that is where they were in the futures trading this morning when the testimony was first released at eight:30 eastern so that would suggest ben bernanke hasn't said anything that deviated wildly from the prepared marks. connell: in this question and answer session, the house of representatives, anything can happen as they say. the most recent questionnaire of the chairman, we will rejoin the hearing now and as development work we will keep you up-to-date on all the news of the day but live to capitol hill once again the ben bernanke hearing. >> housing market which has been a drag on the economy the last couple years has recently begun to show signs of turning around. do you believe the increase in housing prices provide evidence the fed's monetary policies work. is there a casual correlate of relationship between the two. >> i think so. historically the two areas of

the economy which had been most impacted by monetary policy are housing and autos and those are two areas which are leading our recovery and evidently low mortgage rates have contributed, household formation and other factors have also contributed to the housing sector is an important component of the economy at this point and housing prices going up are not only beneficial in terms of stimulating more construction. construction. it will make them more confident, more willing to spend on other business services. >> you are not concerned. >> well, the mortgage rates remain relatively low. we do have to monitor or that. >> they are inching up.

we will see where housing prices go from here. >> do you believe the labor market reflects a new normal, as some have suggested question what is a sustainable rate of unemployment in your view over the media and long-term and what in your view can be done? >> i think we are still far above the normal unemployment rate. to get the one illustration, the projections suggest that the long run rate may be somewhere closer to 5.2-6%. even beyond that, that amount of unemployment reflects the fact that people do not have the right skills for the available

jobs, who are located in the wrong parts of the country, so training and education, improving the function of the labor market, there are things that can be done through labor polity, labor force policies back and lower unemployment further than the fed can just by increasing demand. >> safe or extends in the african american community where a male unemployment hovers around 13-14%. you think the labor department and community colleges need to do a better job of connect gain to target growth in the industry >> were together to try to link up people with jobs.

the community college provides the right training. >> thank you. >> the chair now recognizes the gentleman from alabama. >> thank you, mr. chairman. chairmanbernanke, i am not seeing a lot of discussion regarding the treasury and the deficit coming down. it seems like that would give you more latitude to reduce your purchases of treasuries. would you like to comment on that? >> well, the defense still owns a relatively small share of all the treasuries outstanding. it is true that as the new issuance comes down that it becomes a larger share of the new flow of treasuries coming into the market. we have not seen that our purchases are disrupting the

treasury market in any way. we believe they have been effective in keeping interest rates low. with that being said, as i have described, depending on how the economy evolves, we are considering the changing of mix of tools that we use. >> they will probably be issuing less. >> we would consider that. again, our view of it, which, you know, people disagree. what matters is the share of the total that we owe not the share of the new issuance. >> you mentioned last year that it was said that goal. do you still believe that and not structural? >> i think that probably about two percentage points or so.

the rest of it is that economists would call frictional or instructional. >> okay. have you done, your studies, you think maybe 5% structural. >> most importantly, so far, we do not see much evidence that the structural part has increased much during this period. they lose their skills. they lose their attachment to the labor market. so far, it still appears to us that we can obtain an unemployment rate. leave the country. >> so far, they did not specifically address the 7% unemployment target. you mentioned it in your press

conference. was that 7% target discussed and agreed on? >> yes, it was. 7% is not a target. it was meant to be a negative. i described a series of conditions that would need to be met for us to proceed with our moderation of purchases. we have a go around where everybody is in that committee, including those that are not voting get to express their general views. there was a good support for both the broad plan, which i described, and for the use of 7% as indicative for the kind of improvement we are trying to get. >> okay. thank you. >> assessment of the longer run normal level of the rate has been lowered.

do you agree with that? >> well, a rough rule of that is that long-term interest rates are roughly equal to the inflation rate plus the growth rate for the economy. the inflation rate, we are looking to get to 2%. to the extent that in the aftermath of a crisis and from other reasons that the economy has a somewhat lower real growth rate going forward, that would imply a lower equilibrium rate as well. >> you mentioned gdp estimates. they were too optimistic. i think earlier you said you believe one fact there is a policy decisions made by congress to some extent. and failing to address the long-term structural changes. >> that is right. we should all keep in mind that these are very rough estimates

and they get revised. for example, you get different numbers would you look at gross mistake and come and set of gross domestic product. yes, as i have said a couple times already, i think that congress would be well advised to focus more on the longer term. >> thank you. >> the chairman now revises the general lady from new york. >> it is my understanding that we are going to people that did not have the opportunity to ask questions at the last one. the next person would be -- >> happy to do it. it is just the list that we receive from you. we are very happy to recognize the gentleman from colorado for five minutes. >> i think the chair. i think the general lady from new york.

mr. chairman, it is good to see you, as always. i just want to compliment you on being a steady hand through all of this. in terms of fiscal policy, we had a very expansionary policy. to sort of take it back a little bit on mr. baucus' question and mr. clay's, i am looking at page 11 of your report where it says congressional budget office estimated that the deficit reduction policies generate 4.25 percentage point narrowing in the structural deficit will also restrain the pace of real gdp growth to 1.5 percentage point this calendar year. what is 1.5% of real gdp means in terms of jobs and wealth and one in half% is just a number?

>> the cbo also estimated that 1.5 percentage points was something in the order of 750,000 full-time equivalent jobs. i think with another 1.5 percentage points of growth, we would probably see unemployment down another seven or eight tabs. something like that. it makes a very big difference. it is very substantial. we are hoping that as the economy moves through this. they will see more rapid growth. >> the graph on the proceeding page, total and structural federal deficit 1980-2018. do you see that? >> yes. can you explain that graft?

it looks like you project no structural deficit in about 2017-2018. what does that mean? >> that means that, that means that taking away the affects of the business cycle, the business cycle causes extra deficit. you get less tax revenue. you get more spending on other programs at various times. before that is bernanke on capitol hill. watching those markets, the dow holding steady. still in positive territory up there is something that are nagy just said that 5% unemployment is achievable. connell: let's bring in the former governor of minnesota. let's get his reaction to that.

