thank you for your time, (applause)

-- we a.m., the senate continues debate on the war powers >> the hearing will come to water. senator brown has been delayed,

but i will go ahead because most people realize we had to readjust the time of this hearing for those who have been called on the floor. that means the senators will need to really stick to their five minutes, and even then we may not get through for everybody and i apologize for that. i'm sure that senator brown and i will stick around 15, 20 minutes into the first vote so we can go around as long as we possibly can. i will wave my questions. but i will start with my introductory statement. welcome, chairman powell. today the federal reserve chairman jerome powell will update the committee on monetary policy development and the state of the u.s. economy. the u.s. economy continued to expand in 2019 come exceeding 2% growth for the third straight year. the american people have enjoyed the longest continued economic expansion in american history. the labor market is strong, with the labor force at an all-time high of 164 million people. the most recent jobs report shows employers added 225,000 jobs in january alone with the unemployment rate at 3.6%, remaining near a half-century low. wages also

grew in january by 3.1% from a year earlier. making it 18 consecutive months that pay has grown at an annualized pace of 3% or more. americans view on their personal financial situations are increasingly optimistic a, according to polls. nearly six in 10 americans, 59% come say they are better off financially than they were a year ago, up from 50% a year ago. tax reform in 2017 and rightsizing regulations including under the economic growth, regulatory relief, and consumer protection act of 2018 has undoubtably helped fuel the strong economy and labor market. americans are said to benefit more when considering the effects of the usmca and the phase one trade deal with china. despite the substantial progress, there are several external factors that could have a meaningful impact on the economic activity in our

financial markets that need to be better understood. including the fed's decision to maintain a significantly larger balance sheet in the future, including its recent decision to purchase treasury bills in response to volatility and short-term borrowing rates. the fed's future plans to maintain to meeting stability short-term borrowing rates, including structural based market-based fixes. and risks of transition away from libor to alternative reference rates, steps that should be taken to ensure a smooth transition and curb risks to businesses and financial markets. and the financial mac it impact of the coronavirus. the fed has also taken a number of important supervisory and regulatory actions that merit attention. the fed and other financial agencies recently proposed amendments to the volcker rule that would improve, streamline and clarify the covered funds portion of the rule. proposal bills and the supplication of

the vocal rule in 2019, standing to improve market liquidity and preserve diverse forces diverse sources of capital with balancing safety and soundness. many banking committee republicans and i have raised concerns in the past with the agency possible and examination process, including the use of guidance as rules. in january, the fed vice chairman offered a roadmap to foster transparency, accountability and fairness in bank supervision. including tailoring the supervisory framework to better align with categories developed under the fed's thomistic and foreign bank tailoring rules. putting significant guidance out for public comment and submitting it to congress. other improvements to the supervisory process, such as rulemaking, that would cover the agency's use of guidance in the supervisory process. this roadmap has greatly encouraging and i urge the fed to take steps to put it in motion. there is a constant innovation

including in the financial services industry to increase resources to un-banked and under-bank populations, reduce friction in the delivery of financial products and services. some recent examples are facebook's announcement of li bra, a stable cryptocurrency backed by real assets and block chain technology. work by global governments and central banks to explore the development of central bank digital currencies, especially amid rumors china has launched a digital yuan is imminent. the numerous applications of leisure technology, including clearing and settlement, identity verification, and cross-border transactions, and some financial institutions adoptions of public cloud technologies. as i've stated in past hearings, it seems to me technological innovations are inevitable and the u.s. should be leading and developing with the rules of the road should be. during this hearing i look

forward to hearing your thoughts, mr. chairman, on these important issues and about the work the fed it has engaged into a purple invest in them. and again, thank you for joining us today. senator brown? >> thank you, mr. chairman. chairman powell, nice to have you back. thank you for the accessibility and the conversations you have with both parties on this committee. before we start, i want say a few words about what happened last night, when we got word jesse loop nomination was withdrawn. she was to appear in front of this committee, was going to appear in front of the senate, when president trump withdrew her nomination. i heard some of you, my colleagues and friends, say the president was being chastened by impeachment. some told me you knew what the president did was wrong. some told me privately how much you think he lies. but you also said publicly that was not enough to rise to the level of removal

from office, and many of you asserted he has learned his lesson, he would not do these things again. he would not try to through illegal means try to change the 2020 election. it's pretty clear the president learned a lesson. the lesson as he can do whatever he wants, whenever he wants, can abuse his office and never be held accountable by the senate. that was the lesson. since acquittal he has gone on a retribution tour, starting at the prayer breakfast. a prayer breakfast, mind you, continuing through the east room where many of you were in the audience and applauded him as he personally attacked attacked people who have served this country. he

removed colonel vindman, a a patriot and purple heart recipient, who served his country. he mocked his accent, mocking his ukrainian removed su testified to the quid pro quo. yesterday, and the reason i bring this up today, he continued the tour, interfering with the department of justice. strong arming political appointees, to overrule prosecutors. those attorneys were thrown in protest, the professionals, i don't know their political party, they withdrew in protest from the case. one case resign entirely from the department. we cannot give him a permanent license to turn the presidency, and the executive branch into his own personal vengeance operation. we all know what's happening, even the senator that just walked out knows that it is happening. i'm afraid that's what we are

seeing. a vengeance operation. no one should be above the law. if we say nothing, and i include everyone in this committee. i include myself. if we say nothing, it will get worse. his behavior will get worse, the retribution tour will continue. we all know that. on the chairman now on to the issue at hand. i welcome chairman paul back. earlier this week bloomberg reported on a fast paced company. they buy and sell plasma. a word that means blood as we. no americans who are struggling to ends meet are lining up to put food on the table their stock is doing great. hard to think of a better metaphor to the trump economy.

the s&p 500 and nasdaq both reach record highs, 2019 was the best year for u.s. bank's in history, $36 billion, 36,000 million in profit. big corporations are spending hundred's of billion's of dollars in stock buybacks and dividends, and the economy has been expanding uncorrupted over 10 years, although the grass the growth the last three years of the obama administration has been greater than the first three years of the trump administration. but you talk to the vast majority of people who rely not on invest in before those two are native living, they have a different story. they have been bleeding for years. what families don't understand why the harder they work, sometimes more than one job, the harder it gets to afford pretty much everything childcare, health care, rent, college tuition. the people in this room may remember last september when the financial industry took a panic over the benchmark rate passing 10%. wall street faced uncertainty, so we respond. the fed leapt

into action. smart government employees came up with a plan that led to the federal reserve letting about to hunt a billion dollars to the financial markets lending about $200 billion to the financial markets that is not been used since the crisis. i don't get is wrong for the fed to be creative and make sure the economy keeps working. it is in everybody's interest for the banks to keep lending money and credit to keep flowing so businesses can invest in manufacturing consumers can buy houses and cars. my problem is when main street faces uncertainty, nobody at the fed gets creative. the president does not criticize my tweet in person, but by name the chairman of the federal reserve when he's that she never demands corporations raise wages for workers. that is never his criticism. it is hard for families to understand why wall street gets worked up about a 2% interest rate when so many families are lucky if the payday lender down the street charges less than 400%. small businesses are having trouble making payroll and don't have access to so-called

repo funding. the fed does not take action when its own research finds 40% of americans don't have cash. 40% of americans don't have $400 in cash if their car breaks down to fix it, so they go to the payday lender and things spiral downward. nobody raises alarms when 40 million americans predict they will miss at least one credit card payment, which means $1.2 billion in late fees will flow from the pockets of struggling families to help j.p. morgan chase earned $36 billion last year. serious people have not dropped everything to bring down the cost of housing and raise wages once they found out one and four renters are paying more than half of their income towards housing. one thing goes wrong in their life, their lives turned upside down. people see different economies and different responses. we hear about the divides in this country between red and blue,

