact able to manage its affairs. there ought to be no debate, as i said, when it comes to making sure we pay our bills on time. the bills congress has incurred. as i said, the business round able was quoted as saying, urgent action is required on the part of congress in order to prevent a default. in fact, he said, if we , all ed, every american 315 million-plus, would feel the negative effects. why would anybody vote against such a bill?

one additional minute. is that possible? are you running out of time? ok. you're running out of time. so, 30 seconds. the speaker pro tempore: the gentleman is recognized for an additional 30 seconds. mr. hoyer: i will conclude because my friend is running out of time. this is not a partisan vote. and should not be viewed as such. republicans and democrats have voted to protect the american people, provide for the national defense and provide for the general welfare of our country, pursuant to our constitutional responsibilities. having done so, there is no responsible alternative but to pay our bills. that's what this vote is about. let's show the courage, the wisdom, the common sense to do just that. vote yes. the speaker pro tempore: the gentleman from michigan. mr. camp: i yield myself such

time as i may consume. the speaker pro tempore: the gentleman is recognized. mr. camp: i would just point outer to my friends on the other side -- out to my friends on the other side that in recent memory there have been seven instances where debt limits were part of other major pieces of legislation. for example, in the first bush administration there was a balanced budget in emergency deficit act. in the clinton administration there were reconciliations act, as well as the contract with america advancement act. in the obama administration there was stimulus, pay as you go, budget control act, so this has happened seven times. . in recent history. why can't it happen now? the difference is, you had both parties willing to come together and negotiate major pieces of legislation that would help to address the short-term, medium, and long-term drivers of our debt. what we have now is a very open

admission that it's absolutely nonnegotiable. that this is a straight increase in debt limit without any of these legislations even though this happened seven times in the past. i would just say that debt limit increases are often parts of larger pieces of legislation and it would not be unusual and i think it's a sad day when the other side has a take it or leave it approach and is unwilling to come together with the republicans to find a way to bring other legislation to the floor that will help address the drivers of our debt. i reserve. the speaker pro tempore: the gentleman's time has reserved this egentleman from new york. mr. crowley: i yield two minutes to the ranking member of the financial services committee, ms. waters. the speaker pro tempore: the gentlelady is recognized for two minutes. ms. waters: thank you, mr. speaker. once again, it's the house democrats required to take important action to protect our nation's well being. today, most house republicans

will once again refuse to stand behind the full faith and credit of the united states, threatening an economic catastrophe for all americans. when republicans pushed our nation to the brink of default last year, refusing to increase the debt limit, businesses large and smalligan to cut back by slowing spending and hiring. consumer confidence fell faster than at any other time since the financial crisis in 2008. potential home buyers didn't buy homes. but despite these warnings, house republicans still want to push us to default and the consequences would be disastrous. the value of our 401k's and iras would plummet, significantly hurting those saving for retirement. for consumers, a default would make credit cards, mortgages, student, and automobile loans more expensive. default would lead to a u.s. credit rating downgrade, making

it harder for businesses to hire new employees and our cities and states to finance schools and hospitals, roads and bridges. mr. speaker, the american people cannot afford another round of republican recklessness. everyone from wall street c.e.o.'s to conservative economists agree, we need to honor our debt. i and my democratic colleagues will once again do what is necessary. i urge the republicans to put americans before ideology and support this legislation to raise the debt ceiling. i yield back. the speaker pro tempore: the gentleman from michigan. mr. camp: i reserve. the speaker pro tempore: the gentleman from new york. mr. crowley: i yield two minutes to the gentleman from california, mr. honda. the speaker pro tempore: the gentleman is recognized for two minutes. mr. honda: i want to thank my friend for yielding. mr. speaker, today u.s. congress is doing its job. five days after forcing the treasury to resort to extraordinary measures to

finance our government and three legislative days before an unprecedented default. this marks the fourth time in the last three years we have been pushed right to the brink of default. everyone outside of this chamber knows we could have and should have lifted the debt ceiling long before we arrived at this point. i'm glad to see that once again we've been able to do our most basic job. but we need to stop playing these political games with our economy, our stability, and our reputation. we should not be forced to wonder year after year if we're going to be able to decide to meet our obligations. we should guarantee that the only time we debate spending is during spending debates. i would ask my colleagues to help me reform this process and install a permanent fix to end the brinksmanship surrounding the debt limit. that's why i introduced two bills that allow the debt limit

to be raised unless a supermajority of congress votes to block them. this would shift the role of congress to kiss approving debt ceiling increases instead of being forced to approve them. my approach has been introduced in the other chamber by a number of senators and has been endorsed by a growing numb of economists and outside thought leaders. today i urge my colleagues to vote yes to lift the debt limit with me today but i also ask my colleagues to join me in ursuing permanent, necessary changes for tomorrow so we can eliminate this hostage taking. i yield back. the speaker pro tempore: the gentleman from michigan reserves. the gentleman from new york. mr. crowley: i yield two minutes to the gentlelady from texas, ms. sheila jackson lee. the speaker pro tempore: the gentlelady is recognized for two minutes. ms. jackson lee: i thank the gentleman very much. as i have listened to debate on the floor of ethe house, i have

seen that members are coming from all regions of the united states which means that in fact this will be impacting all of our constituents. i would hope republicans would join the democrats who will vote by and large in almost near 100% to do what the federal reserve chairman, former chairman, ben bernanke said, to avoid a government shutdown and perhaps even more so, a failure to raise the debt limit could have serious consequences for the financial market and for the economy. but more importantly, it will cost student loans much more to ur young aspirants who are attempting to develop an expertise to contribute to this society. it could increase payments by $2,000 for 531,327 texas students who rely on loans to go to college. mr. speaker, i don't want to do that. higher interest rates for mortgages and auto loans and student loans and credit cards.

mr. speaker, i don't want to do that. families -- families re' tirmente savings and 401k's dropping as the stock market plummets, reminding us of four years ago when we had one of the worst plummets we have experienced in the last administration. 3.4 million veterans not receiving disability. i know we dent want to do that 10 million americans not receiving their social security check on time in just the first week. we cannot do that. drug reimbursements under medicare stopping and doctors and hospitals not getting paid. i know members of congress will not and do not want to do that. so a clean debt ceiling is the only direction. but we have some other options. we can do this in a bipartisan manner. we can have the democrats standing tall as they have advocated for a clean debt ceiling but we can join with our partners and we can acknowledge the fact that the government is not broke. we can invest in infrastructure. we can as my colleague has said,

congressman levin, we can extend the unemployment insurance and provide for education and provide for research and development, we can build this country, it's time now to vote for a clean debt ceiling and do it together so we can nst in america. i yield back. the speaker pro tempore: the gentleman from michigan. mr. camp: i reserve. the speaker pro tempore: the gentleman from new york. mr. crowley: i appreciate my colleagues, all my colleagues for coming down to the floor this afternoon to speak in favor of this proposed bill. i think it's note worthy to point out that only the gentleman from michigan has come down to speak on behalf of the majority today and abley, i should say. he's voting for this bill and i appreciate his support. i notice that no one took time in opposition on the other side of the aisle. maybe they don't care as much about this issue as we thought they did. but the reality is, every vote against this bill is a vote for