even as dagen was coming out of the bernanke comments, specifically on this point of 5% unemployment being achievable from where we are now, the mid- seventh. our thoughts, governor. >> i certainly hope so. as you look at our nation's history, i do not take that percent should be looked at as out of range. i think he was trying to make the point that of the current unemployment rate, he thought about two or 2.5% of it was difficult. the rest of it was structural. as to the structural piece, we should have a discussion. what that implies is that there are some folks who lack the necessary skill or education to connect to the economy today or tomorrow.

we need to change and improve that structure as part of a solution as well. dagen: do you worry that structurally we have so many people that are out of the workforce that are on unemployment disability and the like that they will never reenter the workforce? we could have a more pronounced problem nationwide. >> that is a concern. of course, if somebody not able to work due to a disability, we need to make special exceptions for this. for those that are able to work and want to work, but lack the necessary skill or education or do not have enough growth in the economy to provide, there is more that we can do about that. one generation ago, my dad and many of his contemporaries, you could still go get what he called the strong back job. you could drive a forklift. you could do lots of things in the meatpacking town.

many of those jobs are now gone. so much of this, income gap and employment gap, is really an education and skill gap. connell: not necessarily anything that the federal reserve chairman can do about that. this position that you have, the financial services roundtable, would you jump on that bandwagon of criticism? it could be stronger if we had a different policy in place. how do you personally rate what you have seen. >> well, of course, he has been the federal reserve chairman during very challenging and difficult times. i think that history will judge him kindly.

keep in mind, the final chapter is not written yet. the last chapter was important. we do not know what will happen particularly as quantitative easing measures it withdrawn. so far, you would have to say that the chairman and very challenging times has guided the fed and the economy at least directionally in a more positive way. dagen: governor, it was great to see you. thank you so much for taking the time. be well. connell: we continue our coverage of this life hearing on capitol hill. the republican gary miller of california, the chairman in the middle of his answer. let's rejoin. >> right now we basically have a government run market. in order to protect the

taxpayer, to increase efficiency, we would like to have more market participation. i do not know the answer to your question. first, if the government does play a role, it should be fairly compensated. it should read steve some kind of insurance premium. >> if you are going to have a facility to replace the gse's, the profits should go into reserve accounts. to make sure it is solved. when the account built up large enough over seven or eight years, there is no need for a government guarantee because the reserves will be so huge. you would not put the taxpayer

at risk. the problem we have had in the past is when you have investors investing in gse's, the gse at that point in time chases market share to make investors happy. that is not their role. i am also concerned that if we make a mistake the government will still be there. they will not let the housing market crumble if something goes wrong. you two make sure that it can withstand a downturn. >> well, i think that is right. either you have to be 100% confident or, alternatively, if you think there is a scenario, then it may be a good idea to make sure that the government gets paid appropriately in the rules of the game are laid out in advance.

>> said that the prophets were. if you just looked at the profits that gse's are making today, if there is an entity doing that of equivalent, those reserves would be $8 billion minimum. you charge a reasonable fee, that is probably $2 billion. you have a trillion dollars which is six times the risk the government took. would that not add to market stability? >> this new entity could charge those entities if you had competition.

>> they are not crowding in today. we want to get them in. we still need to provide in charities. >> correct. >> time has expired. the chair now recognizes the gentleman from massachusetts. >> thank you, mr. chairman. thank you for your service and willingness to come before the committee and help us with our work. i want to stay on that line of questioning. both the house and senate are actively considering just laid of proposals. i think most of us, in some form it is necessary. fannie mae and the fha creations

of the new deal, i wanted to ask you, historically, the 30 year fixed mortgage, which is really, you know, a major renovation, prior to the government getting in, gse's getting in and providing that backstop, was that available and was the private sector successful in trying to create that? >> during that period of time, people usually took out five year balloon or judges and refinanced financially. in terms of the last eight years of government support, you know, that is really what has created opportunities for middle income potential homeowners from

getting into the market. as we are grappling with this reform, i am very concerned about what happens to rates. i do agree with mr. miller. there seems to be some requirement of a backstop at some point. obviously, you want the taxpayer to be as far back as possible and that the initial cushions or the initial loss, if necessary, be absorbed by the private sector. we are trying to figure out a way of preserving an affordable 30 year fixed mortgage. keep that market going without having the taxpayer take all of that risk up front. that is what we are trying to grapple with. i am wondering if you can help us with that. >> earlier, the chairman asked me about passing on subsidies to the consumer. i do not think that government

backstops are very gifted and lowering rates unless they have a control, a price control. >> isn't that a function of risk, though? if the private sector knows that at a certain point, like with the terrorist risk insurance we created, the industry knew that there was a backstop beyond which they would not be responsible. it did in fact result in a lower rate. >> yes. what i was going to add, though, the argument are exactly the situations we have faced the last few years. the biggest housing problem in part on trend private sector are not adding counters typically. is there a role for the government to support this process?

if that will happen -- figuring out what the government is in charge for whatever protection it is prepared to provide. >> okay. sir, i want to thank you for your service. i have heard storres that this may be your last appearance in front of this committee for this purpose. i thank you. you have served us very well under very difficult circumstances. i appreciate your service to country. >> the chair recognizes the chairman from california. >> thank you. i think the risk waiting at the end of the day is only as good as the metrics that we develop. i am thinking back to basel one and now we are looking at the final basel three.

it includes a risk weighting of 20% for debt issued by fannie mae and freddie mac. the rule includes a risk weighting of 04 unconditional debt issued by ireland. they have no country risk classification. both of these are, in my memory, identical to the risk weightings of basel one. my concern is that we should have learned a few things about those metrics given the consequences of the clear failure. yet, here we have the cord looking an awful lot like this one. given what we have experienced, the failure of the gse's, the

propping up of many here. economies can't do you think that these accurately reflect the accurate risk posed by these exposures? >> they are international. you know, international agreements. each country can take that floor and do whatever it wants, you know, about that floor. we would not allow a u.s. bank to hold greek debt at zero weight. in terms of gse's, they have not created any loss whatsoever. they have set the taxpayer, but not the holders of those securities. it is not just the risk rates. >> instills to me that at the end of the day, with respect to what you are working out, you

have a situation where high-risk countries like spain or portugal should they, receive the same risk weight as exposures to the u.s. and that is the way that would be handled i think in europe. you just seem -- that should be addressed in the calculus. >> one way to address it is through stress testing. certain sovereign debt airs losses and then calculate into those scenarios. >> let me ask you another question. a role in the housing market that the government play. such a role obviously would be far better than the role

government played during the last crisis. which was stored in early process a call if you look back over the rate ballooned bubble and subsequent bust that was developed as a result of housing policy and a lot of the actions taken. title ii of the act has several provisions meant to allow fha to play that role. the goal obviously is to greatly expand eligibility. during the act, if it were enacted. that would get us to the point of that borrower eligibility in such a circumstance. would you agree, enabling fha to play a role in times of crisis as suggested under the act will help continued access to the mortgage market?