rural and urban, the coast and the heartland. people who watch nbc and people who watch fox, but people feel no matter how hard they work, they cannot maintain real economic security. the real divide is between those whose problems are considered an emergency and those whose struggles wall street and large parts of washington decided they can ignore. the fed needs to get creative for the people who make this country work, and particular it is clear the president and majority leader are not about to. president trump rubbed about restoring the stock market that he has pumped up with his billion dollar tax break for billionaires, the deficit exceeding a trillion dollars. don't hear much about that anymore, now he wants to pay for those tax cuts, as he said in davos and in the budget, by cutting medicare and medicaid and social security. he lied about the blue-collar boom. i was fairly incredulous when my own state of ohio job growth has been anemic or nonexistent. manufacturing jobs are stolen compared with when he took

office. and now in his budget come after promising workers not to sell their homes, we will bring jobs back, to kill the loan program that was giving the community a little hope that some manufacturing jobs would come back. chairman powell, you and your highly capable staff have been creative chairman powell, you and your highly capable staff have been creative, and we are all appreciative of that, but i hope to hear from you today is how you might be proactive and use that same level of creativity to make this economy work for everyone else. >> chairman powell, i commend you for the work you are doing. i think there are results that i'm expecting you will discuss today, from the efforts you have undertaken. you may now make your statement and we will proceed. chairman powell: thank you very much. members of the committee, i'm pleased to

present the federal reserve's semiannual monetary policy report. my colleagues and i strongly support the goals of maximum employment and price stability congress has set for monetary policy. congress has given us an important degree of independence to pursue these goals based solely on data and objective analysis. this independence brings with an obligation to explain clearly how we pursue our goals. today i will review the current economic situation before turning to monetary policy. the economic expansion is well into its 11th year and is the longest on record. over the second half of last year economic activity increased at a moderate pace and the labor market strengthen further as the economy appeared resilient from global headwinds that had intensified last summer. inflation has been low and stable but has continued to run below the fomc's symmetric 2% objective. job gains averaged 200,000 per month in the second half of last year and an additional 225,000 jobs added in january. the pace of job

gains has remained above what is needed to provide jobs for new workers entering the labor force, allowing the unemployment rate to move down further over the course of last year. the unemployment rate was 3.6% last month and has been near half-century lows for more than a year. job openings remain plentiful. employers are increasingly willing to hire workers with fewer skills and train them. as a result, the benefits of a strong labor market have become more widely shared. people who live and work in low and middle income communities are finding new opportunities. employment gains have been broad-based across all racial and economic groups and levels of education. witches have been rising for particularly lower paying jobs wages have been rising. gdp rose over the second of last year. growth in consumer

spending moderated towards the end of the year following earlier strong increases, but the fundamental supporting household spending remains solid. residential investment turned up in the second half but is this investment and exports were weak, reflecting sluggish growth abroad and trade developments. those same factors weighed on activity at the nation's factories whose output declined over the first half of 2019 and has been little changed on net since then. the fig or monetary policy report discusses the recent weakness in manufacturing, some of the uncertainties around trade have diminished recently, but risks to the outlook remain. we are closely monitoring the emergence of the coronavirus, which could lead to disruption in china that spills over to the rest of the global economy. inflation inflation ran below the 2%, the value of 2:19. that through december. overall inflation based on the price of personal consumption expenditures was 1.6%. coren play shun, which excludes volatile, food, energy prices, was also 1.6. percent over the next few months, we expect inflation to

move closer to 10%, as unusually low readings from 2019 drop out of the 12 month calculation. the nation faces important water run challenges. labor force participation by individuals in their prime working years is its highest rate in over than a decade. it remains lower than other advanced economies. troubling market disparities across ethnic groups, and regions of society. it's encouraging that productivity growth, living, wages standards over the longer term has moved. up productivity gains have been subpar throughout this long economic expansion. boost to productivity growth would benefit americans. it should remain and national priority. i will now turn to monetary policy. over the second half of 2019, shifted to a more monetary

stance of monetary policy. to cushion trade development, and promote a faster rate of inflation to our original objective. we lowered the target range that are july, september, october meetings. off the target range, to a quarter of a percent. some uncertainty around trade having diminished, also destabilizing. the committee left the policy rate unchanged. they believe that the current stance of monetary policy will support continued on economic. worth a strong labor market. contributing to the 2% objective. as long as it remains consistent with the outlook, the current stance on monetary policy will remain objective. of course, development submerge, reassessment of our outlook, we will respond according really. there has been a decline over

the past quarter century and the level of interest, economy operating at its full potential. this low interest rate might reduce the ability of economy to be supported during a downturn. with this concern in mind, we have been keeping in mind the communications practices. communication as a. at the heart of this effort. we have been hearing from representatives, consumer, labor, community, other groups. the february monetary report shares what we found so far. the insight we've gained has framed our discussions, as reported in the midst of our meetings. we will finish the review likely in the middle of the shoot. this also means that it would be important for fiscal economy to support the economy if it weakened. putting the federal budget on

us. , but ensure that policy makers have the space to use fiscal policy to assist in stabilizing the economy during down. sure a more sustainable federal public budget can also sustain the economy's growth over the long term i will also talk about our plans to support monetary policy. the report provides details on our operation last october, there was an announcement to, these actions have been successful in the banking system. the effective control to the federal funds rate. as purchases continue to develop, we transition away from the active use of ricardo nation. we've also reached naturally ample levels. we slow our pace. it will allow our balance sheet to grow in line with demand.

all of these measures support the effective implementation of monetary policy. as always, we stand ready to adjust the detail of our technical operations. thank you. i'm happy to take your questions. >> thank you, chairman pal. i will not use my five minutes for questions. i will not use much of my five minutes at all, try to set a standard for the rest of the committee. before i turn my time over to senator brown, i yield my time. it has been brought to my attention, senator shelby, who unfortunately is not able to be here now, recently became the longest serving member of the senate banking committee in history. he began his service on the committee on january 6, 1987, and has now served

approximately 33 years, one month, six days. that surpasses senator sparkman, interestingly also of alabama, who previously served on the banking committee between january 6, 1947 and january 3, 19 79, almost 32 years. senator shelby has clearly seen dramatic changes in the financial services industry over these years and himself has had a meaningful impact on financial institutions, markets, and consumers during his tenure on the i take this opportunity to thank him in his services and congratulate him on this significant milestone. senator brown. >> he's not here. i yield my time to you. >> thank you, mr. chairman. when the fed says it is nearing maximum employment, the labor market is strong, it can mean workers have one good paying job, or a worker is working under 40

hours and three part-time jobs at minimum wage. this highlights how the economic recovery has not benefited everybody. 50% 25% of people pay half of their rent half of their income in rent. half of americans cannot come up with $400. it is not reaching everyone. if you are working a job in one of the 10 fastest-growing professions, seven out of 10 of those jobs you cannot still afford rent. something is wrong. i appreciate you on tour, i have been looking to the report. who do you have working on bold and creative ways to use the fed's authority, some tools we probably don't know about, using your authorities to help working families that are benefiting from economic growth? what can you do to make sure most of our economic growth, not a sliver of it, most of our

economic growth is an worker's pockets is in worker's pockets pockets? >> we do not have those tools. other agencies do. elected officials hold the power to address those issues. the thrust of our review of monetary policy, the first we have done of this nature, is to assure we have the tools to carry out the mandate you have given us of maximum employment and stable prices in a world where inflation is trending lower, where the phillips curve is very flat, so the connection between inflation and tightness of the economy is very low. and also, where interest rates are low. it creates a very challenging environment for us to carry out the job you have given us. that's why we are doing a deep dive on issues around our strategy tools and communications. >> these conversations can take place