default. now our republican colleagues have an answer for that. they have a plan. they intend to default someday so they have a plan. it's a bill they call the full faith and credit act. we call it the pay china first act. it says in the event of a default, we will pay those people who own our bonds, we will pay foreign governments first and everyone else gets put down to the bottom of the barrel. but they have a plan. republicans have a plan in the case that we default. let me just say, mr. speaker, i think it is totally irresponsible to even have had a debate on this floor on a bill that would determine the payments of our debt in lieu of default. i think it's irresponsible. the fact that we've had these manmade brinksmanships is irresponsible. once again the republican party and their caucus is showing that they're not responsible enough to be ruling and to be governing here in the house of representatives. mr. speaker, with that, i yield back the balance of our time. the speaker pro tempore: the

gentleman yields back. the gentleman from mr. -- from michigan. mr. camp: i yield myself such time as i may consume. the speaker pro tempore: the gentleman is recognized. mr. camp: we have heard a lot of talk about how the nation must pay its bills but one major reason we're in this position is an unpaid-for trillion dollar stimulus bill that did not increase economic growth, did not create jobs, and simpley added to our debt. i know there are some on the other side who want to keep on spending no matter what the impact is on our credit rating. and while i believe that we must increase our debt limit, i'm clearly not satisfied that there are no provisions that would help us address the long-term drivers of this debt. but i will say that it's

disappointing that the democrats have walked away from the table. it's disappointing that we are not engaged in a more serious debate today a debate about policy and how we rein in what really has become runaway debt. but as i said, for as disappointed as i am in that, i cannot in good conscience let the democrats re-- democrats' refusal to engage lead to a default so i will vote yes on this legislation today. but it's hardly a solution to our looming debt crisis. that's why the ways and means committee will continue to move forward on reforming medicare and social security as we have with bipartisan proposals that are in legislative form published for the public to view on our website. and we'll move forward on tax reform. one that will help grow our economy, create jobs, and help address our debt crisis by a stronger, more vibrant economy that will provide opportunity for individuals to get work,

increase their wages, and provide for themselves and their families. i hoach that democrats will join me in these efforts. -- i hope that democrats will join me in these efforts. i believe it's only through a combination of those policies that can we really get to the true solutions to this very significant problem facing our country. so while this is a short-term solution to prevent what i think is essential that we do prevent, a default, it's not enough. and as i said, there's so much >> join the conversation on facebook. for those of you complaining about raising the debt limit, where were you guys when reagan was president? is reagan's now it fault?

when he took office, carter's unemployment was 12 are sent -- 12%. >> we are joined by ginger gibson was a congressional reporter for political. i don't think they expected at the house would be taken this up. how did they get to this point and why? >> we thought that there would be a long fight over the next 48 hours over the debt ceiling. it went along much faster and smoother than anyone anticipated. militarilyed benefits on the debt ceiling, seeing that they were losing votes. they're voting on the clean debt ceiling increase, including no other policy provisions.

it simply raises the debt ceiling. for democratic and republican members, what is at stake for suspending the debt ceiling? >> when you look at john boehner's decision to move away , they arettachments trading one political decision for another. democrat voting against military benefits. he is just going to start attacking democrats. saying it is the president stepped, and it is democrats debt. there should be some criticism of democrats for increased spending and increased debt. democrats think it is a winning message. they think that people remember the shutdown and they're pushing the idea that they are being more responsible and taking care

of the country plus business. country's business. >> the bill suspends the debt limit through march. what does that mean? >> it is more of a deadline than an actual number. this allows the house to reassess the situation without allowing the treasury department to use a extraordinary measures that we have seen. we know that the debt limit was supposed to expire on february 7. before, wewas done probably have until the end of the month to get it done. this will be a similar situation in march. to expire ined february, but then the treasury says they can make it last till september. that will not be the case. 2015 and come back in

a stronger negotiating position. >> assuming passage and the house, they are out for the next couple of weeks, not coming into legislative work tomorrow. this presumably goes to the senate. what is in store there? >> they will be likely to try to get this done very quickly. this is the best possible outcome that they could've hoped for. there is a possibility that senate republicans try to make noise on this issue. rand paul or ted cruz hold the process up. saidr, no one has explicitly that that is what they're going to do. that could make it take even longer to get it done. this and is likely to take what the house has passed, move it along, and not require the house be back again. and wrap this up pretty quickly. it will be the last thing to do

before election season. >> ginger is covering all of this. you can reach her reporting at politico.com. >> thank you for having me. >> final passage of suspending the debt limit through march of 2015. of 15 minute vote. they will need to hundred 18 to pass the debt limit. we will watch. >> coming up on c-span, the house hears from janet yellen. regarding's the vote the debt ceiling. "prime are live for time."r's question

members of the privacy and oversight board testified before the senate judiciary committee on data collection. a.m. is coverage at 10:00 on c-span. >> i think the appearance of justice is more important than justice itself. >> friday c-span radio continues a series of oral history interviews with former supreme court justices. this week from 1959, associate justice tom clark. online atso

www.c-span.org. >> c-span. we put you in the room for congressional hearings, readings and conferences, and would offer complete gavel to gavel coverage of the united states house as a private service of industry. we are c-span. create a by the cable tv industry 35 years ago and funded by your local cable or satellite provider. follow us on twitter and like us on facebook. >> janet yellen, the new federal reserve chairman and first woman bankuld -- had the central -- >> the committee will come to order.

the chair is authorized to declare a recess. this is for the semiannual testimony for the chairman of the federal reserve on monetary policy and the state of the economy. before we get started, i would draw the attention of the committee that we are blessed again with the appearance of the gentlelady from new york, carolyn mccarthy. what a blessing it is to have her back with us. [applause] the chairman will now recognize himself for six minutes to give an opening statement. >> we welcome chair yellen.

you may recall that just two months after alan greenspan became the chairman in 1987, the stock market crashed. paul volker sent him a note that said congratulations, you are now a central banker. chair yellen, you face the daunting prospect of facing a balance sheet that we have never seen before, in the face of an economy that is underperforming at best. allow me to paraphrase. congratulations, you're now the chair of the central bank. we look forward to working with you to ensure that the federal reserve has the tools that it needs to operate effectively into the next century. we look forward to working with you closely as the committee embarks on the year-long federal reserve centennial oversight project.

any agency or bureau of government that is 100 years old probably needs a good checkup, especially one as powerful as yours. independence and accountability are not mutually exclusive concepts. the most critical issue we must examine is the limit of monetary policy to promote a healthy economy. we have witnessed the greatest fiscal and stimulus program in the nation's history. the results could not be more is -- disappointing. despite the more than five years into the so-called obama recovery, we still see millions of our fellow citizens unemployed and underemployed. trillions of dollars of new unsustainable debt. why is the non-recovery recovery producing only one third of the growth of previous recoveries?