>> i am not advocating a specific plan, i am just pointing out that we need to think about the situation where there is a lot of stress in the market and we need some sort of backstop. i obviously have not studied this proposal. it seems to me that fha could be structured to provide such a back drop. that would be one to have the government provide a backstop. >> i thank you very much, chairman. for attending the hearing here today and for your answer. we will probably be in consultation later with further questions. >> the back chair recognizes the gentleman from texas. >> thank you, mr. chairman and thank you for mr. bernanke for thank you, ben bernanke, for appearing again. i trust this will not be last visit. i believe our country has service. not just the service itself, but

the way you have conducted yourself in a time of great turmoil. i am hopeful that you will be back. i would like to, for just a moment like you to visit with us about the issue of certainty and uncertainty. uncertainty, confidence, optimism, because while you may do lot of things if consumer confidence for producers don't have confidence that could have a significant impact on long-term growth. confidence is important to growth and i read through your paper, by the way and i'm excited about the things you have said but i didn't get enough on the question of confidence. would you please elaborate a bit? >> it is quite true that business confidence, home

builder confidence, consumer confidence have very important, good policies promote confidence, the fed policy, and congressional policy, we create a framework, we understand what is happening and believe they have confidence that the basics of economic stability will be preserved. is a difficult thing. to some extent a political talent to create confidence in their constituents. nobody has a magic formula for that bud the more we can demonstrate that we are working together, and we will instill confidence and that in turn will pay off in economic terms. >> i compliment you and i would like to focus on one aspect of working together. i contend that this is an

important element instilling confidence and i believe the american economy is quite resilient. it is strong notwithstanding some of the weaknesses that have been exposed. the reason i know it is strong is it survived congress. if the economy can survive congress i am confident it will thrive eventually, things that we do, repealing continually, attempting to repeal some of the significant aspects of bills that have passed the american people i am not sure how much confidence these engender more than 30 or 40 attempts to appeal the affordable care act, attempt to repeal dodd-frank without

replacing it, attempts to repeal the cftc without a good sense whether the replacement would be. at some point we in congress and engender the confidence that would cause the american people to want to buy or invest or produce or congress has a significant role to play and unfortunately we have not been able to work together to the extent that the american people are confident that we will do things to help create jobs, to build a broader economy. you have been very focused on jobs, very focused. we have not been as focused on jobs. legislation that can produce jobs much of it has lingered and not had an opportunity to move

forward. i believe in the final analysis your good work while it is going to be slaughtered and applauded still needs help from the policymakers in terms of working together to instill confidence. confidence is needed. this economy is needed to blossom. when i talk to business people they say to me we need confidence, that the rules are going to be static, consumers say to me i need confidence, i buy a house and i am confident that the system will remain status and knocked dynamic. i thank you for your service and trust that we will help instill the confidence to augment or supplement the good work you have done. >> thank you. >> the chair recognizes the gentleman from virginia, mr. hurt. >> thank you, german ben bernanke for being here today, thank you for your hard work.

i represent a rural district in virginia, one that has not seen the same economic growth other places in this country have seen. we still have a places in our district where we have jobless rates that double digits, we certainly look to washington to adopt policies that will make it easier for our businesses to succeed, families to succeed as opposed to making things more difficult. in listening to your remarks you talk about systemic -- adopting policies that go to systemic importance. obviously you discuss basel iii and to the your hat to me in st. talking about the fed's adopted policies to support main street, jobs, consumers, things we all

care about. in aftermath of the rules adopted earlier this month relating to that, frank keating with the american bankers association asked the question are we making things easier or are we making things more difficult than the essentially said if we are making them harder that is not what we need for our economy, not what the recovering economy needs. as i think about what we need in my role i'd think about community banks and with the important lifeblood they are to our main streets economy. i wonder if you could talk a little bit about the reasoning behind not just exempting community banks from the application of the rules that you have adopted. and why you did that. >> i agree about the importance of community banks particularly in rural areas that might not be

served by larger institutions. is also important community banks well-capitalized so they continue to lend in difficult periods and don't fail. we want to be sure they are well capitalized, but in terms of the final basel iii rule we were very responsive to the concerns raised by community banks, they raise the number of specific issues related to the risk of mortgages, relating to the treatment of other comprehensive income, trust preferreds, a variety of things they were concerned about which we responded to and it is part of a broader attempt threw out reach, meeting with advisory councils to understand the needs of community banks and make sure we do everything we can to protect them. basel iii is aimed at the

largest international elective firms, most of the rule was not relevant. clear the wall tried to make some accommodations for community banks and i recognize that. my question is is there a reason that you talk a little bit about why you all concluded you could not exempt them entirely and i guess the second question is that i have is do you think do you think based on your studies or anybody else's studies, do you think these rules will have a disproportionate effect on community banks? obviously that is the heart of the concern, the smaller banks have a much more difficult time complying with regulations than the largest banks. >> i don't think basel iii is aimed at community banks. the amount of bureaucracy and rules is not significantly

different from what they are doing now. in terms of capital the community banks are already typically held more capital as a ratio than larger banks do. >> ben bernanke continues his to the testimony and we cover it on fox business. the market taking it in stride would be the cliche of the day because the dow is up 3 points as the chairman continues to take questions. dagen: longer-term interest-rate that you look at the ten year yield are actually lower, below 2.5%. what do you make of that? jeff tom lehman is chief investment officer at the hague the wealth advisor is overseeing $2 billion in assets, he joins us from atlanta. it seems like any worries have been wiped away if you will about longer-term interest rates, the federal reserve acting in a way that might