individually, but i ask you to be as creative as the fed. i have a list of extraordinary federal actions that did not require congress. i'm not arguing congress is not doing its job, senator mcconnell and the president have refused to lift the minimum wage. they took away over time for about 2 million or 3 million americans because of trump gaining the overtime rule. tax cuts for the rich and cuts from ed congress is not doing his job to redistribute income in any way that is fair to hundreds of millions of americans. just list the maiden lane, the assets, the credit facility, converting investment banks to bank holding companies so they can borrow from a discount window. the fed has been creative to the countries benefit when wall street has

reached difficult times, has run into difficult times. sometimes of their own making. some people with my political policy don't support the fed. you have stepped up. i ask you to be as creative in thinking of ways that this wealth is shared beyond 1%, 2%, or 5% who are doing well and are thrilled with the economy the way it is. it just doesn't reach so many. i'm worried about other risks in our economy, the fed taking leverage lending seriously. same time, we see the financial system get more exotic. j.p. morgan chase wants to buy an electric plant in el paso. also a stake in a nuclear power plant. that means j.p. morgan chase could likely own a nuclear power plant. the japanese equivalent of amazon wants to form an industrial loan company in utah to get the benefits of being a bank without the regulation. recently, voted with other bank regulators to weaken the volcker rule about having

protections in the 2013 rule allowing for more risky leverage investments. are we going in the right direction? it seems the financial system is getting more complex or exotic. things people don't understand. >> what we are focused on is maintaining much higher capital, much higher liquidity requirements. stress test that keep the banks on their toes and address the issues of the day. also resolution planning. those are the important measures that we put into place after the financial crisis. we are focused on sustaining those, making them more effective and keeping them strong. >> welcome back, mr. chairman. good to see you. i have several technical questions i would like to go over. some we have discussed to varying degrees in the past.

one is the fed's real-time payment system. i was never convinced it was a great idea for the fed to pursue this, since we have a private sector system in place up and running and really encouraged by the fed back in the day. a number of constituents expressed the concern that we are going to end up with two systems that are not fully operable. to the extent that employers, financial institutions, and other participants would be plugged into different systems, if they are not fully interoperable, there is a real concern that at a minimum, it will diminish the ability to innovate in these systems going forward. if you can briefly, address the question of whether it is a priority of the fed to ensure the fed now system will be fully interoperable with the

system? >> full interoperability is the goal. it will be hard to reach, but it is high on our priorities. it is something we are focused on in the design stage. >> the clearinghouse system is committed to having flat fees and not providing discounts for volume and size of transactions provided that the fed now system does not provide those kind of discounts. can the fed commit that it will have uniform pricing on this platform? >> we haven't made that commitment. it is not clear that the banks who really wanted us to do this are really looking for it. >> this is often cited as a reason for the fed to do this, because of the private system might discriminate on the basis of price. i think it's important the system has volunteered, they clearly have to be regulated, to ensure that this would occur. it would be really ironic and a shame if it turns out that it is the fed that

makes it more expensive for the small banks to participate. let me move on to sofer. as we have discussed, one of the challenges of replacing libor is libor has an embedded credit risk element. it's an interbank rate. sofer is a risk-free rate, because it is essentially a repo rate. that mismatch can create some problems, especially to the extent that banks are finding themselves in an interbank market subject to spreads. it may not reflect. a mismatch in assets and liabilities can become problematic. yesterday, you may have, and i didn't see the transcript, you may have suggested there is a thought of trying to introduce a credit component, some kind of credit spread or credit risk component as either a compliment, alternative, not replace sofer, but would be credit sensitive. they are doing that now. we are working to try and support (technical problem) either a

compliment, alternative, or integrate it with sofer. did i get that right? is that something you are thinking about? are you concerned about it at all? >> libor itself we can't assume it will be published past the end of 2021. it will be challenged. sofer will be the rate a lot of the derivatives go to, and many across the broad financial system will. a number of banks have come forward and said they want to work on a separate rate, which would not replace sofer, but would be credit sensitive. they are doing that now. we are working to try and support that process. we are open to that. it doesn't mean the transition away from libor to sofer will stop. it has to go forward. >> last thing on my list. the glitch in the repo market, as

we discussed, my concern is when banks choose to earn less than 2% on excess reserves when they could be making up to 10% in the repo market, it suggests something is going on. they could have they chose not to. i'm not aware of an explicit rule that required that during the episodes when these rates happened. i'm concerned that there might be some kind of unspoken pressure on the part of regulators to favor cash on deposit with the fed over the liquidity in the form of repo transactions. that goes beyond what is actually in the rules. i'm wondering if you share that concern, what you think about it. the fed's response has been to provide liquidity. that works at the given moment, but

if there is an underlying problem that has not been fixed, there is a risk the spike in repo rates could recur and you have to provide the liquidity again. >> there isn't a preference for reserves over treasuries and the lcr, but there is in the internal liquidity stress test in the sense that it takes one day to turn the treasury into liquidity. the idea of on equal footing so they can't achieve liquidity is a good goal, because we don't want to tilt banks in the direction of having more reserves than they really need. as long as the overall level of liquidity is appropriate. we don't want them in that direction. you may have seen the vice chair give a speech and talk about this issue. we're are looking at ways to address that. one way is to assume the discounted window is available in the stress test, which is a reasonable assumption to make.

there are things to do. there was liquidity, but it didn't flow. it wasn't liquid. the question is why not? we are looking at ways to address that that will not undermine the safety, but make the operates markets operate better. >> let me thank you for your leadership. thank you for joining us. it was a wonderful evening. it is important here efforts to ensure the independence of the federal reserve. without the independent federal reserve, our national policymaking is really floored. keep up your efforts. you mentioned we have expanded the economy for 11 years, that would be eight years under president obama and three years under president trump. the expansion is good. there are still issues we should address. a few report in

january, they indicated the sheer wealth held by middle income families has been falling for roughly 20 years. i would like you to comment whether it continues to fall, despite the expanding economy? in addition, they point out income inequality in the u.s. has increased since 1980. is it still increasing? and it is greater than the other countries that are similar to us in many aspects. despite the expanding economy, a shrinkage of wealth in the middle class and income inequality, social, political, and economic trends i don't think are sustainable. are those trends continuing? what policy can we adopt to change them? >> those are longer-term trends that i think are driven by important

underlying factors. many of them global. i would assume the data will continue to move in that direction. incomes have been moving across the income spectrum, particularly if you look at benefits and tax effects. it has been a particularly good time to be at the top end of the income spectrum. the two key problems, one is low mobility. we have lower mobility from the bottom quintile to the middle quintile in many other advanced economies. this is not our self image as a country. the relative stagnation of income in the low-end, we want prosperity to be broadly shared. it comes down to education and training. things that enable people to do well in the modern economy, which is a globalized economy that is less about manufacturing and manufacturing jobs are more

technical than they were. we need a workforce that can benefit from technology and globalization. those are policies that the fed doesn't have our hands on. >> you don't have the policies, but if we sit back, the trends will continue and go even further. a further merger divergence between a vast majority and small majority of americans. it's incumbent upon congress executives to take steps, is that fair? >> i think so, and u.s. businesses get this very much. business leaders see the workforce and the need for one we wanted to be as shared as possible. we hear from business and government leaders, as well. it's an important national priority. >> the community reinvestment act is being massaged by the currency and the fdic. there have been comments critical of their efforts. not just by affordable

housing advocates, but some banking institutions that they are not doing a proper cost-benefit analysis, that the proposal could unintentionally discourage revitalization in neighborhoods that need it most. can you let us know what role you might play and you would help get it right? >> we are not going to comment on their proposal. i think all of us, including the fbi see and occ are looking forward to those comments and learning more. we do share the goal of modernizing cra. technology and demographics have changed the delivery of banking services, particularly in rural areas. that hasn't been done in 25 years. we agree on the goal, we want it to be more effective.