by one estimate, the obama administration has imposed 494 billion dollars in new regulatory costs upon the economy. to the incomprehensible volcker rule. business enterprises are drowning in regulatory red a. -- red tape. they are attempting to expand and create more jobs, and monetary policy cannot fix this. what else is different from previous recoveries? the single largest tax increase in american history. $1.5 trillion in new taxes from the fiscal cliff and obamacare. these taxes fall upon small businesses, entrepreneurs, and investors as they try to bring about a healthier economy and create jobs. monetary policy cannot remedy this, either.

what else is different? fear, doubt, uncertainty, and pessimism that has arisen from the erosion of the rule of law. never before in my lifetime is more unchecked, unbridled, and discretionary authority that has been given to relatively unaccountable government agencies. we are slipping from the rule of law to the role of rulers. to punctuate this, the president reminded us that he has a pen and a phone to enact whatever policy he sees fit. regrettably, he does not seem to have handy a copy of the constitution. i suppose the fed could send him one and throwing in a copy of "capitalism and freedom," although i doubt it would do much good. there are clearly limits to what monetary policy can achieve but much it could risk. thus the trillion dollar

question remains whether qe3 will continue to taper slowly, and abruptly, or go into infinity. we look forward to hearing the chair's thoughts and intentions on the matter. as part of our centennial oversight project project, we will thoroughly examine the federal reserve's unprecedented role in credit allocation. should the fed pick these markets to support while ignoring others? this creates winners and losers and under the current policies, seniors on fixed incomes are clearly losers, as we continue to see the blurring of lines between fiscal and monetary policy. this committee will examine the federal reserve's role as the facilitator of the president's deficit spending.

it has been clear that the federal reserve should be independent of the president's fiscal process that policy. -- fiscal policy. is it? we will also consider how the federal reserve has undertaken the expensive new banking regulatory powers it obtained under the dodd frank act and why it fails to conduct an analysis. we will consider whether dodd frank constrained. we will examine an old debate on monetary policy and rules of discretion. during successful periods of the federal reserve wash history, the central bank appeared to follow a clear rule. now it focuses on amorphous guidance. this arguably leaves investors and consumers lost in a mist as

they attempt to create a healthier economy. chair yellen, we look forward to working with you. we hope that there is the expertise and resources to effectively fulfill its goals. >> thank you, mr. chairman. i would like to take a moment to say how pleased and honored, to have our colleague, ms. mccarthy back with us today. [applause] thank you, mr. chairman. it is with great pleasure that i

welcome you, chair yellen, to deliver your first testimony. your presence here today is historic and well deserved. your record of distinguished service in government, academia, and at the federal reserve makes you uniquely qualified to navigate considerable challenges that lie ahead. your career in public service has been marked by high praise from economists and policy makers from across the political spectrum. in the face of an increasingly complex and interconnected global economy, your sound judgment has been validated time and time again. in the run-up to the 2008 financial crisis, you actively identified the risk to the economy and spoke up, telling colleagues, " the possibilities of a credit crunch developing, and economy slipping into recession seem all too real."

you pushed to challenge conventional thinking about the limits of monetary policy and appropriately encourage the fed to act. the economic data seems to suggest that the recovery still fragile. millions of americans continue to be unemployed. your willingness to think outside the box is more important than ever. ike many of my colleagues, i remain concerned that more needs to be done to address the long-term unemployment crisis. 3.6 million americans have been out of work for 27 weeks or more. i feel that any further delay in addressing the problem could permit -- permanently damage the itor force in the ability of to grow over the long term. i hope you will press your colleagues on the federal open market committee to take into account the ongoing impact that

this long-term unemployment crisis is having on millions of american families. of course, the republican's ideologically driven austerity agenda, protracted political brinksmanship, and their failure to extend unemployment insurance benefits, has made the situation more dire. ironically, republican willingness to provide the short-term assistance that is needed is putting more pressure on the federal reserve. although monetary policy is indeed a powerful tool, the responsibility for putting the economy on more stable footing cannot and should not all federalely on the reserve. congress must do its part. we must address the growing issue of income inequality.

the economic recovery has disproportionately benefited the wealthiest in our society. i believe that the income gap is one of the most pressing threats to our economic potential. i look forward to your views on how we can work together to close that. finally, there are a number of pending issues related to the fed's role in implementing the dodd frank act. although we will not be able to discuss all of them today i hope , to hear more about the fed's riskin reducing systemic across the system. this includes credential standards for large u.s. and foreign banking firms and your views on risks that continue to exist in the repo markets. as the 2008 financial crisis may clear, growtho

and prosperity are linked to financial stability. therefore, you are critically important. thank you again for being with us today and i yield back the balance of my time. >> we recognize the gentleman from michigan for two minutes. >> chair yellen, congratulations on being confirmed as the first woman chair. i think you can see with the cameras in front of you, uncle -- buckle up and hang on. this'll be an interesting ride, i am sure. i sent out a facebook and twitter tweet about what i should ask you. a number of things came back. competitiveness, our u.s. competitiveness. auditing the fed, and a number of other things. i have a couple of other ideas as well. i'm eager to hear your insights on the economy and the new rules.

-- not to -- i'm not to ranking member, waters thank you for thinking outside the box. some of us are trying to determine what the box is these days. i think we all have a responsibility to explain that to the american people. originally created to supervise the banking system, the fed's role has continued to grow, seemingly unchecked through acts like the dodd frank act, and other reasons. its current position of being a lender of last resort to banking is to shins that require additional credit to stay afloat is something we need to continue to explore. given the interconnectedness of the global financial system, there is no doubt that the federal reserve's policies have impacted foreign economies. it was explored at that table

last week when there was discussion of the fragile five countries out there, as was our own country. i look forward to hearing your comments on these topics during thank you very much. >> the chair recognizes the gentleman from missouri. for three minutes. >> welcome, chairman yellen. as you report to the committee for your first time in this position, i would like you to know that, like you, i believe that the actions of the federal reserve should always consider the impact and well-being of main street as well as wall street. that means actively pursuing the twin goals of creating employment and controlling inflation. it also means closing the income inequality gap, which is hurting so many working families and threatening america's economic future.

like you, i believe in fundamental financial reform and real transparency to protect american consumers. that includes maintaining a consumer financial protection bureau with real teeth and the authority to act strictly -- swiftly against financial abuses. i strongly opposed the majority's efforts to cripple be consumer financial protection bureau. it is shocking. it saddens me that the majority is more concerned about bringing comfort and relief, not to struggling consumers, but to some of the same financial predators who caused the great recession.