surprise the bond market. >> we had a good spike in the ten year yield over the last couple months on this notion that the fed may begin tapering later, they haven't done anything but continuing to be in the marketplace buying at the same pace that they have but it was an abrupt change to get to these levels. a fairly rational thing, and the feature driving the ten year yield down to 1.6, finally back above the rate of inflation by a small bit currently. i would suspect those yields will probably stay in this range, the fed is going to have to start backing out of the bond market at some point whether it happens in september or december or later than that is up in the air. this is where we want to be, we have the economy being able to

go its own little better. stuart: the chairman's testimony comes in the middle of corporate earnings season, a shift from the bond market to the stock market, what do you think drives the market from here on out. visit ben bernanke's policy, his latest comments or fed officials and as you were talking about interest rates going or where we think we're going or where are we getting back to the point were public's money, corporations are making or how much they're supposed to make in the future, the interest rate environment could affect that but will be more driven by those types of things? >> the trend in earnings will be extremely important as we get through the remainder this year and into next. 2013 has been interesting with a strong smart to the year for u.s. stocks but it has been driven by multiple expansion, earnings growth in the first quarter was similar to the overall economic growth at 2%, and earnings growth around 4%.

and in the upper teens, we have gone through multiple expansion which implies pretty solid improvement in both the economy and earnings growth through the course of the remainder this year, but if you look at bank earnings that have been issued this week they will be beneficiaries of the recent change because the cost of funds stayed the same with zero interest-rate policy the steepening of the yield curve should do some nice things for the spread which will continue to help those banks he'll. dagen: speaking of making the money where are you going for income for customers at this point? any portfolio changes you have made recently? >> one affect of this pop in yields is bonds again have improved at the margin and we still think the trend will be more likely upward in rates and

you have to be careful, more income generation. we are finding actually good opportunities and dividend paying stocks around world, emerging markets have a really tough time this year, but we use an e t f to build in as part of the emerging market, nine times earnings and dividend yield more than 4% so we think when you look at favorable valuation levels, strong dividend yields, good precondition for future total returns as well -- dagen: did you learn emerging markets on the way down? that was the question. >> yes we did but keeping on the way down in perspective, a pretty terrific asset class over the last few years they are having a hard time this year and we suspect that might be overdone. connell: we're past the time to rejoin the chairman and the testimony were watching on the side of the screen.

i we passed the time, since we have been here the last few months when anything out of ben bernanke's mouth or anybody associated with the federal reserve is a big market event often misinterpreted? are we getting past that? may be we have a better idea what the federal reserve is thinking or think we do? >> what we might be passed is uncertainty about how these bond purchases will pay out. it is a known thing they will be reducing their purchases in the bond market over the next several months so that is a positive feature. anytime you remove uncertainty from the market that is good but the fed, may be some investors want more certainties and they have gotten but the fed is operating in a very uncertain environment that is full of potential hazards soak it is a little difficult to get a lot more fight with the 6 of their

policy. once again, this abrupt correction in rates which will factor in what is going to happen, the fed will back out, and the rate of inflation which is a more normal situation over the last two years. dagen: thanks for being here. and we appreciate it. connell: we will rejoin the fed chairman, the congressman, emanuel cleaver who represents the house of representatives handling the question right now. here once again, testimony of fed chairman ben bernanke. >> to rationally and thoughtfully consider the absence and my fear, and reduce the likelihood that this is

going to happen. and i would have time for action. we had a free more orderly liquidation. >> the chair recognizes the gentleman from ohio. >> thank you, mr. chairman, thank you for being here today. i really appreciate your willingness to come and answer questions. i will try to get through basel iii and we will see how my time goes. the first is following up on the questions mr. hurd asked and i will quote you, you said basel iii was not aimed at community banks and it is clear it is aimed at larger financial institutions who helped create the financial crisis and i agree that it won't result in most community banks raising capital because their capital is normally higher but for a few

community banks that don't have capital right now where they have not as much access to capital markets it could harm them and none of these banks will be too big to fail. and they're not so interconnected and i am curious why given that basel iii is voluntarily comply internationally why we didn't exempt the community banks. >> is important to capitalized to protect the deposit insurance fund, protect local communities and the borrowers that depends upon them and we have seen in the past financial crises that were small firms like the depression and savings at home crisis and the issue that you mention, we're getting along transitions, we are not saying you have to have this level of capital tomorrow, and may have capital through retained earnings. >> is not a burden on most

community banks but i worry about a few of them. and -- dagen: the house financial services committee getting grilled, not much marketing, the dow still positive. it is lower. is back below a short time ago below 2.5%. connell: as you look at the market, let's see if his hands are still in his heads as they were a moment ago. we will squeeze in a quick break and come back, there is the chairman looking attendant on fox business in a moment. every day 're working to be an even better company -

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connell: chairman of the federal

reserve, his testimony before the house of representatives. vostok market has taken a turn lower, crazy reaction, and have been higher most of the day. dagen: the yield on the tenure is 2%. let's go back to the testimony. >> might be a more normal recovery process. it is hurting our recovery. would discuss your views on japan's currency policy and to baton the economy and do you believe there currency policy is hurting the economic recovery in the globe right now? >> yes. fundamental differences between china's policy and japan's policy. china managed this exchange rate and kept it for many years below its equilibrium level in order to increase its exports. that is what economists call a zero some game, with that game we lose. the japanese approach is different.

they are not manipulating their exchange rate for directly trying to set their exchange rate at a given level. they are engaging in strong domestic monetary policy measures trying to break the deflationary they had for 15 years and a side effect of that is the yen has weakened. the g 20 and g7 discussed these matters and the international consensus is as long as the country is using domestic policy tools for domestic purposes, that would be and taxable approach. i recognize movement and exchange rates to affect competition. you said you are from michigan. i see wear your concern have come from. in your interest the sea of japan strengthened, the economy grow faster and increase markets as well as competitive supply and over time if they do achieve

positive inflation, partially offset the exchange rate movement. i recognize the concern i don't -- and the companies to try to get there sense but there is a difference which is japan is trying to extend its overall economy and therefore, a benefit and a cross and a japanese economy and stronger asian market. >> to pick up from that point, as you wind down quantitative easing while japan maintain this current policy driving down the yen do you believe that will have an impact on american manufacturing as you wind down as they continue that policy? >> it could to that extent. as you know for example, and there is --