it would help if it were more transparent or objective. we share objectives with the agencies. we worked closely with them for a long time to get on the same page. we developed our own approach, which was a bit different. we weren't able to get together in the end. we should look at it as an ongoing process, where we will continue to learn. >> thank you, mr. chairman. >> chairman powell, thanks for being here. you have been consistently raising warning bells about what you call the greatest threat to the financial system. you talk to many of us in private about cyber issues. you said yesterday on the house side that you don't think it's breaking through. can you summarize where you are worried about cyber attacks on our financial system? >> they kind of pay us at night to be worried about things. if you look at the financial crisis, we had a game plan, we

implemented it over the course of 10 years. i won't say it's perfect, but we have a plan meant to address those kinds of things. what is new in the threat environment is the ongoing level of cyber threat and the increasing sophistication of it. we spent a ton of time worrying about it. the treasury department has really taken the lead on that. we are very focused on it. we are focused on making sure the financial institutions we supervise are doing the best they can to stay the state-of-the-art, good cyber hygiene. a lot of these things are people failing to implement updating their software and things like that. that's where a lot of breaches happen. it is an intense focus. supervisors invite financial institutions, nonfinancial institution companies, all kinds of businesses are having this. it's in an arm's focus. it

never feels like we have done enough. it is something we keep trying to get better at. a lot of resources in all of the agencies and companies. >> give us maybe two examples of the way you think the attack could have spillover effects. how do the dominoes work without giving somebody a template or roadmap? you talked about ways that this could cause bigger consequences than 2008, how would that happen? >> i would just say that the confidence in the financial system is really important. the public has to have confidence in the financial system. a successful cyber attack on a payments utility, for example, would be challenging. we can address it, isolate it, but you would want to avoid broader blows to

confidence. when confidence weakens, people will take money out, stop acting, things like that. uncertainty and lack of confidence are the reason. >> we need to recognize that many different conversations we have with the chinese government tend to have a benign diplomatic flavor. we should underscore what's happening this week with the equifax hack having new headlines. the 2017 heck of a for fax equifax that come from my the financial records of more than 39% of all americans. the justice department indicted for chinese communist party officials affiliated with military intelligence in china. this isn't an accident. it is the same communist party that has records and has moved on to equifax. can you envision scenarios where the chinese

communist party was hacking into the u.s. banking system? >> we need to be resilient against all cyber threats. certainly state actors are a big part. we are well aware of those. we have help from the intelligence agencies and others in the country in keeping our eyes out for that. >> the president's budget came out this last weekend. some of us will be in the finance committee discussing the larger budget. we have headlines that focus on whatever the discretionary programs are that tend to be more hot button and current in the news. you talked about health entitlements and may be more broadly than health entitlements, the inefficiencies of our health care delivery system. for a developed nation, we have mediocre health outcomes. we have high-priced things. can you talk about the consequences of u.s. health and competitiveness on our larger economy? >> i should start by saying we don't do fiscal policy or give you advice on fiscal policy, but since you asked, the biggest issue of our

federal budget is health care spending. it is not that our benefits are too strong, we delivered them in a way that is measured by the outcomes. the outcomes are perfectly average for a first world nation, but we spend six or 7% of gdp more than other countries. it is about the delivery. that is a lot of money every year that you are spending and getting nothing. i have to leave it with you there. it is not up for us or me to fix this, but that really is what it's about. the discretionary things are very high-profile. they get a lot of reporting. that's what is driving it. it is not that the benefits are fabulously generous, they are just what people get in western economies. we deliver them at the cost of 17%, 18% of gdp. others do it at 11%. that's what we should focus on. >> thank you for having this hearing. i want to thank you,

chairman powell, for your work. i didn't hear all of the questions, what if it has to do with the independence on the fed, count me on that block. it is important you maintain independence. i applaud you on your efforts. both the fed, through lower rates in congress, through entry spending, through increased debt, have taken actions to boost the economy during a long stretch of growth. i'm concerned that if we do approach a downturn, and there are a number of indicators that are concerning to me, that our options to address a downturn are limited. i want to hear your perspective on what the fed has as ability to react to the downturn. >> our traditional tool is interest rates. low rates are not really the choice anymore. they are a fact of reality. we will have less room to cut.

that means it is more likely will have to turn to the tools we use in the financial crisis when we hit the lower bound. it is forward guidance. it says we will keep rates low. it is also large-scale asset purchases of longer-term securities to drive longer-term rates down and support the economy. we will use those tools aggressively. should the need arise to do so. there's no need to do that now. we will use them aggressively. the view we are undertaking of strategy tools and communications, in which we think inclusions in midyear, is we are looking to make sure in this low rate environment, difficult environment for central banks and those we work for, that we are using tools as best we can, we have explored

every possible way to find every scrap of policy space to support the economy. i would stress is important for the fed to support the economy in downturn, as well. >> the debt is at $23 trillion, is that right? at what point in time do you get concerned? the budget the president put out is another $1 trillion to the debt. >> it's hard to say what level you get concerned. i would say beer concern now. we are concerned now. we need to have the debt grow slower than the economy is growing. if the economy is growing faster than the debt, effectively, leverage is going down. what's happening is debt to gdp is going up quickly as these things move. other countries have managed to get to very high levels. it

means 20 years from now, we will be spending those tax dollars, our children will be spending those tax dollars on servicing the debt rather than on the things they need. we are sending them those bills. >> the debt doesn't go down if the economy downturns? >> not at all, quite the opposite. >> it becomes much bigger of an issue. i want to talk about housing. it's a big issue everywhere, rural and urban america. when you see the housing challenges impact individuals and the economy. >> housing is generally facing difficulties and affordability. the housing industry is doing better, building more houses that are profitable, but from the standpoint of the public, you have a squeeze going on to do difficulty, just supply-side constraints keeping the quantity of housing down. lack of skilled labor, regulations of various kinds. what you see

in many places, not just big cities, you see housing and affordability challenges. it is a fairly widescale problem. >> there has been a lot of debate for a number of years. much of it started by the senator to my left on gse reform. does gse reform have impacts on the housing >> in the long run, it is important it happens, that we move forward. it is a big unfinished piece of business from the financial crisis. it is not ideal to have the entire housing finance system riding on the federal government in the long run. it would be better to move forward with something. in the long run, it is a more sustainable basis for housing. >> thank you for your work. i have other questions for the record. thank you for your service. >> thank you, mr. chairman. first of all,

welcome. i want to echo what some of the colleagues had to say. on both sides of the aisle, you will find strong support for the fed. i'd like to ask you about a rule that i filed a comment letter on, the fed's building blocks building blocks approach. it doesn't seem to make sense for the fed to resurrect the original section 171 calculation from dodd frank. i understand this particular calculation unintentionally imposed bank centric capital rules. insurance saving and loan holding companies, which have a totally different business model. congress spoke clearly to the passage on insurance capital standards curve cajun act that it's intent was for banks to be regulated like banks, and insurance companies to be regulated like insurance companies. given the clear

intent of congress, why has the fed chosen to revisit section 171? how does the fed intend to move forward? >> we got a number of comments on that issue. we have looked at the law change. the question we are asking is what is the nature of the change made in the law? does it apply here? we will be reviewing those comments and considering them in getting to a view on that. >> one of the reasons for having these open discussions is to bring attention to it. i think it is a very serious issue. it needs full attention of the fed. hopefully you get it resolved as quickly as possible to avoid questions that may be lingering. i would also like to