in 1977, congress amended the federal reserve act to promote full employment. the consumer price index rose 1.5% in 2013 after an increase in 2012. that is lower than the 2.4% average increase in cpi over the last 10 years. as a response to the financial emergency in 2008, the federal reserve bank purchased made loans and provided funding through liquidity swaps with foreign central banks. this action significantly expanded the federal reserve's balance sheet. the fed has gradually tapered the asset purchases from the $85 billion to this month $65 billion in treasury and mortgage backed securities. in terms of supporting full employment, let's look at the data. because of the positive

leadership under former chairman bernanke, the unemployment rate in the u.s. is 6.6%, but the number of long-term unemployed is 3.7 million people. that is even more compelling as to why congress should extend emergency unemployment benefits without delay. my time has run out, but i look forward to the chairman's testimony. >> today we welcome the testimony of the honorable janet yellen, the chair of the board of governors. this was a position she was confirmed to by the senate on january 6 of this year. she took office on february 3 of last week three we congratulate her for her confirmation, her historic confirmation is the first female chair of the board of governors. she served as the vice chair of the board of governors for

years. she was the president and ceo of the federal reserve bank of san francisco. during the clinton administration, she served as chair of the president's advisers. she holds a phd in economics from yale. i want to personally thank you for cooperating with us to ensure that every member of the committee has an opportunity to ask you questions, as part of the hearing today. i hope the members are paying careful attention. i would also say that the unsolicited offer to stay all day, madam chair, you are in luck, we are not staying all day. this committee has a bill on the floor later this afternoon. you will be spared that.

i peeked at your testimony where you pledged to be accountable. you're off to a very good start by agreeing to do this. because of the anticipated length of the hearing, i wish to alert members that the chair does expect a call a couple of recesses during chair yellen's testimony. the chair will yield a strict gavel. without objection, chair yellen's written statement will be made part of the record after the oral remarks. welcome. you are now recognized for your oral presentation. >> since this is your first time, you will have to bring the microphone much closer to you so we can hear you. >> chairman, and ranking member, other members of the committee,

i am pleased to present the federal reserve's monetary policy report to the congress. in my remarks today, i will discuss the current economic situation and outlook before turning to monetary policy. i will conclude with an update on our continuing work on regulatory reform. first, let me knowledge the important contribution of chairman bernanke. his leadership helped make our economy and financial system stronger and ensure that the federal reserve is transparent and accountable. i pledge to continue that work. the economic recovery gained greater traction in the second half of last year. real gross domestic product is estimated to have risen at an average annual rate of more than 3.5% in the third and fourth

quarters, up from a 1.75% pace in the first half. the pickup has yielded further progress in the labor market. about 1.25 million jobs have been added. 3.2 5 million have been added since 2012. the month before the federal reserve began a new round of asset purchases to add momentum to the recovery. the unemployment rate has fallen since the middle of last year. and 1.5% since the beginning of the current purchase program. nevertheless, the recovery in the labor market is are from complete. the unemployment rate is still they estimate this

is consistent with maximum sustainable employment. those out of a job for more than six months continue to make up an unusually large fraction of the unemployed. the number of people who are working part-time, but would prefer a full-time job remains very high. these observations underscore the importance of considering more than the unemployment rate when evaluating the conditions of the u.s. labor market. among the major components of the gdp, household and business spending growth stepped up during the second half of the year. early in 2013, the growth in consumer spending was restrained by changes in fiscal policy. as the restraint abated, household spending accelerated,

supported by job gains and by rising home values and equity prices. similarly, growth and business investment started off slowly last year, but then picked up during the second half, reflecting improving sales prospects and still favorable financial conditions. in contrast, the recovery in the housing sector slowed in the wake of last year's increasing mortgage rates. inflation remained low as the economy picked up strength. with the pce indexes rising only about 1% last year, well below fomc's objective for inflation

over the long run. some of the recent softness to reflects factors that seem likely to prove transitory, including falling prices for crude oil and declines in non-oil import rices. -- prices. my colleagues on the fomc believe that unemployment will expand this year and next. the unemployment rate will continue to decline toward a longer run sustainable level, and inflation will move back toward 2% over the coming years. we have been watching closely the recent volatility in global financial markets. our sense is, at this stage, these developments do not impose a substantial risk to the u.s. economic outlook. we will, of course, continue to monitor the situation.

turning to monetary policy, let me emphasize that i expect a great deal of continuity in the fomc's approach to monetary policy. i served on the committee as we formulated our current policy strategy. and i strongly support the strategy, which is designed to fulfill the federal reserve's statutory mandate of maximum employment and price stability. prior to the financial crisis, the fomc carried that monetary policy by adjusting the target for the federal funds rate. with that rate near zero since late 2008, we relied on to less traditional tools, asset purchases and forward guidance, to help the economy move toward maximum employment and price stability.

both tools put downward pressure on longer-term interest rates and support asset prices. in turn, these accommodative financial conditions support consumer spending, business investment, and housing construction. our current program of asset purchases began in september 2012 amid signs that the recovery was weakening and progress in the labor market had slowed. the committee said that it would continue the program until there was a substantial improvement in the outlook of the labor market. in mid-2013, the committee indicated that if progress toward the objectives continued, as expected, moderation in the monthly pace of purchases would likely become appropriate later

in the year. in december, the committee judged that the cumulative progress toward maximum employment and the improvement in the outlook of the labor market conditions warranted a modest reduction in the face of purchases from $45 billion to $40 billion month of long-term securities and from $40 billion to $30 billion per month of the agency backed securities. at the january meeting, the committee decided to make additional reductions of the same magnitude. if incoming information broadly supports the committee's expectation of ongoing marketment of the labor conditions and inflation moving back toward the longer run objective, the committee will

likely reduce the pace of asset purchases and further measure steps at future meetings. that said, purchases are not on a preset course. and the committee's decisions about their pace will remain contingent on the outlook for the labor market and inflation, as well as the assessment of the likely efficacy and cost of such purchases. the committee has emphasized that a highly accommodative policy will remain for considerable time after asset purchases end. in addition, the committee has said since 2012 that it expects the current low target range to be appropriate at least as long as the unemployment rate remains above 6.5%, inflation is projected to be no more than .5% longer run goal, and

longer-term expectations remain well anchored. crossing one of these threshold will not automatically prompt an increase in the federal funds rate but will indicate if it had become appropriate for the committee to consider with the broader economic outlook would justify such an increase. in december of last year, and again this january, the committee said that its current expectation based on its assessment of a broad range of measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments, is that it likely will be appropriate to maintain the current target range for the rate well past the

time that the unemployment rate especially if.5%, projected inflation continues to run below the 2% goal. i'm committed to achieving both parts of our two-part mandate, helping the economy return to full employment and returning inflation to 2% while ensuring that it does not run above or below that level. i will finish with an update on progress on regulatory reforms and supervisory actions to strengthen the financial system. in october, the federal reserve board proposed a rule to strengthen the liquidity positions of large and internationally active financial institutions. together with other federal agencies, the board also issued

a final rule implementing the volcker rule, which prohibits engaging ins for short-term, proprietary trading of certain financial instruments. the next round of annual capital stressed tests of the largest 30 bank holding companies is underway and we expect to report results in march. regulatory and supervisory actions, including those that are leading to increases in the liquidity and capital in the banking sector, are making our financial system more resilient. still, important tasks lie ahead. in the near term, we expect to finalize the rules implementing enhanced prudential standards mandated by section 165 of the dodd frank wall street reform and consumer protection act.