connell: ben bernanke continues his testimony on capitol hill, watching that and monitoring of all day on the fox business network. the dow down nine points. coverage continues after a quick break. keep it here. >> i don't think -- this change in the value

dennis: i'm dennis kneale. cheryl: i am cheryl casone. we continue to monitor ben bernanke's testimony on capitol hill and the bill under way. a few things we mentioned here. and whether 5% as achievable, and -- dennis: the dow moved lower. it is downie unless the point

based on a german's reaction and an all-star panel, and attack entrepreneur about to join or rape new york city mayor, go 1-on-1 with jack, founder of vice.com. cheryl: vendor ben bernanke's testimony, that continues, he was answering a question, asking the gentleman from tennessee, this is the queue and a portion and we expect this to run another hour or so. >> that is the mandate. when the economy is away from food employment to provide the financial support that will move the economy. >> the politics over the past four five or six years of playing more of a role than they did six with seven years ago. >> your earlier point about collaborating with the treasury and the financial crisis has nothing to do with monetary policy. that had to do with the two main financial institutions in the government working together to

prevent a big financial collapse and the collaboration was needed but at no time during the crisis or at any point did the administration or congress or the treasury department tell the fed we need monetary policy. we always maintained independence and we think it is critically important that we maintain it. >> i have about a minute left. i fear the government's intervention into trying to make sure the private sector is running at full capacity creates all sorts of problems. now that i am up here and see how big this is i had a constituent the other day who brought this point up. he said with the regulatory policies that we have with the choking death fact that some say, the big government is really good for big business. the big businesses can react to big government, smaller businesses have a harder time doing that with the resources we

had and i thought about it a minute and it is a great point. again i am fearful we are out of control, pumping the money in, private-sector is addicted to the pumping of money and when we shot that off there is going to be a reaction. the reaction that the stock market is 15,000 if we drop back to 12,000 you will see a panic, what do we do then? so many people, chairman, think the government's role is to step in and save the day. this is taxpayer money, very dangerous. >> there is an idea going around that the fed can step away and not do anything. we have to have interest rates somewhere. the fed does control of our money supply so we have to do something and we are better off trying to get the economy moving and not. >> the time of the gentleman expires, the chair recognizes

the gentleman from illinois. >> time for the tee shirts to be passed on by the retirement party, and thirty-fourth fell in dollar swing in household net worth. when we see $16 trillion drop in household net worth, and republican fiscal regulatory and monetary policy were pleased by and $18 trillion recovery, one of the most impressive achievements and no doubt the three legs of financial policy, monetary, fiscal and regulatory monetary policy deserves a lot of credit. you deserve the compliments you have been getting. the question of when like to pursue. i understand the fed and the cbo maintain roughly comparable macroeconomic models, the cbo has analyzed two macroeconomics scenarios, one in which congress

passed the senate proposal for comprehensive immigration reform on a path to citizenship and which they found resulted in a $1.5 trillion increase in economic activity over the next ten years and the $200 billion reduction in the federal death and a second scenario in which republicans succeed in blocking immigration reform, and in out larger level of federal debt and decrease in economic activity compared to the other scenarios so given this policy that he will those scenarios. and republican obstruction and the load that scenario that would follow congressional passage in the senate comprehensive immigration reform bill. >> to begin with we haven't done

comparable analysis of economic implications of immigration. in general, growing population, more talented people had to help the economy grow. and would deal with aging, situation. and we are a nation of immigrants. all that being said there are a lot of details, and monitored and i think those of the province of congress and i don't want to try to set the immigration policy. the details have to be worked out in congress. >> my question is when there are policy choices being made by congress, with fairly large macroeconomic effects, how you deal with this in your plan? >> generally we take those decisions as given and figure out the best thing we can do given the economic environment we find ourselves in. the fiscal policy and restraint,

and how much monetary accommodation is needed. and much longer term propagation is these are gains and losses over many years. and insurance cyclical movements in the economy our focus is 10 or 20 years rather than the next few years? >> to follow-up on representative release's questions, federal housing policies which we pointed out not on the republican proposal but the democratic principles for housing market reform. there was also a reason -- cheryl: we want to bring you back to our studios in new york as we continue to question the testimony on capitol hill, pa house financial services committee fed chairman ben bernanke and talking about immigration reform. dennis: a lot of other stuff. think of how the markets gyrated

last time they gave the simple answer to question and all the fear, the fact that the dallas up 3 points is almost a relief, the relief of boredom, much better market reaction, no major wave. let's go to ben bernanke's comments from the all-star panel. shares at the stockton, fox business contributor charles payne, and rbc capital markets standing by. to you first on the issue of housing. it was in a prepared, and this morning, the fed chairman was asked about the stability of the housing market. the housing market has been a bright spot for the stock market and today's data was negative. >> it was. stunningly so, the only thing of highlight is is more of a function of multifamily starts which have been very volatile and in that regard that did the damage today from housing starts

perspective. if you look at single-family, single-family was pretty modest. connell: the journal came out saying ben bernanke is firmly saying no set schedule for pulling back, why such in muted response? >> unmuted response is bullish because the alternative is a pullback for the s&p 500. i look at markets from a technical standpoint, and the first supply and demand for indices and if you look at the s&p 500 it still has momentum behind it and it is on the verge of a new all-time high. it is okay by the may high but it will break out. cheryl: get technical from a stock perspective that you are telling your clients right now that if there is up fullback is a good time to buy even though the inclination would be to sell. charles: technical analysis but more on the fundamental side momentum is with us.

one of the congressman brought up the volatility. scott garrett was on with stuart varney and what you have seen is both sides of the political aisle trying to get the fed chairman to weigh in on their side. obviously is not going to does his own jobs the despite the libertarian questions and conservative questions about this ticking time bomb of that accommodation and on the other end income inequality is not a bad idea. i like the reaction so far. it is and intelligent idea, let's see how the market closes. dennis: we always see interest rates rising, rising rates are a stronger economy. >> ben bernanke is trying to take this out of here. trying to sell the story, rates are rising because of better economic backdrop. you actually ask the market

participant, they now fear the press of this started the exit process. i would push back hard on the view that this is a function of a better job. dennis: release came in here. and the dual mandate to. they may be succeeded and policy at 7 points. they're forecasting threshold of 6.5%, and into the fed board. charles: i think we started off with housing which is the third mandate and on the question of housing that housing rebound has been professional investors. and in ben bernanke's comments, he may not be fooled by 6% rate, can people dropping out of the job market.