talk about vice chair recently remarked that business investment business fixed investment continues to be weak. having declined over the course of 2019. do you think it's fair fair to say this is driven by uncertainty with regard to trade and that businesses are waiting to see how trade tensions resolve before they are prepared to make further investments? >> i would say there are abundant of there are a bunch of factors we need to look at. one is lower oil prices. the united states, that is a big swing factor. our work and that of many outside of congress does suggest there is also a role for trade policy and uncertainty around trade policy. the short answer to your question would be yes, i think there is upside to the extent businesses see the trade situation as uncertainty around the trade situation as having declined. >> there has been a

discussion about groupthink and about how the fed approaches it within meetings. do you think it is important for the fed board to reject groupthink and consider a variety of viewpoints? >> i do. i am strongly inclined to think you need to hear all sides of the case. i used to speak against my own deal just to force people to defend them. so i would really get a sense i believe in things. it is critical to have diverse perspectives. i think we do. if you think about it, the reserve

bank system guarantees from an institutional standpoint we will have diverse perspectives on monetary policy. on regulation, where we get it is from comments and the group of people on the board. a number of us have private sector backgrounds, and we bring that to the table. quits fair to say you could have people from varying points of view that could have very lively discussions and yet at the end of the day still be part of a very strong team? chair powell: absolutely. i think it makes you stronger. we have had plenty of dissent at the fed over the years. >> when the board voted on its rule for tailoring resolutions planned last fall, the vice chair gave a statement saying there's more that can be done when it comes to tailoring from these supervisory standpoint. can you elaborate on how the fed intends to move forward with

this? >> the vicechair gave a speech on that and laid out quite a number of aspects of that. these were ideas, they are not at the stage of proposals yet, but we are going to be looking at those. >> how will they be manifested? as rulemaking? as guidance? chair powell: some of it will be rulemaking, some of it will be guidance, some of it will be changes to guidance. the key thing is, he highlights this the tension between the right to due process and clarity that we depend upon from our government. but also with supervision there is a role for discretion. it is a very thoughtful process of looking at that and asking, how can we make it more transparent with more due process, but still effective, because supervision has to be firm, but fair. quick thank you, mr. chair. >> i think a lot of our institutions are under assault these days. i

share some of the concerns about the independence of the justice department. on a regular basis, to make sure the intelligence community can maintain their independence. i would ask and frankly plead with you that if you see efforts made to undermine the fed's independence that you keep this committee fully apprised. the fed's independence is more important than ever. i want to also follow-up on my good friend's comments about equifax. i share with you the belief, the challenge that china poses, but i also think in the case of equifax and the credit rating agencies broadly, none of us choose to be an equifax customer or any credit rating agency. that cyberattack was

due to sloppy behavior by equifax, and the fact we have not put in place any, frankly, enhanced rules of liability around credit reporting agencies is something i hope, i know i have talked with the chairman, i hope we will come back to, because i think we have to be on guard, if we don't have the minimum standards and they can make this obscene break into the cost of business, i don't think that is good for anyone. i do have questions for you as well. yesterday in your testimony, you talked about this movement toward digital currency, something i'm very interested in. you indicated it was possible there might be a united states digital currency. my question is, would that be desirable? i get the component parts around a digital currency might provide convenience and

potentially even lower friction costs in terms of credit to consumers. but how do we wait weigh privacy and cyber concerns? how would that deal with our retail banking system? do you think the fed has the capacity to do this without congressional approval? i have one last question about china's role. talk to me first about the domestic implications. >> you have listed the potential costs and benefits. the benefits would include perhaps greater financial inclusion, lower cost, more convenience. the risks or costs would include cyber risk and fraud risk and privacy risk, things like that. there is a lot to

work on there. every major central bank in the world right now is doing a deep dive on digital currencies and we think it is our responsibility to be at the very forefront of knowledge and thinking about a central bank digital currency. >> would you take positive action on that? >> it would depend a lot on the design choices. it's a good question. i would say we are working very broadly, including with other central banks around the world, on this. there is just a lot of thinking and experimentation and understanding that we are gaining. if we conclude we need more authority and this is appropriate to due, we will ask for the authority. >> one of the things you mentioned yesterday, and a number of us on the intel community share concern about the rise of china in a series of areas. it is clear china may move quicker on a digital currency. you said

you have some visibility into what china might be doing on digital currency. i would love you to spell out a little bit. do you think they will use their influence through their belt and road investment strategy in a number of countries that have bought into that system that they might also be buying into that chinese digital currency? what would that do in terms of cross-border, dollar supremacy? any further guidance you might have on your insight into china's actions in this space with the help. >> we have to assume we have to ask, what

would it mean if china had a currency, including two other countries. we have to ask, what if a private-sector entity, a large company with a large network of users, has a digital currency. >> we had a pretty bipartisan concern on that one. chair powell: i would say libra was something that lit a fire. we have been focused on digital currencies for a couple decades. we are doing a great deal of work. >> i would urge, having seen china's ability to move aggressively in a series of other areas, that you forge that coalition among other central banks sooner rather than later. >> senator purdue. >> mr. chairman, thank you for being here. i have one quick question. we have two dynamics right now driving the economy in different directions. labor is a limiting factor. we have roughly 7 million job openings. it is a limiting factor. on the other hand we have low energy costs. since 2007, we have doubled our output of oil. we are a net exporter of oil and

gas, the largest producer in the world. 8% of our economy is energy. 15% of our is going to that today. we produce more oil than saudi arabia. my question is, are we in a low energy price environment, and what assumptions of that do you make over the next decade? what impact you think that will have on inflation, deflation, i know you have talked about concerns in the past. where are we on that big factor in our economy, energy? >> it has been transformational. if you think back when we were in college, energy spiked, there were long lines at the gas pump. we now have very large domestic energy industry which amounts to a shock absorber. u.s. drilling goes up with the price of oil,

puts people back to work, it controls prices, it controls inflation. we are in a situation where that particular mechanic for inflation going up is just not happening anymore. supply response from the u.s. industry is quick. you will not see that, you know, having sustained effect on inflation and also you will not see it having sustained negative effects on growth. it roughly offsets the effect of lower energy prices at the pump. the new supply will put people to work. >> are you concerned about the work participation rate with the growth of jobs in the last few years? workforce participation has bumped up, but not as much as one might have thought. chair powell: >>

it is greatly a surprise to the upside, which is a great thing. the prediction, basically just because of demographics, labor force participation should drop by a quarter of a percent per year. it has been flat since 2013. labor is tight, but there is a supply response. nobody had that in their model seven years ago, but that's what we have. it is a positive thing. >> thank you. i yield back. >> thank you, chairman powell for being here. how does income inequality impact economic growth? there is a lot of talk on the policymaking side of the impact on families. how does it hit your analysis, and what can be done on your side of the

shop? >> obviously, people who are at the bottom end of the income spectrum whose incomes are not growing, consumption will be constrained. consumption will be constrained and their marginal propensity to consume and add new dollars will be high to the extent gains are going to the people at the top. they will not be hitting gdp, it will be going into savings. those are effects that will show up quite gradually over time. inequality is a gradually moving phenomenon. >> talk to me about the relationship between productivity and unemployment. is there a relationship that is emerging? is there new thinking along those lines? the traditional analysis is productivity goes up. that is basically good for the economy. but it seems to me the way people perceive it is those things are decoupled. i'm wondering if that is a change

or if that is a political overlay to say, things may look good, but we are still on the bottom eating your scraps. i'm wondering if it is more than that and that there is actually a change in the way you have analyzed this. chair powell: we are always learning and we have seen relatively low productivity in the wake of the financial crisis. it appears to be persistent. that means lower rates. you need rising productivity to create higher standards of living. it does not mean in any given year you will see that, but you see a tight connection between if you add benefits, not just wages, but look at the full cost of employment, you see a