we also are working to finalize the proposed rule, strengthening the leverage ratio standards for us-based, systemically important banks. we expect to issue proposals for risk-based capital surcharge to those banks as well as a long-term debt requirement to ensure that these organizations can be resolved. in addition, we are working to advance proposals on margins for derivatives consistent with the global framework and are evaluating possible measures to assess risks associated with short-term wholesale funding. we will continue to monitor for emerging risks, including watching carefully to see if regulatory reforms work as intended.

since the financial crisis and the depth of the recession, progress has been made in restoring the economy to health and in strengthening the financial system. still, there is more to do. too many americans remain unemployed. inflation remains below are longer-term objective, and the work of making the financial system more robust has not yet been completed. i look forward to working with my colleagues and many others to carry out this important mission that you have given the federal reserve. thank you. i would be pleased to take your questions. >> the chair will recognize himself for five minutes for questions. you testified that "i expect a great deal of continuity on the fomc's approach to monetary policy."

i will ask the obvious question. in forward guidance, which has been anchored in the evidence rule, that seemingly said that it will not tighten until unemployment drops below 6.5%. chairman bernanke announced -- well, he described this as a taylor-like rule. although professor taylor may not agree. we stand on the threshold. i also see in your testimony where you said, " crossing one of these thresholds will not automatically prompt an increase in the federal funds rate." the writer of the "wall street journal" predicted this. and opined, perhaps the open market committee should have

called it an evan suggested. evans suggestion. the mistake was telling mark is there was a fixed will when the only sure thing is that the fed is more improvisation. who is right here? is "the wall street journal" right, or do we have something that is rule-like? >> well, after the federal funds rate hit its effective -- >> chair, could you pull the microphone closer to you? thank you. >> after it reached the effective lower bound close to zero at the end of 2008, the federal reserve was forced to provide additional accommodations through tools that were new and novel. the most important tool that had been used, to some extent in the past, but we have relied on

quite heavily since that time, is the forward guidance concerning the likely path of monetary policy. >> you reach a threshold and then you ignore the threshold? what good is the forward guidance? >> what the fed indicated in december of 2012 is that we would not consider, did not think it would be appropriate to consider raising the federal funds rate as long as unemployment was over 6.5% and inflation was projected to run under 2.5%, as long as inflation expectations were also well anchored. we have followed the guidance. it has been -- >> i would say this if i could, madam chair.

my time is running out. i want to cover a little of the -- other ground as well. dealing with a rules-based monetary policy. i think if i read some of your statements properly, and a lot -- and i don't want to put words in your mouth, that you consider times after the financial crisis still extraordinary, and it is not necessarily an appropriate time for a rules-based approach. is that a fair assessment of your views? >> i am in favor of a predictable monetary policy that responds in a systematic way to shifts in economic variables. >> earlier in your career, you said it is, " what sensible banks do." that begs the question today, using your words, are you a

sensible central banker? >> i believe that i am a sensible central banker. these are very unusual times, in which monetary policy, for quite long time has not even been able to do what a rule like that would have prescribed. that rule would've prescribed that the federal funds rate would have been in negative territory, which was impossible. the conditions facing the economy are extremely unusual. i have tried to argue and believe strongly that the rule or something like it provides a sensible approach in normal times, like the great moderation. when current conditions

there are severe headwinds from the financial crisis, and it is not been able to move the funds rate into the negative territory that rule would have prescribed, that we need to follow a different approach. we are attempting, through our forward guidance, to be a systematic and predictable as we can possibly be. >> madam chairman, my time is expired, and i'm going to attempt to set a good example for the rest of the committee. the chair recognizes the ranking member for five minutes. >> thank you, mr. chairman. ms. yellen, you alluded to continuing the policies that were initiated by the committee that you served on with mr. bernanke. i am a supporter of quantitative easing.

i would like to hear from you what you think quantitative easing did to stabilize this economy. can you tell us, not only what you think happened with quantitative easing, but how you continue the policy on tapering as it is today? >> thank you, congressman waters. the purpose of quantitative easing -- we have been buying longer-term treasuries and agency backed securities, the objective has been to push down the long term interest rate. i believe we have succeeded in doing that. enter more broadly make financial conditions accommodative. the purpose is to achieve more rapid economic growth.

and i believe that we have been successful. some examples would be that, as mortgage rates fell to historically low levels, we certainly saw a pickup, a very meaningful pickup, in housing activity. we have also seen a meaningful increase in house prices. i think that that improves the security of a large number of households. many households have been underwater in their mortgages. that fraction has diminished substantially. that means that those households are in a better position to spend and borrow. in addition, low interest rates have stimulated spending in other interest-sensitive sectors, like automobiles. we have seen a decided pick in

-- pickup in that sector, as well. when spending and employment increase in the sectors, the availability of jobs increases, unemployment comes down, growth picks up. as i mentioned, we have seen the beginning of this program, we have seen the unemployment rate declined 1.5%. i think this program contributed to that. you asked about our plans. when the committee began the policy, it did so when the time when it looked like recovery and progress in the labor markets was stalling. we began these asset purchases as a secondary tool, a supplementary tool to our forward guidance to add some momentum to the recovery.

we said we would continue those purchases until we had seen a substantial improvement in the outlook of the labor market in the context of price stability. there has been a substantial number of jobs created. unemployment has come down. december, the committee judged there had been enough progress made in the labor market to begin a measured pace of reduction and asset purchases. we decided to act in a measured and deliberate way and take measured steps to watch and see what was happening in the economy. we have indicated that the outlook continues to be one in which we expect and are seeing continued improvement in the labor markets that implies grow strong enough, going forward to anticipate such improvements.

and inflation, which is running below the objective, if we see evidence that it will come back toward our objective over time, we are likely to continue reducing the pace of our purchases in measured steps. we have also indicated that the program is not on the present course, which means that if the committee judges there to be a change in the outlook, that it would reconsider what is appropriate with respect to the program. >> thank you very much. i yield back my time. >> the committee recognizes the gentleman for michigan. >> did short proprietary trading cause the financial crisis? >> i would not say that was the main cause of the crisis.

>> i'm sorry, it was not? >> i would not see that is the main cause of the crisis. >> i think we would be in agreement on that. you have noted just this past year at the open meeting board, you some concerns about the volcker rule. you asked what impact it would have on u.s. banks, in terms of do they face this advantage is compared to foreign banks in capital market activities? i have some of those same concerns, and i am not sure, as we had the five regulators, the alphabet soup of regulators that

look at all of this, the discussion of the volcker rule and the impact. they seem to it indicate that the fed was very concerned about that, that we were not going to somehow be at a disadvantage. i am not sure we have made ourselves safer. would you mind chatting up that? >> i think the impact of the rule is something we will monitor over time, as he goes into effect. the agencies have worked hard jointly to write a balanced rule that permits banking organizations to continue to engage in critical market-making and hedging activities. we will be very careful in how they supervise institutions -- >> i am sure you are aware.

we are the only major economy that has put anything like this into effect. you are comfortable saying, monitor this over time to see the effect? how long are you comfortable waiting to see what will happen? three months? six months? one year? how long will we see liquidity leave the united states and lose that market share? >> i think that banks will be able to go on as we implement this rule to engage in those activities, particularly market-making and hedging that are really vital to a well functioning financial system. >> is there a length of time? that is what i am looking for. how long are you interested in waiting to see the effectiveness? it is 932 pages.