will not be fooled by 6% rate. in that party is pretty interesting. and his main goal is to make sure everyone understands the difference between capering and actually raising -- dennis: let me as the technical question. to bond prices react or our stock price movements dictated by bond price movement? >> they were related, positively correlated recently to trade off. and a positive correlation under way. you cannot rely on that, treasury yields moved higher. and the trajectory, and surely

rising, does that mean the stock market has -- cheryl: i want to take the nation of the nation's dad, where ben bernanke has been very clear, the fiscal head wind from washington will be marked negative and economic negative, and $7 trillion as the recession began. >> the previous guest made this point, so many people missing get. there's a massive distinction in the capering process engaging and lifting fund rates. and the last three meetings, the reason -- highly accommodative policy, and the funds rate, the tapering process would be less asset purchases, still being

very accommodative, this notion of applying less pressure to the gas pedal, this isn't an ideal we are driving home for months, ben bernanke is trying to make that point again here today so that is important. in terms of fiscal policy is interesting to hear him talk about this. he said he effectively one of the reasons reading between the lines one reason the fed had to be so accommodative is they fear fiscal policy and he said fiscal policy is worth 1 to 1.5 percentage points in terms of the drag from gdp so if not for fiscal policy's dragons be close to 23%. and one last quick point. and if not for is this massive fiscal policy perspective and monetary policy would not have been as accommodative. dennis: if my grandmother had

wheels she would be a wagon as my father used to say. this economy is not growing 3%, and -- >> i would argue your study -- just make sure -- okay. cheryl: love you, thank you. charles payne, we love you as well. good to see you in our studio. dennis: back with more coverage of ben bernanke, master of the house on the hill next. cheryl: with the energy market as we go to great. oil prices, and other issues. we will be right back.

if you've got it, you know how hard it can be to breathe and man, you know how that feels. copd includes emphysema and chronic bronchitis. spiriva is a once-daily inhaled copd maintenance treatment that helps open my obstructed airways foa full 24 hours. you know, spiriva helps me breathe easier. spiriva handihaler tiotropium bromide inhalation powder does not replace fast-acting inhalers for sudden symptoms. tell your doctor if you have kidney problems,

glaucoma, trouble urinating, or an enlarged prostate. these may worsen with spiriva. discuss all medicines you take, even eye drops. stop taking spiriva and seek immediate medical help if your breathing suddenly worsens, your throat or tongue swells, you get hives, vision changes or eye pain, or problems passing urine. other side effects include dry mouth and constipation. nothing can reverse copd. spiriva helps me breathe better. does breathing with copd weigh you down? don't wait to ask your doctor about spiriva. cheryl: quarter after the hour, time for stock, floor of the stock exchange with nicole petallides. kind of a mix day. bank of america coming out. nicole: a lot going on, earnings going on and that moves a name like banc of america which is a 2.5%. let's look at the headline which

is ben bernanke's testimony. traders are watching carefully but getting much of the same. we know we have a highly accommodative fed and today's speech we have been hearing is very much said speed, basically if things get better we will taper. if we don't then we won't. basically back and forth and saying we are here if necessary, we will continue q e as long as we can convince the unemployment is problematic in a weak economy and you have this back-and-forth action on the dow jones industrials but the range of the dow is not even 100 points. we had a little back and forth but the dow is up just 0.1%. other winners include coca-cola, verizon and do coin. gerri: that is the point you were making, nice to see the mark and not going crazy when we see ben bernanke's testimony. dennis: the dow up 24 for no apparent reason. cheryl: let's go to ben bernanke

who continues to testify on capitol hill and there he is and we expect this to go, this is -- >> you have in front of you would like to put up on the screen showing a correlation between the size of your balance sheet and performance of the s&p over the course of the last four or five years and as you can see there is a strong argument the two things move together so my question is simple, what can you say to convince us and the markets that you will be able to return the balance sheet to its normal size as your internal study says you want to do by 2018-19-25, will you do that without dragging the market down at the same time especially in light of what happened last month after your comments to the j.d. see? >> the main thing that supports the stock market or other markets is the underlying economy and i would say i don't know what it means to say markets are detected. i don't think that is a

technical term in finance but the reason i think markets have improved since 2009 is fed policy and other policies have succeeded in providing a stronger economy with low inflation. >> if the economy is growing at such a strong rate and supports fairly dramatic increases in the stock market's we have seen wire you continuing your raising money policy? >> profits are ahead of jobs. that is one of the problems. we continue to provide easy money in order to get the job situation back to where we did and inflation is below our target. so i think the scenario you are worried about would be most likely to happen if the fed withdrew eat monetary policy prematurely and the economy relapse into weakness you would see asset prices come down. >> are you satisfied if you're called upon at some point in the future, not trying to rattle many markets, to begin bringing the balance sheet back to normal size and market react with

fairly substantial reduction that you will have the staying power to keep the exit strategy despite the fact that markets the going down? >> i think the key is making sure the market's first of all understand our plan but secondly we have done enough that the economy is growing on its own. if the economy is growing on its the won't need the fed's help and support and the markets will be fine. >> i want to talk about something else that is off the beaten track, we talked about it before. you mentioned it when you were here this year, talking about the fed. and your written testimony, they could be quite low for a time in some scenarios particularly if interest rates are -- could cease entirely. you have an internal study of mr. carpenter and others in january which indicates having the fed generate combined earnings insufficient to cover

operating costs and paid in capital, is that a problem as the fed carry the balance sheet on deferred asset and goes on to say in the past the public -- has been for a short period of time. the fed is not able to make these remittances over a long time. he did unprecedented expansion of the balance sheet. and of tremendous amount of money in higher interest-rate environment, we had a witness testify of 100 basis point interest rate rise, and hundreds of billions of dollars, and with the fed going on for an extended period, how would that impact the fed operation and independence. >> and monetary policy, independence is up to congress.

in terms of the fiscal impact, and many simulations, and i remittances almost $100 million. >> where does the money come from, and if they cover your operating expenses and what ever else, where does the money come from? cheryl: ben bernanke's testimony before the house financial services committee and more of his testimony and we will bring back the panel to talk about what they think he is saying and not saying today. dennis: we also have a pro-business tech entrepreneur joining the crowded race for new york city mayor and the one on one with the founder of dice.com. cheryl: as we go to break something else ben bernanke has a little bit of power over, the world's currency or the dollar anyway. we will be right back.