connection between >> are they no less correlated than they used to be? i would not say that. if you look at the moment, wages 3%, productivity growth has been low. it has just moved up. inflation is 2%. >> if most of the increase in total compensation is just that the employer absorbed a 7% increase in health care costs, that is not really an increase in wages in the traditional sense. from your standpoint it seems like an increase in wages, but if you're trying to maximize compensation, it means nothing to a regular person. let me move on to climate. i have a couple of questions. what is the fed doing in regard to climate related financial

disclosures? >> i think like others, other central banks, we are at the beginning of the process of understanding how climate change affects our work. one way we know it will affect our work is that the public will count on us to make sure financial institutions we regulate central counterparties will be robust to the risks from climate change. we are at the beginning of understanding what all that means. in terms of disclosure, it is an fdic's issue. they regulate disclosure and they have been doing work on this lately. >> you had an exchange with a member of the house, i think it was yesterday, the question was whether we ought to be stress testing for climate risk. you said you are watching the bank of england. i'm wondering if you can

elaborate. >> they are doing stress tests which are not at all connected to the process that relates to the amount of dividends and distributions that a company can have. this is more just exploratory. we are very closely monitoring that. we have good relationships with the major central banks, especially the bank of england and others. it is something we will be thinking about. these are early days. we are actually doing a fair amount of work through the federal reserve system on understanding this emerging risk. >> thank you. >> thanks for being here. our labor force participation rate is much better, but compared to other oecd countries, we lagged. why?

>> that is a great question. it is a combination of things, no doubt. the educational attainment which was once the highest has fallen relative to our peers. particularly among lower and middle income people, the level of education attainment has plateaued. that is the key thing. >> what else? >> i would say the opioid crisis is not helping. i would say, globalization in technology, advantaged people of relatively higher education and people in manufacturing, you think about what has happened to the manufacturing

base in many countries, a lot of those jobs have been automated or moved abroad. the manufacturing we have now is very efficient and does not use as many people. >> what else? does trade have an impact? >> i would say trade tariffs through this period, we really have had declining tariffs since world war ii. we have had increasing labor force participation. >> does the richness of our social programs play a part? >> it is very hard to make that connection, and i will tell you why. if you look at real terms, the benefits people get, it has declined during this period of declining labor force participation. it is not better or more comfortable to be on public benefits. it is worse than it was. >> it seems to me, and there is going to be a question, i promise. i know sometimes you never get one. >>

that's ok. >> it seems to me any fair-minded person would have to conclude our economy is better. i am biased, of course, but i think the tax cuts and jobs act worked. we have seen wage increases, including, but not limited to, the bottom quartile. we have seen unemployment go down. but we still have a problem in america. i think the root, this is one person's opinion, but the root of a lot of that anger is that we have we still have too many people in this country who are not participating in the great wealth of this country. not economically, not

socially, not culturally. i think sanders supporters and trump supporters have more in common than they realize. the american dream has become the american game. they think it is fixed. the elites are doing fine, but i'm talking about ordinary people. what, if any, role do you think the fed should play in helping us address that? >> there is a lot in what you said. the single most important thing we can do is take seriously your order to us to achieve maximum employment. that is what the law says and that is what we are doing. we are using our tools to keep an eye on maximum employment. there is no reason why the current situation of low unemployment, rising wages,

high job creation, there is no reason it cannot go on. there is nothing about this economy that is out of kilter or imbalanced. that is the main thing we can do. we do other things in the nature of convening we do a lot of research in your state and others. the federal reserve bank will have an operation where they are trying to convene resources around issues of education and poverty and things like that in poor communities, but we do not have the ability to spend money on it. we get community people around a table and try to organize things that help the community, as i'm sure you know. it is not something we can do a lot about other than research and do our jobs on monetary policy. >> if i could have another 10 seconds, mr. chairman, i was distracted because you were talking. stay

independent. i think you're doing a great job and all of us in politics are going to give you plenty of advice, but call them like you see them. thank you. >> chairman powell, it is great to see you again. thank you for being here and always being responsive, but let me follow-up on this line of discussion of maximum employment. you keep talking about level of educational attainment that is so important. what do you define

as education? >> it includes the kind of training people are getting out of high school. it is not meant to be limited to college as such or getting a liberal arts degree. the acquisition of skills in society. >> do you think we have changed in society it is very difficult to just graduate from high school and get a job that pays a decent wage for your family without getting some sort of additional education? >> yes it is that very much. for people with high school degrees, incomes have stagnated badly. what happens with technological changes is that it wants higher and higher levels of skill. if society provides those people and those skills, incomes can go up across the board and inequality

can go down. that was the american story for a long time. >> isn't part of that this is why i'm curious. part of that also has to do with wages, the increase in wages, and the level of wage you are paying. are you saying because you graduate from high school and you want that job, whatever that job is you are able to do, it should be a minimum level of wage that should never increase even with gains in productivity we have seen? chair powell: i am not saying that at all. >> good, because i agree with you. there are people in this country and i am pleased with the high unemployment rate, but they live in my state, they are working two jobs. they are actually working two jobs because the wages are so low. there is a disparity that we have to do a better job of understanding. i was looking through the monetary report you gave. i'm curious, do you identify those individuals who are actually working two jobs?

>> those are identified in the data collected by the bureau of labor statistics. >> is that data you can provide that gives a better understanding of how many americans across this country are working two jobs? >> a very high level right now. >> that's what i would like to see. let me just one final question. votes have been called. you note in your opening remarks there are troubling labor market disparities across racial and ethnic groups and across regions of the country. can you go into more specifics with that statement? >> we had a box in the monetary policy report a year ago about the rural and urban disparities which are just getting wider and wider. it talked about what might be causing that. you have a long-term trend here that is challenging for people in rural areas. in terms of racial and ethnic disparities, the african-american unemployment rate is roughly twice that of the overall unemployment rate. you see different groups so it is troubling these things persist this way. we don't have

the ability to operate directly on that other than by carrying out our mandate of maximum employment and stable prices. >> why is there that disparity? what can you point to? >> what disparity? >> the racial disparity you up just talked about. >> it is tied into history, our history. there are higher levels of poverty in the african-american community, as you know. that is because of our history, but we would like to see those gaps declining more than they are. not tools that we have, tools that you have. >> what i'm looking for is the data. there are no data sets you are collecting that help us identify that racial disparity and how we can collect it corrected. chair powell: there's lots of research on that. >> that's what i'm looking for. thank you. >> senateor tillis. >> i have a few questions. the first i want to talk about we have seen in the fdic, a real stepped up effort to take a look at guidance and other actions short of apa promulgated rule to revise or rescind. can you give us an

idea of how that is going at the fed? >> we have for rightly said josh forthrightly said it is not the basis and we have made that clear to our supervisors. you may have seen the vice chair's speech where he addressed these issues. we are working on that as well. >> i know you are aware of the gao ruling. there's a lot of talk that you need to remain independent, but there is something that concerns me that came out after you received word from the gao. it relates back to i think a letter your general counsel wrote in june of last year, which, i have it into front of me now. it says you are continuing to assess

the scope of the federal reserve's obligation to send supervisory guidance documents to congress. does that mean you are exempt from oversight? >> the question is whether we are required to send guidance. we do send some guidance. this is another one, >> what is the current stance? >> what we are going to do is articulate clear

standards for what firms should be in the sick. the vice chair has laid out an approach that i think makes sense. to really try to tie the whole approach more to the tailoring of categories we set up. >> to the other cra, that is the community reinvestment act. one question. rumors swirl around this building the way they do in the fed and all of government. the question i have is it relates to the fed's plans for either joining with the fdic and the occ on rulemaking. some have said you provide an assurance that without governor brainard's support, you would not join. is that a rumor or an assurance you have given chair waters? >> that is not how we are looking at it. what we are doing is trying to develop our own