297,000 words. there is a lot to wade through. >> we will be involved with fcc -- sec and other agencies with using supervision to make sure that firms comply with the rule. >> so an undetermined amount of time to see the effectiveness? >> it will certainly take time to see with the affects of the rule are. >> i will follow up with a letter. i would like you to put some thought about how much time. how long will we be at a competitive disadvantage is what i'm concerned about. we're going to have to move along. i have just over a minute. quantitativeo easing, foreign governments have -- the fragile five, indonesia, india, south africa, turkey, and

brazil have been affected by our monetary policy. it is the reversing of our easing, i guess, as you would say. do you have any concerns that poorly managed tapering that we are trying to do might impact some of these other comedies, as -- other economies as well and , what will that mean for economies, as well, and what would that mean for them? >> capital markets are global. the monetary policies of any country affect other countries in such a world. we have been very clear at the outset that we initiated a program of asset purchases and an accommodative monetary

policy, more generally, to pursue the goals that congress has assigned for the federal reserve, namely supporting economic growth, employment, in the context of price stability. we have tried to be as clear as we possibly can about how we would conduct this policy. it has been quite clear at the outset that, as our recovery advanced, that you would wind down or reduce the pace of our asset purchases. as gross picks up and inflation kos back to our objective over time, eventually, we will normalize the policy stance. >> the gentleman for the time is long since expired. the chair would advise all members perhaps as that last question with at least 30 seconds to go on the clock. the chair recognizes the gentleman from missouri.

>> thank you, mr. chairman. i will be cognizant of the time. the u.s. unemployment rate is 6.6%. for african-americans it stands at 12.1%. for hispanics it is 8%. for asians is it little over 4%. for young adults it is 20%. what can this congress do to work in conjunction with the federal reserve to lower unemployment rates for african-americans, for young people, for the latino community, any suggestions? >> for our part, we are trying to do what we can with monetary policy to stimulate a faster economic recovery to bring unemployment down nationally,

and because high in unemployment disproportionately affects many of the groups that you mentioned, if we are successful, it will have a great benefit to the groups that you mentioned. of course, monetary policy is not a panacea. i think it is absolutely appropriate for congress to consider other measures that you might take in order to foster the same goals. some of those groups have been adversely affected, as well by longer-term trends in the economy that have led to very stagnant wage growth for those in the middle and bottom of the income spectrum.

we are seeing rising inequality. all economist that i know of think that improving skills of the workforce is one important step that we should be taking to address those issues. >> congress could also assist by taking a look at the infrastructure and starting a jobs program in that area where we rebuild the bridges and other infrastructure and put americans back to work? >> these are certainly programs that congress could consider and debate. >> thank you for that response. in a speech that you gave last year, you stated that the evidence you had seen showed that the increase in unemployment subsidies, has been largely cyclical and

not structural. you cited the fact that job losses were widespread across industries and occupational groups and went on to cite a construction manufacturing and other cyclically sensitive industries that were hard hit, as well. do you continue to believe that of ourficant component unemployment situation continues to be a result of cyclical factors? >> i do continue to think that. i think most of the increase we have seen and the decline we have seen, while a small portion may be related to structural issues, and there may be some reduction in structural mismatch. the recovery is preceded, and mainly we have seen the decline in cyclical unemployment. members of the committee every three months and offer their

personal views as to what a longer-run normal unemployment rate is. the range of opinion in the fomc in december ranged from 5% to 6%. well above remain that. some broader measures of the market -- we should not only focus on the unemployment rate. the degree of involuntary part-time employment remains exceptionally high at 5% of the labor force. broader measures of unemployment are even more elevated, relative to normal that are standard unemployment rate. in addition there is an , unusually high incidence of long spells of unemployment.

by a number of measures, our economy is not back, and the labor is not back to normal. >> the chair recognizes the chairman from alabama for five minutes. >> thank you. last week the governor appeared before the committee and said that the clo ownership issues was at the top of the issue for -- top of the agenda for the interagency working group. what additional information do you need to resolve the clo issue and clarify how legacy securities will be treated under volcker? >> this is something a number of banking organizations have asked the regulators to look at. the regulators recently issued a ruling concerning that and this

is something they are jointly engaged in looking at. i will have something on that reasonably soon. >> i was going to ask you, how soon do you think we can expect you to issue some guidance? >> i don't have a definite -- >> but you think maybe soon? >> hopefully. >> do you know what remedy the group is suggesting? >> i do not. this is something they will have to look at. >> do you agree that this is something that needs to have some sense of urgency to address? >> it is certainly something that the regulators will look at and should look at. >> the fed has long suggested, and i know your response mentioned this, has held review that a large portion of the recent decline in the labor

force participation rate has been attributed to cyclical factors, which would become structural if unaddressed. therefore, because you consider it cyclical, it is part of the reason for aggressive quantitative easing. and let me put this up. that is the philadelphia fed's recent employment study. if you look at that, you can see that, number one, there is evidence that there may be a smaller gap between full betwee and current unemployment. they said almost 80% of the

decline in participation is accounted for by increase in nonparticipation due to retirement. this applies that the decline and unemployment rate is not due to more discouraged workers dropping out of the labor force. and the likelihood of those who have left the labor force due to retirement disability rejoining the labor forces small and has been largely insensitive to business cycle conditions in the past suggesting at least to me that the decision to leave the labor force for those, who reasons is more or less permanent. if you look at that line, participation is coming down for 10 or 12 years. and let me put a second chart up consistent with that. that's the bureau of labor

statistics. i think since 1998 on the fed and in 2001 we have a consistent dropping of participation. does that maybe modify or amend your review on the structural versus cyclical debate that we've been having? >> so i would like to make clear that i think a significant part of the decline in labor force participation as you mentioned is structural and not cyclical. the baby boomers are moving into older dangers where there's a dramatic dropoff in labor force an an aging population. we should expect to see a decline in labor force participation. and as you noted, that has been

going on for some time. so there's no doubt in my mind that an important portion of this labor force participation decline is structural. that said, there may also be, and i'm inclined to believe myself based on the evidence that there are also cyclical factors that work. so it has a structural component and also a cyclical component. there's no surefire way to separate the decline into the two components. but it is important to realize that we're seeing declining participation also among prime age workers and among younger people. and it seems to me some portion of that reflects discouragement about job opportunities. but there is no clear scientific

way at this point to say exactly what fraction of that decline is cyclical. >> time of the chair has expired. the chair now recognizes the gentle lady of new york for five minutes. >> thank you, mr. chairman. i would like to begin by congratulating you, chair yellen. in the 100-year history of the federal reserve, it's existed for 100 years, there's been only 15 fed chairs. you are the first woman to lead the fed or any major central bank. we are so proud of you. and in your long and distinguished career, you have excelled at every single point of your career and i just want to note that your appointment is a tremendously important historic achievement in the women's movement. congratulation congratulations. >> thank you, congresswoman.