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cheryl: discussion is back to capering on capitol hill, house financial services committee testimony, semi-annual testimony

from ben bernanke and he is being asked again about capering and support of the economy whether or not they should back off of capering. let's listen to the question and answer period. >> about interest rate risks that may be accumulating on the balance sheet of regulated financial institutions based on the interest-rate environment we have been in and the access shortages if you will. it is hard for banks to originate access. how concerned are you they are building up reasonably significant interest rate risks in their business? >> we have been looking at that as regulators. we are reasonably comfortable that banks are managing their interest rate risk appropriately. note that from the bank's perspective, even as higher interest rates reduce the value of their securities that they hold, higher interest rates also potentially improve their net

interest margins and profitability so as interest rates of gone up we have seen bank stocks go up rather than down. >> thank you again for your service. >> the gentleman's time is expired. the chair now recognizess the gentleman from illinois. mr. holmgren. >> thank you, appreciate your time today. a fine may i would like to highlight the article from earlier this year that discussed the rash of bank closings and consolidations in and around chicago. certainly there are many causes of the article uses tied park bank from president obama's home neighborhood to discuss one contributing cause to talk about the near zero interest rate set by the fed making the impossible for banks to invest safely and decent yields. i wonder for community banks that rely on net interest margin how you justify the fed policy and is the fed using the tool to help a section of the economy

while hurting another? >> first, that is not accurate. net interest margins of come down a little but not much and profitability in banks the last few years has been generally quite good. moreover low-interest rates, what is the purpose of low-interest rate? to give us a stronger economy and that means better asset quality, more lending opportunities, low-interest rates take away, they give on the other hand by giving a better economic environment for banks to operate in. >> theoretically may be that is true but i don't hear that from my community banks. they're struggling partially and the regulation, the regulatory burden they are fielding but also feeling because of an interest rate crunch, how they are expressing it to me. let me switch gears quickly. you have been outspoken on the negative effect of section 716 of dodd-frank, the spinoff provision. as some of my colleagues have

reversed their position from last year at wonder if you could restate why section 716 could have a negative affect on users and system excelled this. >> it creates additional cost essentials because it moved out certain kinds of instruments from the banks, makes it more difficult for banks to offer a range of services to their customers and puts u.s. banks, potential cost advantage to international competitors. >> you would be supportive of changing this provision in section 716? >> we have concerns with that provision. everything depends on what the alternative is and how the congress makes those changes? >> let me switch again to something else, mr. chairman. cheryl: an illinois republican asking about basically community banks, something important to

this particular congressman. also when we get the prepared remarks, he was talking about basel iii, what is going to happen with the capital requirements. dennis: what strikes me about this hearing especially today is they are getting so arcane is as if they want to give us a false sense of security by boring us to death, questions on 716. i guarantees congressmen who knows so little about the way business works and economy and the markets especially i guarantee that congressman knows almost nothing about 716. these are questions prepared by their staff and the staff are getting the questions from some experts somewhere else. interesting to watch because in the middle of that board and suddenly things happen. that is why you got to stick around. cheryl: we are going to do the dirty work for you and monitor ben bernanke's testimony and check in with our fed panel for more analysis and their thoughts for what they bring today. dennis: the pro-business tech entrepreneur joining the crowded

race for new york city mayor, bring them on and find out what the founder of dice not, as to say about the race and the city. dennis: cheryl: ok today. dow is up 10, when is above the s&p, yahoo! earnings coming out. revenue maybe not so much but earnings per share, nice beat this morning, we will be right back.

cheryl: we continue to monitor the market. nicole petallides denning by with the market reaction to the hearing today. nicole: what is interesting as we have seen the back-and-forth action. we will gain on each word

everybody hangs on from the fed and ben bernanke in particular. he said the main thing was that the course they are hones on ist preset. it is basically a play-by-play. the fed can move very quickly. they will keep it the way it is, keep everything afloat. if things appear to be better, they can tape of the bond buying. standing here at the post, down about 2% which is worth roughly 12 dow points at the moment. under pressure because of european commissions woul whichy pose a limit on the fees the banks can charge. bank of america has been a big winner. cheryl: nicole, thank you. dennis: let's get reaction by the all-star panel.

cheryl: charles, we have been together monitoring what he has been saying and some thoughts on what he is not saying basically. >> we came back we had another conservative congressmen say to him or suggest to him when the fed steps away, the stock market is going to crash. this is very important for the audience to understand. they have made about zero in the last four years. the reason they have made no money in the market is because everybody keeps telling them the rally is false, the rally is fake. they have an opportunity of a lifetime. it was interesting because usual accommodation and the market, they correlate pretty well. ben bernanke says why is the stock market doing so well? he said the economy. he should have said it the global economy. you should look at these earnings. i look at them as they come out.

they are making so much money from overseas it is not a reflection of america's economy. everyone trying to articulate what the market is up gets it wrong. people may miss out on continued opportunities because they are waiting for the next cataclysmic crash. dennis: if you look at stocks before the big long slide, i would much rather be in stocks now when this economy is not on the brink of the huge, long slide going down. i do not think we're in is bad of shape as we were in there. >> technically we are still in an uptrend. that is important to know. you will obviously missed that if you don't follow the trend. to me it is very important to have the momentum, you cannot argue with momentum when the

s&p 500 is on the verge of a new all-time high. over several months, bringing up into 2014, very doable from a technical standpoint. cheryl: you also brought up the point the issue of debt that we have added since the recession began, but your point is we are once again approaching that that feeling. charles: i will talk about the fact the debt ceiling, i don't do how that happens, but what was interesting was pushing through yesterday might have been the best market news nobody said was market news because we have both sides avoid the nuclear option. little bit of give and take, that is what w we're going to

need. in my mind that may have been the best news for the stock market. cheryl: again, just under 17 trillion. thank you to both of you. let's listen once again to this q&a portion with ben bernanke. he says things are tightening in the mortgage market. >> he said that is to say the amendment requires generally applicable options be provided. i look at what concerns me is that i'm afraid your hands may be tied. wthe two different financial institutions. we have a short-term funding in the banks and the long-term insurance companies and yet we will give risk-based capital requirements expanded requirements based on general accounting principles which don't apply to insurance companies.