thinking on cra reform, as did the occ. they took a lot of our ideas but we were not able to get on the same page. >> what would be the rational basis for two standards? >> there are going to be two standards under the fdic's occ proposal. 70% of institutions will be able to opt out, so there's going to be the existing standard and the new standard assuming they go forward with it. there will be two systems. if we don't do anything, it will just be like the 70% of institutions they supervise. >> is the vice chair on point for this? >> is he on point for this? >> with the community reinvestment act be within his lane? >> we all have to vote on this. this has always been handled by a different group, dcca, which governor brainard chaired. i am

very comfortable with where we are on this. >> i was going to ask questions similar to senator toomey's. i will not. i'm only going to send out some questions for the record which are about the mechanics of implementation. thank you. >> senator jones. >> thank you mr. chairman. chairman powell, thank you for being here. let me echo other colleagues on both sides of the aisle regarding the independence of the fed. i concur it is extremely important that we maintain that independence. i want to ask you about homeownership. it follows up a little bit with what senator kennedy was talking about, wealth gaps between so many americans. nationwide, homeownership is relatively stable, but there is also massive disparities in homeownership by age, race, ethnicity. african-american homeownership rates fell to a

50 year low. it remains 30% 30 points below white homeownership hispanic homeownership. millennials are less likely to own a home by age 34 than their parents or grandparents. i am concerned that if trends continue, i mean to some extent, we have relatively wages are rising, but they have not been raising as we would like. homeownership rates are increasing. i'm concerned if trends continue, a growing number of americans are going to get locked out of homeownership. what are the economic consequences in terms of wealth building for minorities and a broader economy of leaving this disparity in the realm of homeownership unaddressed? do you have suggestions of how we in congress or the fed can

address homeownership? >> let me say first, i would agree with you there is there are pressures on affordability which are very widespread to do with difficulty in getting land is owned and difficulty in acquiring workers and costs, regulatory costs, material costs, putting pressure on house prices, upward pressure. it is quite widespread around the country. in terms of the level of homeownership, i think we don't want to be back in a situation where we push the idea of homeownership passed what is financially sustainable for people. we kind of did that in the pre-crisis era. what has happened is credit is much less available now for people without spotless credit records. that is a lot of what

is behind the data you cited. i think it is a good question. did we move too far? i do not have a view that we did, but it is a good question to make sure people who should have access to credit and can handle borrowing that size get it. >> i know senator cortez has asked, i would like to get some of that same information about the racial disparities. i assume there is some connection with that and economics as well. let me go back to the lower rate of labor force participation. how can we encourage that? how can we get more participation and get those numbers up? what can we do to get more folks in that participation in the market? what we can do is continue to use our tool for a strong labor market. it's great to see that participation rising, economist and think we would see those

items again. that's a really positive thing. but that is a longer term, that is not really a strategy. we need policies that will ultimately, they have to have skills an app to push to keep them in the labor force. ways they can take part in the labor force. that's where other government policies come into effect. it's a lot of education and training and also policies that will support attachment into the labor force. there's a lot would be happy to sit down and talk to you about. that's important. other countries that have leapfrogged us, have done more of those things. and i've had more rising educational entertainment. >> thank you for, that i look forward to a discussion about that. thank you mister chairman. >> thank you senator mcsally. >> thank you mister chairman, on february 2nd, the american banker published an article

titled. when a small town lose its it's only bank. the article mentions duncan arizona, which at one bank, and recently closed its doors. the residents are now forced to drive 40 miles to conduct any banking. local businesses no longer have a place to deposit, make daily deposits, or get change. and a customer service issues, require driving long distances. the article states, the economic implications, are enough of a concern the federal reserve has been studying what happens in areas where people don't have access to a local branch. what has the fed learned that study, and it's not happening in duncan arizona, but across rural arizona in rural america. >> we published a study, we had meetings all around the country, and did research. i think we did find the loss of a branch, in these rural communities, can be a serious

blow. it's the availability of financial services, but it's also a bank is an important civics citizen, and contributes in many ways to that town. i think dunkin'i think we had an event in duncan, it was one of our events when i think of it. we learned that you see it happening the price they're going down and have been reduced in a number of jurisdictions. you see it more rural. also the people in rural areas, or more likely or more inclined he is a brink branch rather than an electronic branch. the facts are significant. we saw that it's quite a negative effect. >> so, these are banking deserts, how does the fed define a banking desert. is it about distance, or the number of customers, or any other economic statistics for this. you are absolutely right, more people in urban areas are using

online banking. we will areas have two challenges. one is there possibly less inclined to do that, it's not part of the culture, also we have connectivity challenges with rural broadband. those things further hurt rule communities. how do you guys the fine banking desert, and what can be done to address this issue? >> they're actually there is no except a definition, it's one of those things where you know when you see it. it's a place where people don't have access to basic banking services. duncan is a classic example. effective to drive 40 miles to get there, at the banking desert. a lot of them are in the high desert, that's another indicator. there's a real issue in rural america principally. >> do you have any ideas within your roller our role how we can address this issue? >> we cannot be in the business of ultimately telling banks that they can close branches,

but we can find incentives for them, to support rural areas. cra reform may be one vehicle for that. where we can move, there's a constructive aspect of the other agencies proposal. moving to support more activity in the cra nation nature and rural areas. that's one idea. it's challenging. as you know, for quite a while now people have been leaving rural air isn't going to the city but these are longer term demographic pressures. >> i appreciate it, i look forward to following up with you. i also want to touch on the labor force participation and wage growth issue. i know not as many members asked about it. it's really great to see so many americans coming off the sidelines, and coming back into the workforce. we are starting to see wages go up as well especially for the

lower levels of the economic spectrum. can you touch a bit more of the dynamics you're seeing, the positive effects of that, and where you are seeing people coming off the sidelines, and how wage increases are impacting. >> sure it's a combination of people not leaving as much, and people coming back in. as you may have seen unusually, at this point, most of the people who are newly employed in, do not come out of unemployment they come from out of the labor force. we break everyone out indifferent labor categories. the biggest flow is out of the labor force and into unemployment. there's also just people outside the labor force, or having job opportunities. that's very positive. the thing is, we did not expect this, it's very positive. we just want to do whatever we

can, to continue to foster this trend. is nothing like a job to get people's lives right. and to get them on the right track. it's good to see this were using our tools. >> thank you. >> thank you mister chairman, and thank you mister chairman and like my colleagues i want to thank you for your accessibility, and always appreciate the opportunity a fact based conversation here. before i get to so my questions, i want to thank you and the fed to moving ahead on the event now system. i think will save millions of americans billions of dollars when it's implemented. we passed a huge tax cut back in december 2017. it dramatically increase the annual deficit, and the long term that. at that time december 2017, here is what president trump

tweeted out. he said that his tax cuts were going to rock the economy the growth rates of 4%, 5% and maybe even 6%. mister chairman the economy has not gotten anywhere near that in the past three years has it? >> no event continue moderate growth of 2%. >> we have not had the growth of 5% or 4%. the trump administration has not ever hit 3% annual growth has it? >> one 2018 was mark at a percent, then it got marked down to 8%. >> we are having a reality based conversation here, the reality is no it has not hit 3%. >> correct. >> if you look at the budget that was just submitted by the trump administration, there are predicting 2.8 growth for the coming here. very far from what president

trump was talking about, for five 6%. even at that number, 2.8% that is higher and most optimistic projections for the 2020 gdp from the 17 fomc members. we don't have a unified forecast, we don't adopt on a forecast but we do show data, and the median forecasts would be in the low twos for this year. >> i look at the medium forecast which is 2%, >> the most optimistic one is 2.3%. still for half percent below of the presidents protect projections. let me now turn out from the aggregate numbers but to the real wages. there has been a lot of hype, lately. i want to get a sense of where people really are. obviously it's good news, but the unemployment numbers have continued to come down, on the