>> i would like to ask you about the reaction to the unexpectedly weak job report which showed that the economy only created 113,000 jobs in january. some in the markets are now calling for a pause in the fed's tapering strategy. and has the weak jobs report caused you to consider slowing the pace of the feds' tapering? >> so, i was surprised that the jobs report in december and january, the pace of job creation was running under what i had anticipated. but, we have to be very careful not to jump to conclusions in interpreting what those reports mean. there were weather factors. we've had unseasonably cold temperatures that may be

affecting economic activity in the job market and elsewhere. the committee will meet in march. we will have a broad range of data on the economy to look at. including additional em ploilt report, and i think it's important for us to take our time to assess just what the significance of this is. i think the committee has said that -- >> well, can you describe what would cause you to consider a tapering pause? in months of bad data reporting? what would cause you to consider pausing? >> i think what would cause the committee to consider a pause is a notable change in the outlook. the committee when it decided to begin the process of tapering measured steps believed that the outlook was one where we would

see continued improvement in the labor market. if incoming data were to cause the committee -- >> what kind of data? jobs data? what kind of data? >> a broad range of data in the labor market including unemployment, job creation and other indicators of labor market performance. we would also look at indicators of spending and growth in the economy because we do need to see growth at a pace in order to project continued improvement in the labor market. and we note that inflation is running well below the objective. >> well, what would it take for the fed to consider sin creasing the asset purchases again?

instead of just slowing down reductions? what would it take? >> well, a significant deterioration in the outlook. either for the job market or concerns, you know, very serious concerns that inflation would not be moving back up over time. but we will continue to evaluate the evidence. >> so fab they are reducing the bonds with mortgage backed securities. why did the fed choose to split it between mortgage backed securities and treasuries? >> well, both kinds of purchases have similar effects on longer term interest rates. >> now if the housing market starts the to slow down, would the fed consider maintaining the purchases of mortgage backed securities and only tapering

treasury purchases? >> i think both kinds of purchases affect interest rates broadly. some evidence suggested different impact, but it's very hard to think of these being discreet. >> translator: the time of the gentle lady expired. the chair now recognizes the gentle lady from west virginia. >> thank you, mr. chairman. i would like to add my voice to the course of congratulations to chair on her enl employment. i've been on the committee for many, many years and i've understood more of what you said than i have probably the last two folks that were in front of us. so thank you for that. >> well, thank you. >> i represent west virginia and energy state. in your report, you note the growth in the oil and gas development business, which i think has great promise for the

country. it's also noted in notes for the richmond fed that the coal industry is suffering. low coal prices, regulation and a decrease in employment. energy has a great cause to bring jobs to this country and keep them here. what do you hear about energy policy and what effect would that have on economic growth? >> well, i think energy has been a great contributor to growth. and we've seen a huge shift in the u.s. position in terms of net reports in terms of natural gas. and energy policy certainly plays an important role there. >> thank you. another question, again, coming from a state that has a large senior population one of the concerns i've had is a low

interest rate and what concern this has on savers, particularly older savers trying to retire when they're relying on fixed income assets like bonds, cds or savings account. this has been difficult for them to plan for their senior years post retirement. what kind of thinking do you have as you're weighing the interest rate structure on the savings that's occurring in the country. particularly for the older saver? >> well, you know, certainly a low-interest rate environment is a tough one for retirees who are looking to earn incomed in says investments like cds or bank deposits. i think it's important to recognize that interest rates are low for a fundamental reason. and that is because in the u.s. and in the global economy as a whole there's an excess of saving relative to the demand for those savings.

for investment purposes. so, the rates of return that can -- that savers can expect really depend on the health of the economy and with a weak economy where there's a lot of saving and less demand for those savings, that's a fundamental drag on growth and what savers can expect. we are to promote a stronger recovery and in a stronger economy savers will be able to earn a higher return because the economy will be able to generate it. so i recognize that this is difficult for savers. it's also important to recognize that any household, even if it's retired in addition to saving, people care about their work opportunities. they care about the

opportunities of their kids. and a lot of people have exposure to the thought market as well. even if it's through a 401k or the health of a retirement plan, and so, this shouldn't be a one dimensional assessment. >> right. thank you. folks are working longer, too, and that's a concern for those who thought they planned well and they're finding it's not quite turning out for them. you already mentioned that 5% of the labor force is exceptionally large portion for the part time. you know, we've learned with the president's affordable care act that part -- full-time job is now anybody who is working over 29 hours is considered full time. is that consistent with your assessments of what a full-time job is when you're looking at your calculations, and when you say exceptionally large portion as part time, is that anybody working under 29 hours? is that how you define that?

>> i'm talking about part time for economic reasons. people who were working -- >> what's the definition of a part-time job? how many hours a week? how many hours pa week would you consider a part-time job when most people consider a full-time job 40 hours a week. is a part-time job -- the president has defined it as 29 hours and above. what do you define a part-time job as? >> this is a definition by the bureau of labor statistics, not ours. >> do you happen to know what it is? can you get back to me on the that? >> what? 25? 35. under 35. >> 35. all right, thank you. >> thank you, mr. chairman. chair yellen, as you know, the

median wage has failed to keep pace with a booming stock market and record quarter profits. is it possible that stagnant wage growth for american workers are not overly accommodating monetary policy as some has suggested is causing a slower recovery and decreased job creation? >> well, certainly for much of the workforce real wages have been stagnant in recent years. but also unfortunately going back many years as far as the mid to late 80s. there has been some speculation -- i'm not sure we know for sure, but the speculation that the trend for so many households of weak labor market income growth did contribute to the economy, the

idea there would be that wealthier families, higher income families spend less of their additional income than lower income families, and so, that shift in the distribution of income may have created a drag on growth. i don't know that we have any hard evidence on that, but that certainly is a hypothesis that has received some attention. >> the housing sector has continued to see improvement with robust construction activity and higher home prices. how will continued reductions affect the housing market? >> well, i think that quantitative easing or purchases of securities did serve to push down mortgage rates, and other longer term interest rates quite

substantially and was a factor underlying the strength of the housing market. and also promoted a recovery in house prices that's been good for so many families. we did see a backup in interest rates in the spring, and into the summer. in part, i think that was associated with the evaluation of the strength of monetary growth. but although mortgage rates are still very low, we certainly have seen a slowing in the housing sector since mortgage rates have backed up. i'm hoping housing will continue to support the recovery. that was clear provided evidence of the impact that mortgage rates do have on the strength of