we will increase the cost of insurance and i come from estate were insurance is very important in florida. more importantly are going to probably resolve a conflict between implementation of capital requirements for insurance companies. how do you feel we can resolve that, or can we resolve that? >> i was not trying to make a policy recommendation other than to say the last time around we got a pretty big shock to consumer sentiment, so i hope whatever is done has gone the way that is confidence inspiring on insurance companies will do our best to tailor the supervision to insurance companies but i agree with you it does put some tough restrictions. >> one of the reasons for the delay is you cannot put the capital requirements for banks

at a minimum level for insurance companies as points out yesterday in the "wall street article, you are going to see insurance companies that will now be held to a higher capital standard fillmore short-term debt and they may enter the banking business which will be counterproductive to where we are going. so my question to you as a result is if we impose the bank centric capital requirements, without have done anything to have saved aig from its financial collapse of five years ago? >> there are a lot of things edgy was doing that he could not do now. on the amendment it does make it more difficult for us because it imposes as you say bang style requirements on insurance companies. there are some things we can do, but it is providing some.

>> would it be safe to say the future is not too bright for the non-bank financial institutions in terms of having any reduction in the capital requirements? >> there are some assets insurance companies hold that we can differentiate, some things we can do, but again this does pose some difficulty for our oversight. >> thank you. cheryl: as the question from the republicans talking again about the insurance companies, back and forth about the mortgage market. we will continue to monitor it. dennis: for five years the testimony of the fed chairman has been big news, a tense event. i cannot wait until our economy truly heals and these are longer worth wall-to-wall coverage because it will not matter.

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tracy: i am tracy byrnes with your fox business brief. time warner announcing a leadership change. stepping down from his post effective january 1. replace the chief financial and administrative officer john martin. housing fell to the lowest level in almost a year. housing slipped 10% from may. building permits also down seven and the .5% month-to-month. jcpenney under pressure after credit sweeps reiterated the celebrating cited elevated levels of the promotional pricing. in the women's apparel. also expecting the company's second-quarter gross margins to come in less than forecast. but as the latest from the fox business network giving you the power to prosper.

cheryl: you have to wonder if somebody on capitol hill is watching fox business. a couple moments ago charles payne talked about the debt issue. ben bernanke saying he hopes the debt ceiling issue can be resolved smoothly raising the prospect of government is not paying is discerning and would cause some shots the market. somebody is watching fox business over there. we will continue to monitor ben bernanke says 20 front of the house. dennis: let's go to keith. where is the panic, don't see much in a way of fearful reaction to this today. >> there is no fearful reaction. the chairman did not say much that we don't already know. he added a little bit. this one comment was met with skepticism when he said the equity market has been lifted based upon more economic activity based upon the policies.

we believe the money they have been putting out in the market is coming into the equity market before descending into the real economy but time will tell over that. the continued yield took a nosedive when his comments were released at 8:30 central at the equity market as well because it has to find its way somewhere going to the equity market. cheryl: thank you very much, keith. >> my pleasure. dennis: so maybe it is a long shot. and market guru wants to be the next mayor. the leader of dice.com tossed his hat into the ring. we're joined now. i first met in the mid-'90s. glad you survived it. tell us about your pro-business platform so far. lifelong politicians all over this but no business people all that much. >> that is right. others running to the left, they

want to take us back to party politics. i'm coming in as an independent because i have a pro-growth plan. the problem is we have 8.9% unemployment. 350,000 people out of work. more than 1 million people are struggling at the jobs they have to make ends meet. we need to attract more dollars in new york city, i can do that. dennis: a lot of young people. >> absolutely. we need to transform our schools into schools i can engage kids for the jobs of the future. team-based learning preparing for the jobs tomorrow. computer science. dennis: what are fast fixes to get it going in new york city? >> first, let's bring that to new york city. google opened up a campus here in new york, 2500 jobs. i have the relationships in silicon valley to bring new jobs here.

dice.com, 15 years later still producing a profit. on the new york stock exchange still today producing 92% profit. second, let's cut the capital gains for any investment in a small business or growth business, let's have a window of time that attracts capital to new york city businesses. dennis: on top of the federal gains tax. >> we have federal, state and city. 4% income tax across the board. what i am suggesting my plan says let's reduce that, let's reduce that for a period of time that 4%, let's reduce it for any investment in small business in new york city, let's grow new york city small businesses. dennis: about time they cut taxes and growth and jobs. thank you for being with us. cheryl: as we continue to monitor what we're hearing from

capitol hill, testimony from ben bernanke. we will continue to listen to all of this. we will be right back.

dennis: we're still monitoring the testimony of big ben. let's get some last talks from her. >> short-term volatility is likely off of that sensitivity. we really have to set our sights on the long-term trends acknowledge the fact a lot of stocks are reaching new highs. as the s&p 500 extends the own uptrend, we want a bullish bias.

dennis: around 1760, so another 100,000. cheryl: thank you for sharing the hour with us. something dennis finds interesting as well. we want to thank charles payne as well. we're going to take a quick break because we will be going on for another hour of "markets now." dennis: you cannot get rid of us. junius to dissect the testimony on the hill. cheryl: we will introduce you to the business legend that led to a billion dollars in sales. the shares hit small business tips with you and more on small business. dennis: the disappearing movie and white is happening in a theater near you. the boys used double miles from their capital one venture card

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dennis: so far wall street is unimpressed. fed chairman on capitol hill for part one of the two day testimony in front of congress. cheryl: another hour of "markets now" with the two of us. here with ben bernanke is 5% unemployment rate target, and also all the talk about tapering from the fed. dennis: on the affordable care act as well. lanletting the start of the employer mandate now we will tell you what house republicans are doing to dismantle obama's health care law entirely. cheryl: small business owners feeling a little overwhelmed these days. the entrepreneur making it his business to boost yours. former i was petfood owner, this hour we have got some advice for you and some perspective from him.