trajectory they were following, when trump was sworn in. if you actually look at real compensation and i recall from an earlier hearing your view is that the employment cost it's probably the best measure of compensation is that right? >> it is, in a sense. they all have their virtues. >> i was looking at the numbers, and compensation for grew by an average of 0.9% in president obama's second term, and that compares to 0.6 3% per year. this is an inflation, 0.6 3% growth in under president trump. in fact, the real compensation that workers are getting in the workforce, was actually higher

during obama's last term, compared to now. is this a reflection of how difficult it's been, to translate overall economic growth, into higher real wages for americans? >> yes it is, part of that is inflation as a backup a little bit, which is something we have been trying to accomplish. more broadly though, wages of moved up from 2%, two about 3% now. if you look at other expansions, eurasia thing for productivity, we expected to move higher than that. it's a bit of a surprise that we have not seen really unit labor costs. we'll pop which is to say people are getting paid more than productivity and inflation, in which should be a tight labor market. it is not showing up as heightened wages. and you say inflation went up and that was the intention.

but of course when it comes to real purchasing power for americans, that's what they care about, they care if their wages can make purchases. we don't have time to get into it, the budget just come up here, the chairman has announced he does not want to have a hearing on the budget, i hope he will change his minds. a lot of the cuts are made their, include cuts that were made to student loan opportunities, and some of the things you mention that can lead to higher productivity and economy. i will follow up with some raising questions on that thank you. >> thank you. >> thank you mister chairman, i want to speak today about coronavirus and the impact on the global economy. couple of other senators and i had some solutions, honoring a chinese doctor who died last week, what makes him unusually

different is he's one of the first person to blow the whistle in the wuhan coronavirus, and silenced by the communist party. he was forced to sign a statement to say that he and all of his warnings, and unfortunately he leaves behind a small child, another child on the way and his wife. the -- was known for reporting on the conditions in wuhan, he has since disappeared. i raised these examples, and i can multiply them at great length about just simple illustration of chinese dishonesty and lack of transparency in trying to handle the effects of this outbreak. obviously most important impact on our ability to understand the virus and test the vaccine

for, will kind of effect does it have on you and the feds of ability, to understand the economic impact of it, dealing with such an transparent conditions, coming out of beijing, as you get a grasp of what the possible impact could be on the global economy? >> as you point out the real question for the fed, what is the likely effect on the u.s. economy. we will begin to see it in the data coming fairly soon. it's too uncertain to even speculate, of what the level of that will be. weather will be persistent or if it will be any material changes in the outlook. effect should be substantial in china, important but maybe less substantial an immediate trade partners. we will be looking at the economic data, i can't comment about the other kind of data. we look at that to.

>> of course i wouldn't expect that, but chinese economic or central bank officials, in contact with the federal reserve, or counterparts around the world, to try to help you and your counterparts to understand economic impact though? like i was saying the lack of transparency to help political leaders? >> i'm actually sure that will be the case. there has been some kind of conversations. it's too early to say no one really knows the main focus they are containing the outbreak. they have been there taking measures to support economic activity. we'll of course >> i want to

commend the trump administration to stop travel to china and contact tracing in trying to get testing kits to the front lines. -- if that remains the case, if there's no widespread outbreak in united states, is the main economic s&p in the united states, different realty of supply chains that originate in china, what happens at the very beginning of those chains, in factories which may not have sufficient workers? >> supply chains is an important issue. we do get we import a lot of intermediate goods from china, and final goods to. that will be an issue. it will also be, our own exports there will be suppressed during this period. we will not get as much chinese tourism. the other channel i will

mention is financial markets. which can create their own transmission will be looking at all of that, and again it will start to pick it up -- >> we do not want to slow site of our peoples prosperity. i appreciate your attention on this matter. >> senator menendez. >> thank you mister chair for your service. let me ask you something. the northeast corridor where i come from, jersey new york region, generates about 20% of gdp for the entire nation. if we had a major infrastructure, failure, for example the closing of one or more of the hudson tunnels into new york city. the end of the portal bridge,

which takes boston to washington, throughout the northeast corridor. what that not create a significant economic risk. >> if it were sustained yes. we are talking about a sustained closing. things happen, and we fix them and doesn't show much in the gdp. if they are sustained then yes. >> let me share with you something i want to bring to attention, as you look at these issues. and track estimates that a shutdown of the northeast corridor, for a single day, forcing all day talk about sustained issues. would cost our economy 100 million dollars. that is in one day. so if we cannot get this infrastructure, to ultimately be sustained, we saw it with the superstar sandy, tremendous damage.

. actually we have a bridge that does not close correctly, it stops the traffic and the northeast corner. every lawyer, every medical patient, every business does intercity rail travel, across from boston to washington, loses time. if it cannot be closed successfully, they take sledgehammers to close it. that is a significant economic impact. i would urge to take a look at that, as a question about our infrastructure. that's why i am so frustrated, by the administration not seeing the importance of what we call gateway project. the rebuilding of 109 year old portal bridge, we've got some good news on that. overall, this is a project of national significance, in a region as a country that generates 20% of gdp. let me turn to the community

reinvestment act, which i think is an essential tool as one of the minority members on this community and in the senate, against discrimination, but her being red lining, about meeting the needs of law income families. and's they'll see cnn released a proposed rule, that relies heavily on a dollar ratio metric, for measuring all the banks the ari activities, and gives little values was to chairman why is it important for an updated cra rule, to focus on loan count, rather than dollar value? >> in our thinking, loan counts are important. they go to the very purpose of the statute, which is to assure the provision of credit, to low and moderate income individuals, and to their communities. we think that >> do you agree with governor brainer, focusing

on long value, as the fcc proposal does, quotes run the risk of encouraging some institutions to me expectations to a few large community loans or investments then rather than larger community needs? >> we work to try to get fully aligned to a proposal. they were not able to get to our proposal either. we will be looking to see the comments, on all those provisions, which will be coming in and will we will be carefully looking at. >> when you say that, did the reserve share their concerns about emphasizing the metrics put less value out load values, and not on the community input? we >> shared all our work, they took up many of ideas. we incorporate a lot of ideas. >> are you able to send us what particular items were

incorporated, that you shared with them? >> sure. they have identified many them in the testimony a couple weeks ago, the ideas that they incorporate for more work. >> the key things have been ignored in particular. >> their proposal looks both counts, in dollars. there's a number of differences, >> final question. as either of you or governor brain or taken the proposal to the board yet? >> we have not yet. our focus was trying to get onside and get one proposal with the el-sisi in the fbi see. now we see ourselves as waiting to learn more from that process. for the >> for those of the communities in of color, this is important. i know the federal show leadership in this regard, and make sure the community participation continues to be a

hallmark of what the cra is all about. >> thank. you that concludes the questions, i'll come back ask one quick question. you've been asked a lot mister chairman today about wages. i want to ask and verify this with you that i am familiar with. understanding the wage growth is three or 4%. that make 18 straight medals, that the wager it was above 3%? the wage growth rate? >> i have to check that. it certainly takes you back, you know looking at each month gradually at over the past its 3.1% higher. that shakes out of sounds fine. >> back-check that and let me know. that does include the questioning, for the senators who wish to submit questions to the committee that's has to be

done by february 19th. chairman powell once in her response to those questions as promised possible. we thank you for being here, i am late for a vote. i am sure you have other business to conduct, this committee is adjourned. >> thank you mister chairman.

athletes spoke with college athletes' ability to earn money from endorsements. they spoke at a senate commerce subcommittee hearing. >> good morning, everyone. the committee the subcommittee