housing. >> thank you. according to the adp national employment report, small businesses creates four in five new jobs in january. in your opinion, why are small businesses adding more jobs than the larger counterparts? >> well, we have seen over a longer time, not just the month, increases in jobs, in most sectors of the economy. i think both small and large businesses have by and large contributed to that. so of course there's a good deal of month-to-month variation. but there's been broad improvement in the labor market. it could further boost small business lending as the financial products due to general prohibition on risky and

lucrative proprietary trading. what we saw during the financial crisis was a fact. we saw stories about small businesses having problems accessing capital. yet it is changing. do you think that the volcker rule has anything? >> i suppose i wouldn't tie trends in credit availability for small businesses so much to the volcker rule. but certainly during the downturn, during the great recession lots of small businesses have had difficulty accessing credit. business conditions haven't been very good for many businesses during that period. in fact, the demand for credit by many small businesses given their prospects hasn't been that -- hasn't been that high. # and of course, equity in one's

home for small businesses is an important source of financing, and the decline in home prices, i think, has also taken a toll there. >> time of the gentle lady has expired. the chair now recognizes the chairman of the housing and sub committee. >> chairwoman yellen, congratulations to you and thank you for being here today. would you say that the deficit that we have been experiencing over the last few years have a negative impact on the future growth of our economy? >> i would say that long-run deficits that are projected to rise in an unsustainable way is a trend that has a negative effect on the economy. the larger deficits that we've had in recent years, in part reflect the weakness of the economy.

>> but did you agree that long-term, these kind of deficits in the path way is not a positive thing for the economy? >> well, i think if we look at long-term projections, for example, of the congressional budget office, we see as we go out, 20, 30 years that the debt to gdp ratio will be rising over time in a way that looks unsustainable. >> i'm going to take that as a yes. >> that is a negative for the economy. >> so here's a question. it looks like last year in 2013 the fed bought about what would be the equivalent of about 62% of the treasuries issued in 2013. and that you currently hold 18% of the outstanding treasuries. what a lot of people don't realize is you kind of bought

down the yield curve for the treasury. i'm sure mr. lou will put you on his turkey list come christmas time because you're doing him a huge favor by buying down the yield curve. transferring $77 billion from the fed to the treasuries to obviously reduce the interest borrowing cost. so in my view, if these deficits are negative, the fed has almost become a deficit enabler in that you're making it very easy to really mask, you know, what the real cost of these deficits are. speaking of the cbo, they said in a recent release that 74% of the budget deficit for the next ten years will be on interest alone. and so is this quantitative easing in the huge position that

the fed has taken, i question -- i think it's almost become a deficit enabler. i would be interested to hear your response on that. >> so, we're very focused on achieving the objectives that congress has assigned the to the federal reserve. and that is maximum sustainable employment and price stability. we've had an economy with unemployment that is well above normal levels and inflation is running well below our 2% objective, and the federal reserve is focused on putting in place a monetary policy that is designed to achieve those very important objectives that congress has assigned to us. because we have a weak economy, with some sense plentiful savings relative to investment, the fundamentals call for interest rates to be low, and we're allowing them to be low in

fostering a low-interest rate environment to achieve those important goal ls that congress has assigned to us. i don't think it would be helpful, either in terms of achieving the objectives congress assigned to us, or in terms of congress' deficit reduction efforts to purposely raise rates in order to weaken the economy. the likely impact of that in a weaker economy would be larger deficits. >> i hear what you're saying about the things that congress has challenged you with, and the employment and mandatory -- and monetary policy. but congress didn't pass a bill for quantitative easing. that was a choice that the fed made. and that very choice has really impacted, you know, the markets, but more importantly, it really, i believe is enable iing these

deficits to continue. and for the real cost to be masked in the fact that you're make making huge transfers. as those interest rates go up, the deficit has as a percentage of what the interest rate applies to that will be much larger. the chair now recognizes mr. sh sherman for five minutes. >> i'm sure one of your great regrets is you never get time to hang out with accountants. that being the case, you probably haven't focused on the proposal to force the capitalization of all releases. this would add $2 trillion to the balance sheets of america's businesses.

adding 2 trillion of assets. 2 trillion of liabilities. you would think that would balance out. but in fact it destroys the debt ratios, violates their debt borrowing kov nans. it's estimated this will cost from 190,000 jobs to millions of jobs as corporations try to cut back and regain their debt to equity ratio. and as those wanting to do real estate development without an anchored tenant with a long-term lease, you can't build a project. and so i won't ask a question here, except to ask you to take a look at this and perhaps it

will affect your economic projections on the downside. and then in your role as bank regulator realize there will be hundreds of thousands of companies who in no fault of their own are in violation of what they signed with their banks and the pressure will be from the bureaucrats to call the loans because they're in violation. and perhaps looking at the macro economic side and bank regulatory side could focus on that. you say that savings exceeds demand for investment capital. and i disagree with you a little bit on that. it exceeds effective demand. we're here for small businesses. they can't necessarily knock on your door. they're going to knock on our door whether we want them to or not.

american small businesses can't get bank loans. part of the problem is bank executives. they all want to invest in the whale and like the whale until the money in london. but another part of the problem is the bank regulators. i hear from bankers if we invest in sovereign debt, turkey, heck, if we invest in zimbabwe sovereign debt, we're not going to get dinged by the bank regulators near as much as if we make loans to people whose characters we know who have been with our bank for years, who are part of the community. what can you, and these loans shouldn't necessarily be made at pr prime. 1 out of 100 are going under. not every new restaurant is a

good restaurant. what can you do so banks are making prime plus five, prime plus seven loans and having only modest increases in the demand for capital, and the the pressure is on them to stop investing. we need jimmy stewart banking back again. >> i think it's important to make loans in the communities and in our role as bank supervisors we have tried to be very cognizant of the possibility that overwhelming supervision could dminiminish t willingness of the banks to make -- >> that may be the policy at the top. at the field level that's not what's happening. this is an important issue that we've been aware of now for a

number of years. and we work carefully tw the supervisors to make sure we're not taking on policies to discourage lending to small businesses. >> you're going to have to work much harder to get your bureaucrats online on that ft and the proof of it is banks don't make prime plus five loans. one last thing, dodd frank gave you and the other systemic regulators the authority to break up those too big to fail. any chance you're going to use the authority? >> we have a broad program that's designed to deal with too big to fail. it's the dodd-frank program. we are actively completing our work there and i'm very hopeful that is going to effectively deal with it. we will monitor as we go forward if more needs to be done.

the committee will come to order. the chair now recognizes the man from georgia for five minutes, mr. westmoreland. >> thank you, mr. chairman. and thank you madame chair for being here. we've heard from the other side of the aisle that the president's policies are not having any ill effect on the economy. yet, chair yelen, we have just recently all seen a report from the cbo that the obamacare affordable care act is estimated to cost 2.5 million jobs over the next decade. do you believe that regulation or overregulation has an impact